The most valuable CFO is one who can strike the right balance between managing the finance side of their role with managing the tax side, says Joshua Forrester, CFO of Family Financial, a Los Angeles-based asset management firm.
Forrester, a CPA, has more than 10 years of experience in public accounting, focusing primarily on middle market businesses and their owners, with extensive experience in taxation and financial accounting. He has assisted multiple businesses and their stakeholders through liquidity events, focusing on tax planning and financial accounting matters aimed at maximizing value for sellers.
He spoke with StrategicCFO360 about why finance chiefs need to be good communicators, the benefits of remote staffs and how he handles “unpredictable predictability.”
How do you describe the value you bring to an organization in your role as CFO?
The value I bring is the ability to synthesize the financial realities of the moment as well as forecast results in a way that is useful to my organization and communicate the information in a user-friendly format. I take both a financial- and tax-focused approach to my insights and recommendations, with the objective of the financial piece being maximizing profitability and the objective of the tax piece being minimizing taxable income using all permissible methods. This allows the other decision-makers in my organization to have a clearer picture of the consequences of certain actions from both perspectives. This comes from years of experience as a practicing certified public accountant.
To add to this, I have seen tax professionals overlook the effects of their recommendations on the financial side, as well as CFOs and similar positions not consider the effects of their recommendations on the tax side. I strive to provide a balance between the two. This is especially important to small and closely held businesses where the tax consequences cascade to the individual owners who are most often decision makers in their companies as well.
What are the complexities associated with being a CFO for a financial service firm?
What I consider complex about my role as a CFO for a financial service firm is that you have both predictable predictability and unpredictable predictability. While that is a bit of a tongue twister, it boils down to being able to forecast revenues which are largely based on the managed portfolios of the firm’s client base. Major market fluctuations tend to cause the predictable revenues of the firm to become unpredictable, which ends up changing your models and your recommendations.
Since most expenses for this type of business are either based on a percentage of revenue or are fixed, you can provide well-formed insights, but your starting point is always the forecasted revenues based on the current asset management base. As with so many things, it all comes down to communication and being able to provide your insights in a timely manner.
What are some of the managerial trends you are noticing with regard to the shift to a more remote workplace?
The trends I have seen have fallen into two main camps. Some businesses are lamenting the new remote workplace while others are attempting to capitalize on the availability of skilled entry level labor from lower cost of living areas both within the country and abroad.
I have had more conversations about how businesses can best utilize skilled professionals from other countries than ever before. Outsourcing has been around, but with the recent shift, even small businesses are looking abroad for low-cost solutions in areas such as accounting and information technology. The proliferation of online marketplaces for skilled professionals looking for gig work has also contributed to this shift. Businesses are also having to balance the cost savings with the need to develop talent internally in these lower-level positions to fill a higher-level position later.
There are still those businesses out there that dismiss the remote workplace as a trend they will slowly claw back on, but there are so many businesses that have embraced remote work that candidates have the option to choose employers based on their remote work policy. Overall, it can make both holistic and practical sense to have a robust remote work infrastructure, even for small businesses.
How has the role of CFO changed in recent years and what advice do you have for others looking to fill this role in the future?
Circling back to the first question, it is all about the value you add to your organization and its clients. During my career, I have encountered “brilliant historians” in the sense that these CFOs were great when it came to getting the annual reports ready in an accurate and timely manner, but they were not forward looking. On the other hand, I have encountered individuals who held similar positions who were excellent forecasters but simply did not have the financial accounting knowledge needed to provide and interpret accurate and timely financial statements.
There is certainly value in accurate and timely financials, but businesses and their decision-makers are often more interested in what can be done today to improve the future performance of their enterprise. This requires not just the ability to accurately summarize historical information but also to help predict future outcomes based on reasonable assumptions. To fill this role most effectively, I would recommend becoming well rounded in both finance and accounting concepts. I would also recommend that an individual obtain a working understanding of the tax concepts that are critical to their organization and client base.
