A chief financial officer (CFO) is a C-level executive who is responsible for managing an organization’s financial functions. Online businesses can only succeed in the corporate world when they create a structured and sustainable financial back office. Before learning what an eCommerce CFO does, you need to know about the traditional role.
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What Does a Traditional CFO Do?
A traditional CFO is a lot like other financial positions. Their chief duties include advising the executive team on all financially relevant decisions, steering the company in the right direction with meticulous budgeting, analysis of reports, benchmarking, and proactive forecasting.
Most people are familiar with this aspect of a CFO, such as being responsible for presenting and analyzing the reports on a timely basis and from an accurate financial perspective. The data presented by the CFO is shown to a lot of people – employees, creditors, analysts, shareholders, and other members of the management. Due to this information’s sensitivity and based on the fact that your company’s future decisions depend on these figures, it is extremely important for the CFO to present accurate data.
The CFO is responsible for the business’ financial health, and they must know how to invest for the betterment of the organization, considering liquidity as well as the risks involved, and make decisions accordingly. Additionally, the CFO manages an organization’s capital structure, figuring out internal financing, equity, and debt proportions. Taking care of the concerns related to the capital structure and finding methods to generate revenue is one of the most valued CFO duties.
The current and historical status of a company is not the only thing that a CFO has to worry about. They also have an important role in building and securing a company’s financial future. For this, they must have the ability to analyze real-time data and identify areas where the company needs to make improvements and also determine the most efficient segments. The review of the current performance and analysis requires the use of economic forecasting and modeling. With these two, an organization can make the right predictions for their policies and procedures with decisions that make sure that they succeed in the long run.
The Age of an eCommerce CFO
Today, most organizations use an eCommerce platform. Whether they sell services or products, the online market is growing exponentially and organizations have to adapt to this paradigm shift. Tailoring an organization as per the online landscape is important for continued progression and growth.
Business owners often struggle with the eCommerce space. Hence, they have to hire an eCommerce CFO to manage it. Let’s see how the job of an eCommerce CFO is different from a traditional CFO. If you are looking to become one, consider the following post as a guide for your career path.
What Is an eCommerce CFO?
An eCommerce CFO has a lot on their plate, which is why only people who are looking to have a dynamic career should consider this position. They plan, create, and implement online financial strategies for eCommerce businesses. To do this, they are required to assess and evaluate large amounts of data, deciding whether an organization is on track to reach their intended targets. If the eCommerce business is struggling to hit its goals, an eCommerce CFO has to arrange meetings with the business owner. Together, they work out how a plan of action that can improve outcomes in the future.
The eCommerce CFO is also in touch with the marketing and advertising departments of your eCommerce brand. They assist these departments with financial budgets by going through current market trends and analyzing statistics. Hence, an eCommerce CFO cannot thrive without continuously updating themselves with current trends, and adapting as the market takes different turns.
Besides, an eCommerce CFO engages in competitor analysis as well – keeping an eye on your competitors. Like any industry, it will serve you good to track how your competitors are faring. In this way, you can assign the right pricing model to your products, without overpricing or underpricing them. On a similar note, since you are targeting the same audience, with an eCommerce CFO’s help, you get to know how your competitors are standing out in the industry. Become the best by learning from your experienced rivals.
Generally, it is the responsibility of an eCommerce CFO to handle your brand’s financial area, maximizing revenue, and minimizing unnecessary spending. Usually, people who like to work with statistics and numbers shine if they follow the career path of an eCommerce CFO.
Responsibilities Of an eCommerce CFO
An eCommerce CFO always has their hands full, thanks to a wide array of tasks and responsibilities. If you are working as one, here’s what you will need to do.
Develop and Enforce Budget
Budgeting is one of your primary duties. You have to develop budgets for each of your organization’s areas. Firstly, you are required to study all the metrics and data streams to evaluate your business’ current state. In this way, you get to pinpoint areas that offer higher ROI potential. Conversely, you can locate areas where budget cuts are a necessity for better financial performance. Usually, an eCommerce CFO is tasked to manage the budget of the following areas.
- Staff and Payroll
- Software Costs – Email marketing platforms, website plugins, project management tools, web hosting, and editing programs
- Office Supplies
Data Analysis and Reporting
After implementing your budgets, you have to regularly perform data analysis, examine the new results, and decide what works and what does not. You observe business areas that are flourishing and the ones where changes are needed. As the eCommerce industry evolves at a rapid rate, you have to alter or adapt budgets after sudden variations in market trends. Here are the figures that you will study:
- Inbound web traffic
- Outbound web traffic
- What are the sales of a specific product?
