Roles and Responsibilities of the Chief Financial Officer (CFO)

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CFO's Roles and Responsibilities

A CFO is the head of the financial department and wields a lot of power over the company’s direction. This power gives a lot of responsibility to top-level executives. However, one-third of CEOs worry that their CFOs are not future-ready. In small businesses, CFO roles and responsibilities extend to multiple jobs. When they do so, they could blur the lines between what they’re responsible for and what work employees can take up. So, we’ve come up with this post to help businesses understand what modern CFOs do.

Who is a Chief Financial Officer (CFO)?

This senior executive manages all finances actions related to the company. A typical CFO tracks cash flow, plans finances, analyses strengths and weaknesses, and proposes corrective measures to boost the firm’s bank balance. Similar to a treasurer, a CFO completely handles the finance and accounting divisions by ensuring the firm receives accurate financial reports in time. Some CFOs also goes by the designation of CMA (Certified Management Accountant).

How Do Chief Financial Officers Work?

In a company structure, CFO reports to the CEO and has tremendous input in the firm’s investments, revenue structure, and financial management. They contribute tremendously to the overall success by working with other senior executives. When the marketing team launches a new campaign, CFOs ensure that it’s financially feasible and allocate funds. A CFO could also assist the CEO with various predictive cost-benefit analysis and funding initiatives. Overall, the CFO is the head of the financial industry and ranks third among all other industries. Furthermore, they can assume the role of a CEO or COO or company president in the future.

4 Important Roles of a CFO in Modern Businesses

A CFO takes on many roles during their business growth. We discuss four of the most prominent ones below.

Acts as a Steward

CFOs act as a steward by protecting vital company assets, complying with financial regulations, maintaining the books correctly, and communicating risk and rewards with board members and investors.

Acts as an Operator

CFOs operate efficient financial organizations by providing several services like financial planning and analysis, treasury management, tax calculations, and other finance operations.

Acts as a Strategist

CFOs also plan strategies and influence the company’s future direction. They provide financial leadership and align finances with the business to facilitate company growth.

Acts as a Catalyst

CFOs can also trigger and promote timely change execution in the financial part of the company. They facilitate various business improvement initiatives like cost reduction, procurement processes, pricing processes, and others.

5 Responsibilities of Modern CFOs

Checklist

Communicate Effectively

CFOs have to talk to the board of directors regularly, give detailed financial information to analysts, investment managers, and regulators. Overall, a CFO must know how to communicate effectively with important stakeholders to convince them about their point of view. While CEOs focus on the ‘why,’ stakeholders turn to CFOs to understand whether grand plans will bring in the big bucks. A 2013 McKinsey report observes these different CFO models: –

  • The finance expert – CFOs with a lot of experience in the financial industry can be great at financial regulations, global financing, and revenue structures for start-ups or decentralized systems.
  • Generalist – These CFOs have experience outside the financial sector and engage heavily in operational management and strategic planning. They’re trained to be future CEOs.
  • Performance Leader – These CFOs work to transform businesses and work well through diversified businesses that operate across different industry verticals. Such executives focus on how to allocate resources effectively.
  • Growth Champion – These CFOs have experience in mergers and acquisitions and constitute 25 percent of all new CFOs.

Regardless of the CFO’s style, they must succeed at all communication aspects.

Intuitive Thinking

Since CFOs crunch numbers, they need to provide far-sightedness and insight to important stakeholders. They can assume a collaborative role to their CEOs to help them navigate the future business strategy effectively. Financial executives need to incorporate the collective anticipation with their intuition to decide which business strategies customers will prefer. Intuitive thinking is one of the most valued skills CFOs can possess. They need to be independent thinkers and effective communicators to support or go against the tide for the company’s benefit.

Grow Sustainably

Traditionally, CFOs used to be the penny-pinchers of the company that protected the capital and the company from taking too many risks. Hence, they used to be involved in controlling and cutting costs instead of the marketing or sales campaigns. However, their goalposts have now shifted to include sustainable growth as their biggest responsibility. Nearly half of the non-CFO executives express dissatisfaction with the effectiveness of their company’s processes regarding mergers and acquisitions, expansions, and organic growth. They also believe that their CFOs should effectively spend their time on these issues.

Integrate Businesses Effectively

CFOs often discover that they’re handling dissimilar, incompatible, and contradictory enterprise goals. This lack of alignment breed inefficiency, high costs, and irritation. These executives have a bird’s eye view of the organization and control most of the planning, budgeting, and reporting activities. A CFO needs to identify problems earlier and work with other employees to enhance effectiveness, standardize their processes, improve quality, and operational agility. If companies focus on short-term advantages, they may encourage huge cost cuts. However, a good CFO always steps in and tries to do what’s best for the long term with integrated business planning.

Manage Risks Well

Each enterprise faces risks and needs to manage them effectively to protect the business. When firms fail to recognize risks or undermine them, they can incur huge damages to business operations. Various economic recessions have taught businesses that circumstances change! However, businesses that prepare for risks in advance can enable them to continue operations despite these challenges.

Read More: Major Challenges for CFOs in the Digital World

Conclusion

The roles and responsibilities of CFO include a lot of domains. They’re not just number crunching experts. They need to use financial information and analytics to aid strategic decisions. So, choose a CFO wisely and let them grow your company exponentially!

 

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