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 CFO 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. In order to justify their decisions for the company, the CFO must be well versed in reporting financial data to other executives and outside investors.
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 CFO 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.
For companies with hundreds of employees, the CFO can analyze the financing of entire departments to find 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. Within the world of finance, markets are continuously changing, meaning close attention to detail is needed to monitor changes. The supply and demand for products and services are almost always guaranteed to change, and it is the CFO’s responsibility to report on how these changes affect business or stock prices.
A close analysis of market trajectories and advancements can provide any business with the means for financial success or continuing growth. A CFO 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 CFO 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 CFO is also consulted for planning out the acquisition of additional assets or property, though this is more likely to be part of job responsibilities within a larger company.
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 CFO 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 CFO 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. The ability to make strong business decisions is always necessary for working as a CFO, but learning this skill only comes through years of practice and study.
Conclusion
The CFO 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 CFO 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 is also an attractive position for those seeking a job that pays well and has an influential effect on the entire company, though it requires extensive study and experience. A CFO’s strategic insights can help make everything within a business more cost-efficient, which opens the door to continuing business growth.
