The modern era demands more from chief financial officers (CFO) than the mere production and analysis of financial statements.
Documents and processes such as balance sheets, income statements, and statement analysis are all part of the CFO’s role.
These executives are now held in the spotlight and have numerous responsibilities that fall under four distinct roles:
- Team leader
- Third-party liaison officer
- Controller of financial affairs.
The job description and career path of a CFO are never in black and white – there are always some gray areas. As long as the responsibilities fit under any of the above-mentioned roles, the job title of CFO will be held accountable.
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 roles of CFOs.
The Responsibilities of a CFO
A CFO is in charge of the following responsibilities.
No surprises here. A CFO has to ensure that the company’s financial records are in order and nothing goes amiss. It is the responsibility of the CFO to maintain the integrity of the books, securities, funds, and other related documents. They must understand all sources and functions of cash. They are the custodian and disburser of the company’s securities and monies. 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 flow of cash 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 process of budgeting, collecting inputs from the company’s executives, controlling company expenses and ensuring that the company stays as far as possible from financial troubles. The CFO has to oversee and authorize all processes for managing company funds, raising capital and executing investment strategies.
3. Strategy Planning
The CFO provides direction to the company’s financial strategic planning and supports tactical initiatives. His/her job is to direct and monitor the implementation of strategic plans to ensure their proper and timely execution. Development of tax and financial strategies also comes under the CFO’s domain.
4. Manage Financial Operations
The CFO also has to play an active role as a part of the executive management team of the company. This includes the management of all finance-related operations such as those involved in treasury, tax, legal, HR, accounting, and investor/third party relations. Additionally, the CFO has to manage all third-party outsourced functions and financial operations and implement the best practices for improving current operational practices. The CFO also has to oversee and review employee incentive and benefit plans to ensure cost-effectiveness.
5. Risk Management
This is one of the core CFO services. The CFO has to understand the risk profile of the company, manage insurance coverage, report risk issues, and mitigate all identified risks. The CFO is responsible to investigate the findings and recommendations of auditors, as well as construct and implement reliable systems for financial operations and control.
6. Data Analysis and Forecasting
A CFO not only controls and manages the current financial situation of a business but also its future financial endeavors. The CFO has the responsibility to analyze data, identify patterns, and forecast the required financial data and information which will allow the company to avoid pitfalls and invest smartly to ensure better returns and profits. This task includes identification of products that contribute most to the bottom line, products that should be discontinued and when the company’s financial profile allows for the development of a new product. This role also includes economic forecasting and modeling which involves the prediction of the best market and economic scenarios that contribute to the company’s success.
7. Financial Information & Reporting
The CFO is responsible to report the company’s current financial profile to stakeholders, board of directors and other members of the executive management team. Various other departments of the company rely on the accuracy and integrity of the data and information provided by the CFO to make decisions and perform other company functions. The higher management, analysts, employees, and creditors utilize this financial information. The magnitude of this responsibility is absolutely huge because it affects the company’s success, growth, and development both in the present and the future. This is why there is no room for any error or mistake.
8. Compliance, Liability and Liaison Responsibilities
This is another aspect of a CFO’s job description. It is the CFO’s responsibility to ensure that company policies, procedures and practices comply with those set by the regulatory bodies and external auditors. Publicly held companies face more compliance issues as compared to privately-held and the CFO plays a crucial role in this regard. The CFO has to understand all legalities of the company, including tax obligations, legal contracts, and hidden liabilities. They are responsible for maintaining external relations with investors and third parties, which makes them the financial ‘face’ of the company.
The Role of CFO as a Catalyst
In addition to the above-described responsibilities, a CFO plays the most important role of a catalyst. This is possible because of the many tasks that a CFO is accountable for. Thus, he/she has the power to stimulate and timely execute changes in the financial profile and/or functions of the company. The CFO can successfully implement initiatives, policies, and procedures that lead to business growth and improvement. These can include procurement, cost reduction, pricing and other innovations and improvements that add value to the company.
The CFO plays a central role in the company’s day to day business activities, specifically core functions with accounting/finance. Therefore, the CFO is one of the most valuable assets of an enterprise. We developed a tool ‘Your Back Office’ that helps CFOs and Accountants perform their job to the fullest. When hiring a CFO, ensure that your prospective CFO will be able to perform all the above-listed responsibilities. Also, be confident they can perform these responsibilities according to the nature of your industry and business.