Big public businesses may have determined the chief financial officer role, but the CFO position is rapidly becoming quite common in small and midsize firms. These days, CEOs recognise the usefulness of an experienced financial advisor who will aid them in growing their market share and their companies. In short, businesses now see the CFO position — both on a virtual and internal basis — as an investment and not an expense.
What Is a CFO?
A chief financial officer is the principal financial personnel in a company and is in charge of the fiscal condition of the organization. The CFO’s duties encompass but are not limited to, ensuring expenses and revenues stay in check, overseeing financial planning and analysis (FP&A) functions, developing a quality accounting and finance team, crafting budgets, verifying the precision of reports, giving counsel on acquisitions and mergers, and obtaining funding. A CFO is also responsible for the execution of every financial strategy.
CFO vs CEO
The CEO (chief executive officer) is an organization’s highest-ranking authority. Depending on the organizational structure, the CEO is responsible for every aspect of a firm’s fiscal and operational health, or the president can share some responsibilities.
CFOs are the leading financial authority in a company. They report only to the CEO and work directly with the company’s board of directors. The CFOs also serve as risk mitigators, sounding boards, and strategists.
Responsibilities of a CFO
Liquidity is a company’s ability to settle its short-term liabilities with readily available funds. It is usually expressed as a percentage or a ratio of what the organization owns against what it owes. CFOs ensure that client payments are made on time and in full, and manage expenses to ensure that there is adequate cash on hand to handle financial obligations.
An essential portion of a CFO’s value to a company is their expertise in precisely predicting possible future outcomes. This encompasses financial forecasting based on the firm’s past performance and external and internal factors that will influence expenses and revenues.
Return On Investment
Another important part of the CFO’s strategic focus is ensuring a significant return on investment (ROI) for the company. ROI is a valuation of the possibility of securing a return on money invested and the accurate amount of the return. A CFO’s role here is to analyze whether a certain project will deliver adequately potent ROI to be deserving of the investment.
Accounting reports such as cash flow statements and balance sheets aid both external stakeholders and internal leaders to understand the current financial condition of the company, and it’s the CFO’s job to verify the accuracy of these statements.
Benefits of a CFO
The CFO of a company doesn’t only guide the accounting and finance team, they also have an extensive view of the firm’s financial health. Allowing the CEO and peers including the VPs of sales and HR, COO, and CMO to focus solely on their operational problems and goals. While a COO and CEO may have some background in finance or accounting, they don’t have the same level of experience or technical acumen that a professional CFO brings to the company.
Companies should think about hiring a CFO when the financial staff and CEO can no longer accurately assess the company’s fiscal standing, forecast financial needs, create business strategy, and evaluate cash flow.