Business finance management is not an easy task and certainly cannot be handled by a CEO alone.
More than 131,815 Chief Financial Officer (CFO) are being put to work in the U.S. alone, and it is obvious that at least some companies understand just how valuable such expertise is. Is your company one of them?
If not, then you are already at a disadvantage. We say this because a company without a CFO is prone to uncertainty and financial risks like poor cash flow management, missed growth opportunities, and ineffective cost control.
So, if you’re wondering what a CFO does, then it’s everything from cash management to budgeting, while simultaneously creating short-term strategies designed to drive long-term prosperity.
Read on to learn what a CFO is, what does the CFO do, their job responsibilities, and what does CFO mean when it comes to a company’s ability to survive.
Also Read: Is a Virtual CFO the Right Move for Your Growing Startup?
What is a CFO?
A CFO is a senior executive responsible for overseeing a company’s financial activities, including cash flow management, financial planning, and analyzing strengths and weaknesses. The CFO ensures the finance and accounting divisions are managed effectively, and that financial reports are accurate.
What is the Role of a CFO?
The following are some of the key activities performed by a CFO in terms of work:
- Day-to-day Financial planning
- Financial risk management
- Monitoring cash flows and expenses
- Dealing with investments as well as taxes
- Taking financial decisions
- Establishment as well as implementation of internal accounting policies
- Acquisition as well as processing of financial data
- Report financial performance to the board of directors
- Ensure that the company complies with regulatory requirements
- Assistance in defining the company’s strategic direction
How to Become A CFO?
To become a CFO, you typically need extensive finance experience, often over 10–15 years. Most CFOs hold advanced degrees, such as a Master of Finance or an MBA in finance.
Generally, their backgrounds are in these areas:
- Accounting: Having experience as a CPA or in financial reporting is very common.
- Investment Banking: Financial modeling and experience of mergers and acquisitions are relevant.
- Financial Analysis: Deep knowledge of financial statements, market trends, etc.
Also Read: Choosing Wisely: How to Find a Financial Advisor You Can Trust?
CFO Responsibilities of a Company
Every CFO wears multiple hats and maintains the company’s financial health. Here are some of the main responsibilities you can expect from a CFO:
Financial Reporting
A CFO oversees financial reporting by managing the collection, analysis, and presentation of the company’s financial data. They ensure accuracy, compliance, and lead the finance team in preparing key reports like income statements and balance sheets.
Preparation of Accurate Financial Statements
CFOs are responsible for the preparation of financial statements with complete accuracy. They do so by ensuring everything balances and the books make sense.
Compliance with Newly Enacted tax laws
CFOs ensure all their financial operations are aligned with the laws and regulations. Such precautionary measures help prevent the company from getting involved in legal mess.
Strategic Planning
Strategic planning is concerned with how to set long-term financial goals, the source of funds, and how they can be used to achieve the financial goals.
Risk Management
It helps CFOs strategize to identify financial risks and find a way to mitigate them. It might be diversifying investments or getting ready for setting up emergency funds.
Cash Flow Management
Cash flow management involves overseeing the inflow and outflow of cash to ensure that the company doesn’t unexpectedly run out of funds.
Investment Decisions
The CFO oversees where the company’s resources are to be invested for maximum returns. It refers to the selection of the right way to ensure growth and profitability. Have you ever wondered, “What does a CFO do?” It is probably because you need one. And if a full-time CFO cannot fit into your budget, Focus CPA’s outsourced and fractional CFO are the best alternative. It is cost-effective yet delivers the same quality of financial leadership that keeps your company on track.
Don’t Miss: What sets CEOs, CFOs, and COOs Apart? Exploring the Executive Triad?
What Size of Company Needs a CFO?
Every company does. But, to be precise, small businesses with modest revenues, typically a few million dollars or less, often don’t need a full-time CFO. Instead, they can rely on an outsourced CFO to build a solid financial foundation for growth.
Mid-sized companies, with revenues ranging from $5 million to $25 million, face more complex financial operations. However, it’s important not to overcomplicate processes at this stage. Many lack the resources for a full-time CFO, but this doesn’t have to hinder growth. An outsourced CFO offers the necessary financial leadership at a fraction of the cost.
For larger companies, it’s often time to bring on a full-time, in-house CFO to oversee financial operations and manage the complexity of their growing financial needs.
Read More: Expert Virtual CFO Service
Is the CEO Different from the CFO?Yes, a CEO and a CFO are two different persons. A CFO works with the top-level managers who comprise the CEO but is majorly related to making the financial decisions. Although the CFO reports to the CEO they control all the monetary matters of that company. |
Qualities and Skills of a Successful CFO
These skills enable a CFO to operate complexity successfully and propel organizational success toward lasting stability and growth.
Leadership and Communication Skills
Effective leadership and communication skills of a CFO help them lead finance teams while working with other individuals in the firm. The CFO explains those complex financial concepts to all parties and assists in fostering a potential alignment and teamwork of everyone toward winning.
Analytical and Strategic Thinking
Analytical and strategic thinking helps the CFO make sense of financial data and market trends correctly. This makes for better decision-making and brings out risks and opportunities that would position an organization for growth and competitiveness.
Technical Financial Knowledge
Technical financial knowledge is also essential for the monitoring of accurate financial reporting and regulation adherence. With the experience of a CFO, the organization will follow the industry standard and always have best practices without causing costly errors.
Flexibility and Solving Skills
To manage a business environment, a CFO needs to be adaptable and equipped with strong problem-solving skills, such as analytical thinking and strategic planning. These abilities help them tackle unexpected challenges and make smart decisions that keep the organization moving forward.
Closing Line!
As we wrap up this blog, let’s address a common misconception you might also have: Is a CFO an accountant?
While many CFOs may come from an accounting background, this isn’t a requirement for success in the role. Accounting focuses on crucial tasks such as managing accounts receivable (AR), accounts payable (AP), and maintaining financial records.
CFOs possess a broader financial skill set, concentrating on managing assets and liabilities, planning for future growth, developing business strategies, and overseeing risk management. Unlike accountants, CFOs provide forward-looking forecasts and strategic recommendations to senior leadership, such as the board and CEO, helping steer the organization toward long-term success.
So, the next time you question, what is a CFO of a company and what their role entails—do not forget to read this blog post!
