By Richard F. Fischer, CPA, CGMA

CFOs in virtually every industry, size of organization, and geographic location are constantly reminded of the challenges they face when it comes to managing the financial and reporting aspects of their organization and, to some extent, the organization’s operations. Based on recent surveys of CFOs and other key members of management conducted by various universities, research organizations, and consultants, the top five current concerns among CFOs are as follows:

• Succession challenges and attracting and retaining talent
• Rising wages, salaries, and benefit cost
• Regulatory changes
• Cybersecurity
• Incorporating change in operations

Succession Challenges and Attracting and Retaining Talent

Baby boomers (people born between 1946 and 1964) have been retiring at a rate of 10,000 per day since 2011, and they will continue to retire at this rate through 2030. The U.S. Bureau of Labor Statistics reported that the unemployment rate was 3.6 percent in April 2019, and the number of unemployed persons was 5.8 million and available jobs was 6.7 million. According to the CFOs surveyed, it is getting increasingly harder to find highly skilled talent. As the number of available jobs indicates, the skill sets needed for available jobs isn’t aligned with the skill sets currently unemployed persons have. Add to this the fact that key members of management are retiring, and this may be the biggest challenge for CFOs.

Rising Wages, Salaries, and Benefit Cost

The U.S. Bureau of Labor Statistics reported that the average hourly wage earning was $27.77 in April 2019, which is forecasted to rise by 3.2 percent annually. As the labor market tightens, salaries and wages will continue to grow to retain talent. Compounding the problem is that with changes in health care, from both insurance companies and government programs, health costs have been rising at a rate greater than wages. With changes in the tax law from the Tax Cuts and Jobs Act (TCJA) of 2017 and uncertainty in the direction health care will take, forecasting future benefit costs, wages, and salaries will be a challenge for CFOs.

Regulatory Changes

CFOs need to be current on regulatory changes from multiple governing bodies. From a financial and reporting aspect, they need to understand the current changes to U.S. generally accepted accounting principles (U.S. GAAP), and possible changes based on International Financial Reporting Standards. Recent changes to U.S. GAAP include revenue recognition and accounting for operating leases that, when implemented, could result in changes to an organization’s accounting and reporting processes, the recording of additional debt, and the timing of when revenue may or may not be recognized by the organization. The TCJA had an impact on all organizations and industries, from tax rate changes and limitations to certain tax deductions. The Fair Labor Standards Act resulted in changes to the annual salary thresholds to determine which employees qualify for overtime pay. Other regulatory changes also are being made by the Environmental Protection Agency, the Occupational Safety and Health Administration, and many more. Regulatory changes go beyond financial reporting, and they require CFOs to understand their companies’ operations in addition to finances.

Cybersecurity

Increasingly more sophisticated cyberattacks involving malware, phishing, and more place organizations and governments at constant risk. Industry continues to suffer from a severe shortage of cybersecurity professionals. With organizations continuing to look for ways to save or reduce cost, they have out-sourced certain services that were originally performed by the organization, such as payroll. These are additional areas of exposure. CFOs need to understand the impact any related cybersecurity breach would have on their own organization and how it might interrupt its core operations, finances, and reporting. Computing power is outpacing the protections organizations have been putting in place, and experts seem to agree that cybercrime will only increase as our dependence on technology continues to grow.

Incorporating Change in Operations

The roles and skills of the typical finance professional have changed over the past 10 years. Historically strong in accounting, auditing, and compliance, finance professionals are being sought who can perform analytics, interpret big data, and understand the industry in which they work. CFOs need people who will embrace change as new technologies are introduced or incorporated into the organization that will allow them to better understand the entire operations of the organization while providing good financial management. As new technologies are incorporated into transactional work, analytics will become the finance department’s core expertise.

Change is never easy, and it is presenting challenges to CFOs in multiple areas of their growing responsibilities.

Richard F. Fischer, CPA, CGMA, is the partner in charge of the accounting and auditing department of Louis Plung & Company and chair of PICPA’s Employee Benefits Plan Committee. He can be reached at info@louisplung.com.

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