The modern era demands more from chief financial officers (CFOs) than the mere production and analysis of financial statements. These executives are now held in the spotlight and have numerous responsibilities that fall under the four distinct roles of strategist, team leader, third-party liaison officer, and controller of financial affairs.
Whether a small business or an enterprise-level company, your organizational structure depends heavily on your ability to develop a solid financial strategy. In this article, we’re examining how CFOs can be the most important position within your company. Continue reading to learn more about the role and responsibilities of a CFO.
The Role and Responsibilities of a CFO
A CFO is in charge of the following responsibilities.
1. Bookkeeping
It is the responsibility of the CFO to maintain the integrity of the books, securities, funds, and other related documents. Additionally, the CFO also enjoys the authority to form accounting policies regarding bill payments, purchases, and other financial transactions. Thus, recording and keeping track of the cash flow is one of the most important responsibilities of a CFO.
2. Finance Management
The CFO is tasked with managing the company finances, which includes supervising the budgeting process, collecting input from the company’s executives, controlling company expenses, and ensuring that the company stays as far as possible from financial troubles.
3. Strategy Planning
The CFO directs the company’s financial strategic planning and supports tactical initiatives. Their job is to direct and monitor strategic plan implementation to ensure proper and timely execution. The development of tax and financial strategies also comes under the CFO’s domain.
4. Manage Financial Operations
The CFO must actively participate in the executive management team, overseeing finance-related operations, including treasury, tax, legal, HR, accounting, and investor relations. Additionally, the CFO manages outsourced functions, improves operational practices, and reviews employee incentive and benefit plans for cost-effectiveness.
5. Risk Management
This is one of the core CFO services. The CFO has to understand the company’s risk profile, manage insurance coverage, report risk issues, and mitigate all identified risks. The CFO is responsible for investigating the findings and recommendations of auditors and constructing and implementing reliable systems for financial operations and control.
6. Data Analysis and Forecasting
A CFO manages a business’s current and future finances, analyzing data to forecast financial needs and identify profitable investments. This includes pinpointing key products, deciding on discontinuations, and timing new product development. The role also involves economic forecasting and modeling to predict optimal market conditions for the company’s success.
7. Financial Information & Reporting
The CFO reports the company’s financial status to stakeholders, the board, and the executive team, providing accurate data for decision-making across various departments. This information is also used by management, analysts, employees, and creditors. The role’s significance is substantial, as it impacts the company’s present and future success, leaving no room for errors.
8. Compliance, Liability, and Liaison Responsibilities
The CFO ensures that company policies and practices comply with regulatory and auditor requirements, especially for publicly held companies. They must understand all legal aspects, including tax obligations and contracts, and manage external relations with investors and third parties, serving as the financial representative of the company.
5 Questions To Ask a CFO in an Interview
With the CFO role and responsibilities outlined above, you now know what a CFO does. However, when hiring a CFO, it’s crucial to understand how they envision and manage the financial aspects of your company. The following interview questions for a CFO cover all the bases, from how to improve cash flow to strategies for funding critical departments.
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Future Capital Structure
Ask the CFO how they envision the company’s capital structure in five years. It is vital to understand whether they foresee a balance between owner’s equity and debt and how this will support business growth and risk management. Their approach to financing — whether through equity, debt, or external investors — will indicate their strategy for sustainable growth.
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Improving Cash Flow Forecasting
Inquire about strategies to enhance the accuracy of cash flow forecasts. Accurate forecasting is essential for maintaining sufficient liquidity for daily operations and long-term projects. It’s important to understand how the CFO plans to integrate inputs across departments to produce realistic and actionable cash flow predictions.
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IT Department Funding
Technology plays a crucial role in modern business. Ask how the CFO plans to allocate funds to the IT department and what their strategy is for evaluating IT investments. Their ability to balance technological advancements with financial prudence will be critical in keeping the company competitive.
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Concerns from Financial Statements
Discuss what concerns the CFO has when reviewing the current year’s financial statements. This question helps identify key metrics and areas they believe require attention or pose risks, providing insights into their priorities and analytical focus.
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Ownership Perspective
Finally, the CFO should be asked what changes would be made if they owned the company. This helps gauge their commitment and insight into the business’s operations and challenges. It also reveals their ability to think critically about operational and people issues, which is essential for fostering a proactive and growth-oriented business environment.
These CFO interview questions will help you determine if a CFO candidate is well-suited to your business’s specific needs and challenges, ensuring they can contribute effectively to its success.
Elevate Your Finances with the Right CFO
Knowing what a CFO stands for and what a CEO does is key to understanding the depth and breadth of a CFO’s responsibilities, which can dramatically influence your hiring decisions and, ultimately, the success of your financial management. Whether you aim to enhance financial forecasting, manage risks, or drive technological investments, the right CFO can transform your company.
If you’re ready to elevate your company’s financial strategy, consider partnering with Fully Accountable for expert financial guidance and executive placement. Schedule a free consultation with one of our experts to learn how we can help you find and select a CFO who can propel your company forward.
Fully Accountable is an outsourced accounting and fractional CFO firm that specializes in ecommerce accounting for online businesses. As a Inc 5000 fastest growing companies award winner, our diverse team of accountants, bookkeepers and CFOs can help you improve your cashflow and effectively manage and grow your bottom line.
