The evolution of the CAO—and what that means for the CFO

Over the past 40 years, there have been a number of notable additions to the C-Suite: chief information officer (CIO), chief procurement officer (CPO), chief technology officer (CTO), chief human resources officer (CHRO), and chief marketing officer (CMO).

Perhaps the most impactful addition to the C-Suite has been the chief accounting officer (CAO). The arrival of the CAO has tremendous implications for the CFO, in addition to the rest of the business. As the role of the CFO has expanded beyond financial reporting and financial planning and analysis (FP&A) to include business strategy and digital transformation, the demand for CAOs has risen greatly.

As the role of CFO has shifted from tactical and operational to highly strategic, CAOs are filling a much-needed role—providing the everyday blocking and tackling necessary for the CFO to thrive.

Changing of the guard

The evolution of the CAO has coincided with the monumental change in the role of the CFO. CFOs are inundated with mission-critical projects: budgeting, FP&A, scenario modeling, advising the CEO on potential M&A targets, planning for IPOs, capital budgeting, obtaining debt and equity financing, and investor relations.

“I'd say, maybe just decades ago, the CFO role was very transactional,” said John Woods, CFO at Citizens Financial, in an interview with Fortune. “There was a heavy dose of accounting presumed in the role. I think the evolution has been toward strategy and business partnering.”

As the role of CFO has become more demanding and ever-expanding, CAOs are being hired to oversee the day-to-day tactical tasks that CFOs once dominated. It’s common for today’s chief accounting officer to be tasked with SEC reporting, Sarbanes-Oxley (SOX) compliance, corporate governance, risk management, and environmental, social, and governance (ESG) reporting.

In addition, today’s CAOs are expected to be more than just the head of accounting—they are expected to partner with the CFO.

At Square, the CFO and CAO work hand-in-hand to “build a world-class finance function that helps guide the business through disruption today and is bold enough to invest in future innovations,” writes Ajmere Dale, the company’s chief accounting officer. “We're focused on automating manual processes, so that we can free up people's time to think about strategic work that enables bold innovation and growth.”

More time for digital transformations

With CAOs carrying the load of overseeing daily accounting operations, this gives CFOs more time to focus on digital transformation of the finance function. This transformation starts by embracing cloud-based ERP that automates mundane accounting tasks; according to a recent KPMG study, 51% of chief accounting officers are looking to automate mundane tasks with cloud-based technology. This automation not only facilitates faster SEC reporting, but it also allows the CAO to accomplish more with fewer staff. 

“Oracle Cloud ERP has helped eradicate a lot of the manual aspects of my team’s jobs,” says Ajmere. “The emerging technologies embedded in those applications automate routine tasks, so that we aren’t spending half of the quarter reporting on the past, but using that time to focus on supporting new product and service innovations at Square.”

This finance transformation would not be complete without cloud EPM to turbo-charge the FP&A process, eliminating a mountain of spreadsheets along the way. Not only does this make planning, scenario modeling, and forecasting easier, but it also helps CFOs answer important questions about the future of their business: Should we raise debt or equity financing, and when? How much should we invest in property, plant, and equipment (PP&E), and when? What impact will an acquisition or divestiture have on the bottom line? Which products and product lines are driving profitability, and which ones aren’t? If revenue declines by 10%, will the company still be profitable?

The CFO also benefits from this transformation in a variety of other ways: real-time analytics, automatic cash flow forecasting, connected planning, and ultimately, greater insight into the current and future financial health of the business. CFOs can spend more time each quarter on capital budgeting and M&A strategizing, and less time gathering data.

Co-piloting the finance department

CFOs are perennially overworked, with 54% of them working more than 50 hours a week—and juggling too many responsibilities. The evolution of the CAO gives CFOs a much-needed, executive-level co-pilot with whom they can make important financial decisions. With the increasing uncertainty of economic times, CFOs and CAOs can collaborate on scenario planning for a variety of contingencies: new products, new business models, acquisitions, divestitures, international expansion, supply chain chaos, economic downturns, and a host of others.

As the second-in-command of finance, CAOs are in a unique position to share the load and help make the CFO’s job easier.

Learn more about Oracle Cloud ERP and Oracle Cloud EPM.