Why FDs and CCOs should be BFFs

Modern-day financial directors carry a lot of weight on their shoulders. Running the financial aspect of big organisations means responsibilities such as developing and implementing strategies, making decisions and managing overall operations to keep the business in rude health.

The main thing FDs want is a profitable business and a confidence in cash flow, so they can advise on future growth across the wider business. So it might come as a shock that FDs and CCOs (chief credit officers) aren’t best friends. But they should be.

The role of the CCO

The CCO is responsible for managing credit within an organisation. The role combines financial insight with intelligence on the customer. This can include underwriting, reviewing and analysing loans, as well as providing support and direction to the credit management team and other parts of the organisation.

Because CCOs focus on lending, credit and loan policies, they have a strong understanding of the company’s loan portfolio and credit quality. This knowledge can help to maximise profitability, while also limiting risk.

In addition, the CCO plays an important role in ensuring customers are happy. Credit managers are often the first ones to know if customers aren’t satisfied, since incoming queries or complaints are often handled by accounts receivables. This gives the CCO insight about quality issues and whether goods are not arriving in an acceptable condition or on time, as well as overall customer satisfaction.

Since happy customers are paying customers, CCOs can provide important insight about cash flow and the overall health of the business. While many of these roles can also come under the jurisdiction of the FD, the CCO has a more ‘boots on the ground’ view of these areas, and can provide crucial insight into the health of the businesses cashflow.

How the CCO can help the FD

Working closely with the CCO can be extremely beneficial to financial directors. After all, the CCO plays an important role in the company’s finances and has a closer relationship with customers. Plus, they are working towards the same objective: a profitable and financially strong company.

Here are just some of the ways that a CCO and FD can work together:

• Providing specific financial insights: The CCO has cash flow transparency across the business, which can provide reassurance to senior management and other key stakeholders by working closely with the FD.
• Making strategic decisions and setting goals: Thanks to the CCO’s unique understanding of the company’s finances and customer satisfaction, he or she can provide a unique perspective when advising on the firm’s strategies and objectives for a healthy bank balance.
• Assessing risks and opportunities: Since CCOs are responsible for deciding when to approve or deny credit, a mistake can cost the company a huge amount of money, interrupting the firm’s cash flow. However, a carefully evaluated risk can also prove to be very profitable for the organisation.
• Managing the credit management function: The FD has a great deal of responsibility on his or her plate. Therefore, overseeing the day-to-day operations of the credit management team can often end up relatively low on the priority list. The CCO can take responsibility for this element of the organisation.
• Establishing policies: With their knowledge of customers and company finances, the CCO can help to implement strategies that will help to improve business performance.
• Representing the company: As a customer-facing executive, the CCO can serve as a representative of the company and their knowledge of the market, and the company’s finances mean they’ll be an informed and experienced face for the organisation.
• Improving quality and customer satisfaction: Since the CCO usually has a better understanding of how customers feel, they are in a better position to know what improvements need to be made and how to make those changes.

Top tips for strengthening the relationship

With so much to offer each other, it’s hard to see why FDs and CEOs aren’t automatically best friends in every organisation. But, building strong relationships takes time and trust from both sides. So here are some tips to help speed up the process.

• Establish good communication: Every great relationship needs excellent communication. But remember, this isn’t just about saying whatever comes to mind. Sometimes you need tact, diplomacy and resourcefulness to get your point across in a way that the other person can absorb.
• Identify shared objectives: It’s so much easier to become someone’s friend if you can find things that you have in common. This is especially true if you have a shared goal that you can work towards, such as the financial health of your organisation!
• Develop mutual respect: It helps if you like each other, but you don’t have to. Respect, however, is essential. This can be boosted by being proactive, keeping promises, practising humility, maintaining a moral code, helping each other and not wasting each other’s time.
• Increase transparency: The CCO might have plenty of data and insight, but without translating that into information that the FD can easily digest and understand, it could cause a block in communication. Presenting this data clearly should be high on the CCOs priority list.
• Have a consistent message: It’s hard to be friends with someone who keeps changing their opinions and stories. So, try to be consistent, both in what you say and how you act. That doesn’t mean you can’t ever change your mind about something, but don’t be flip-floppy either.

Running the entirety of an organisation’s finances is a complicated task, but there’s no reason why a Financial Director should feel like they have to do everything. There are plenty of people across the organisation that can provide valuable insight and advice to make the job easier. The CCO is the ideal choice for a FD’s new best friend due to their in-depth knowledge of the organisation’s cash flow and customers; the two ingredients to successfully grow a business.

Michael Facey is head of marketing and product management at OnGuard