- How visitors discovered your product, which can be an ad, social media post, or a landing page?
- What are the demographics of your visitors?
- At which phase in their buying journey did customers drop?
- What are the daily/monthly/yearly purchasing trends?
- How are your marketing and advertising campaigns working out in terms of conversion?
These are some of the most popular metrics you will have to study and report as an eCommerce CFO. However, based on your eCommerce’s nature, you may have to prioritize other data streams as well.
Financial Risk Assessment
Financial risk refers to a situation where your eCommerce business could lose money. While allocating budgets to various business areas, it is important to evaluate the associated financial risk. After settling into your role as an eCommerce CFO, you have to manage and calculate different forms of financial risks. Examples of financial risks include:
- If a product has low sales, you may be tempted to offer a discount or decrease its price for more sales. However, there is a risk because if your product is not sold at the original price, your business can lose potential revenue.
- Internet marketing campaigns are tricky, especially when you put a sizable chunk of investment in an online ad campaign. If it fails, your eCommerce business could run out of money.
- When you consider influencer marketing .i.e. pay an influencer to promote your products and services through social media. Although you can gain new customers, failure can affect your brand.
Irrespective of the scenario, an eCommerce CFO has to ensure that the budget is directed to high-return and low-risk areas.
Sales forecasting is necessary when it comes to managing an eCommerce business. It enables you to leverage a reliable prediction of upcoming sales and handle your inventory better. With a sales forecast, an eCommerce business gets to make the right decisions that improve both short-term and long-term growth.
eCommerce CFOs come up with long-term and short-term performance after reviewing other competitors, inspecting the economic trends, and studying the historical sales data.
For instance, if you sell HVAC equipment, such as air conditioners, then your target audience is more likely to buy them in the summer season. Based on prior trends and sales data, an eCommerce CFO predicts the company’s profitability in this period. Similarly, they show how you are expected to lose sales in the winter season. These sales forecasts help you to personalize your advertising campaigns and tailor outward spending accordingly.
How to Become an eCommerce CFO?
If you want to become an eCommerce CFO, you should have at least a master’s degree in finance. Such a study track gives important insights into financial leadership, which is a crucial requirement for this designation and career trajectory. Moreover, you have to learn about risk assessments, investments, and corporate finance, offering a much-needed boost to your career. Several options are available for earning a master’s, including in-class learning, full-time programs, and flexible online programs.
Skills Needed to Become an eCommerce CFO?
When you join the eCommerce industry as a CFO, you must know the following:
You must have terrific technical skills required to pursue this career path because your entire profession revolves around technology and software. Hence, you have to gain a basic understanding of website plugins, SEO, website design, spreadsheets, database management, and many more. You will receive various opportunities to build on your skills and learn more on the job, but still, you should have a solid foundation in tech-based skills.
Mathematical and Analytics Skills
A large part of your job is centered on crunching numbers and studying statistics. First things first, you must have the skills needed for data analysis and make conclusions as per your findings. It includes detailed calculations and a great deal of critical thinking. The eCommerce organization depends on you to make predictions for budgeting and trends that are optimal for the company growth. Analytics skills are a lifesaver and enable you to make sense of several business functions.
As you work with numbers, data, reports, and various software, organizational skills are a must-have. Without proper organization, you can confuse numbers and even lose crucial information. As an eCommerce CFO, you have the freedom to build your own systems to create accurate data reports and effective budgets.
As an eCommerce CFO, you get to collaborate with many people belonging to different areas of the eCommerce organization. A CFO must interact effectively with individuals they supervise and establish trust and respect. Additionally, you will lead numerous meetings and it is essential to communicate your financial plans and vision to the organization properly.
As an eCommerce CFO, you have to make a lot of important decisions that decide your organization’s finances. You must have belief in your capability and prowess and make decisions with surety. For that, you will have to build a rapport with your superiors – which is only possible when you demonstrate your skills and prove yourself by not only making rational decisions but also sticking with them.
In this digital age, an eCommerce CFO is absolutely necessary. They can change your company’s fortune. If your eCommerce venture is struggling, get in touch with us and we will help you fulfill an eCommerce CFO’s duties, and turn your back office into a profit center.