For those who study and work in accounting and finance, becoming the CFO (Chief Financial Officer) of a company is often a continuing goal. Even those experienced with bookkeeping may wonder: what does a CFO do? The Chief Financial Officer is critical for any company’s C-suite and directly influences the large-scale outcomes of the company.
For larger companies, the CFO position also has various responsibilities that impact all levels of corporate operations. A CFO providing quality management for your business can create value and optimize profit.
What is a CFO?
The Chief Financial Officer for any company is the lead strategist on all financial investments and operations. This equates to the CFO affecting all aspects of the company, from HR to investments to acquisitions. But while most CFOs have training and experience with accounting, they are rarely the ones maintaining basic services, such as bookkeeping and payroll.
The CFO of any company is a decision-maker, particularly regarding increases in company scale, investments, and cash flow. The Chief Financial Officer must be well versed in reporting financial data to other executives and outside investors in order to justify their decisions for the company.
For smaller companies and start-ups, the CFO role may not be filled through internal hiring. The cost of hiring a CFO is high and many businesses cannot afford the average CFO salary requirements. The Chief Financial Officer position is outsourced instead, on a contract basis. Regardless of how the hiring works for the CFO, the responsibilities and tasks of the role stay the same. Let’s take a look at how a CFO works to improve the trajectory of any business.
Financial Analysis
The CFO reviews and manages the finances of the company from an overhead perspective. This means analyzing all company assets and debts to find financial gaps in value. For direct commerce companies, this can mean accessing the profit margins for all product lines and offerings.
The Chief Financial Officer can analyze the financing of entire departments for companies with hundreds of employees to identify points where overhead costs can be reduced or where additional capital is needed. The CFO’s financial analysis aims to maximize the profitability of a business from within by finding more efficient solutions for internal operations. This portion of a CFO’s job requires considerable professional experience relating to finance and accounting.
Measure Opportunity and Risk
Analyzing and keeping up with the market in which a company is competing is another primary responsibility. In the world of finance, markets continuously change, requiring close attention to detail to monitor these changes. The Chief Financial Officer must report on how these changes affect business or stock prices, as the supply and demand for products and services almost always undergo shifts.
A close analysis of market trajectories and advancements can provide any business with the means for financial success or continuing growth. A Chief Financial Officer takes the market data and the internal financial margins into account to bring attention to both opportunities and risks that will affect the company’s profitability.
Financial Planning
Once a company has identified its related opportunities and risks, a CFO will provide financial recommendations for future operations. Therefore, the CFO is a central decision-maker in deciding how the business moves forward with its product or its current operations. Budgeting for future advertising and marketing is also an essential part of the CFO’s executive role.
The Chief Financial Officer provides strategic advice and guidance for CEOs to make executive goals possible. The CEO, in turn, relies on the CFO to maintain the health of company cash flow, debts, and investments. The Chief Financial Officer plays a role in planning the acquisition of additional assets or property. This responsibility is more common in larger companies. They consult with the CFO for this purpose.
Communicating Success and Failure
CFOs must be able to communicate the wins and losses of the company and provide data that support their assessments. For larger companies, the CFO may report on successes and failures to investors or shareholders to keep the important company stakeholders in the know.
In other cases, this reporting and communicating process comes down to meeting with the rest of C-Suite or the CEO. Projecting confidence and speaking honestly while providing financial data is an important skill for any CFO and can instill public confidence in your business.
CFO Experience and Education Requirements
A Chief Financial Officer position requires a considerable amount of experience and education. Many CFOs hold Master’s degrees in business administration (MBA) and focus on studying finance, accounting, or management. A Chief Financial Officer must understand how the various aspects of business work, with some knowledge of accounting and operations management.
The desire to continue developing and sharpening business skills throughout your career is essential to the CFO position. Most candidates for CFO positions have many years of experience working in accounting, administration, or financial advising roles. Working as a CFO requires the ability to make strong business decisions. This skill is developed through years of practice and study.
Conclusion
The Chief Financial Officer is a vital decision-maker for any company and influences the financial margins and success for the future. For smaller businesses, the skills and advice provided by a CFO are challenging to acquire due to the high costs of internally hiring for this role. These businesses can turn to the support of outsourced CFOs and hire on a contract basis instead.
A Chief Financial Officer can ensure that your business is running optimally and without unnecessary financial risk. For many companies, the CFO is essential for developing long-term executive goals and objectives. The CFO attracts individuals seeking well-paying, influential positions within a company. It demands extensive study and experience. Strategic insights from a CFO enhance cost-efficiency across the business. This fosters continued business growth.
