What is a Chief Financial Officer (CFO)?
CFO is “Chief Financial Officer,” the job title of a company’s top financial leader. They are in charge of their company’s entire financial plan and operations.
A chief financial officer (CFO) is responsible for:
- tracking cash flow
- financial planning
- tax and regulatory compliance
- analyzing the company’s financial strengths and weaknesses
- making strategic recommendations to improve profitability
- overseeing investment decisions
- managing relationships with investors and financial institutions
A company’s Chief Financial Officer (CFO) is usually filled by highly skilled, experienced, and well-known financial experts. Most CFOs have a bachelor’s degree in business management, finance, accounting, or economics. They also have a Master of Finance or Chartered Financial Analyst (CFA) title, which is more common at more extensive or successful companies.
A lot of CFOs have worked as accountants, financial analysts, or investment bankers in the past. The CFO job is usually the most prestigious and well-paid one in the finance department of a company.
Synonyms
- Finance Chief
- CFO
What the CFO Does for a Company
Why chief financial officers are important
The CFO is the most critical person in a company’s finances because they are part of the C-suite. Because of this, they’re not just a business star but also a strategic partner.
- Chief Executive Officer (CEO)
- Chief Technology Officer (CTO)
- Chief Operating Officer (COO)
- Chief Revenue Officer (CRO)
- Chief Marketing Officer (CMO)
- Chief Information Officer (CIO)
The Chief Financial Officer (CFO) has the most power and final say over a company’s assets, capital structure, and how much money it makes and spends.
They help the CEO with…
- making predictions
- managing risks
- raising money
- deciding on mergers and acquisitions
CFOs also work on budgets and financial strategies with top managers lower in the company who work in finance.
But they don’t just affect the finance department. A lot of the time, they work with sales and marketing leaders to boost the bottom line and bring in investors. For example, if the VP of Sales wants to hire more people to help them join new markets, they would talk to the CFO (and, if there is one, the Chief Revenue Officer) to see if it’s possible, get permission, and get the money they need to hire more people and grow the business.
Who is the CFO? News reports that the CEO and COO are in charge, and the CFO is third in line. They work for the CEO, who isn’t always their “boss.” The CEO relies on the CFO’s advice a lot when it comes to investments and cash structure. They work together because of this.
The CEO usually sets the direction and vision, and the CFO helps guide, develop, and carry out that vision in a way that is good for the company’s finances. They might also report to the COO, and along with the CEO, they answer to the Board of Directors.
Who works for the CFO?
There is a chain of command for the job of Chief Financial Officer. They have a lot of employees who answer to them.
They are in charge of treasurers, controllers, tax managers, finance directors, vice presidents and senior vice presidents of finance, accounting directors and executives, and finance directors.
In smaller businesses, some of these jobs might not be as important or be called different things. For example, the finance director might also be the treasurer. In large businesses, they are clear and separate.
Then, these people are in charge of their groups of staff accountants, payroll experts, financial analysts, or administrative assistants.
Difference Between CFO and Financial Controller
The money manager works directly for the chief financial officer (CFO). In an organization’s financial hierarchy, they are right below the CFO and answer to them.
Their main job is to run the company’s finances daily. They manage accounting processes, keep track of accounts due and receivable, make budgets and forecasts, and put together financial statements.
How hands-on the jobs are is the main difference between them. A financial controller is more concerned with making decisions and planning for the future, while a chief financial officer (CFO) works more with financial records and data.
They also talk directly (or almost directly) with the company’s business team. It’s not likely that an analyst or junior accountant will work near the CFO. The controller is usually in charge of the accounting area at a company and works closely with the staff accountants.
What a CFO is responsible for
Taking charge
The chief financial officer (CFO) leads, manages, and directs the company’s financial plan. They are in charge of all of an organization’s financial matters.
CFOs also help shape the culture of their companies and set goals for how well they should do financially. Because of this, they often have a say in who gets hired in their area. They may also help other parts of the company hire people and make staffing decisions.
Getting money
Often, chief financial officers (CFOs) help Series A, B, C, etc., startups and companies merge or buy another company to raise money. When investors look at a company, they usually look at its finances first. The CFO’s job is to show them that and explain it in a way that makes sense.
Deals to merge or buy another company
Most of the time, the CFO is involved in significant mergers and acquisitions by giving possible buyers financial information or doing due diligence for their company. They might be in charge of a group of financial experts and advisors to do this.
M&A deals are often very complicated and require many rounds of talks. The CFO looks at any deal from a financial perspective and ensures it fits with the company’s long-term business goals. They will also decide if M&A is the best way to go in the first place.
Cash Flow
Treasury management keeps track of all of a company’s assets, such as cash and loans. The CFO has the final say when it comes to how money is spent in a business.
In addition, they are in charge of
- Liquidity management: Ensuring there’s always enough cash flow to meet obligations
- Capital budgeting: Determining what assets to invest in
- Working capital management: Managing the assets and liabilities that support day-to-day operations
- Finance Operations: The CFO oversees an organization’s finances and leads the Finance Operations (FinOps) team. They do high-level financial planning with the CEO and sometimes other members of the C-suite. They focus on long-term strategy planning for making money and keeping costs down.
Before going ahead with a significant investment in staff, tools, growth, research and development, or new products, the CFO must go through. The same goes for anything that involves getting more money through debt or property.
Predictions about money
The chief financial officer (CFO) is in charge of analyzing both internal and external market trends. They also make long-term financial plans that align with the company’s goal and make decisions that affect those plans. They are very familiar with predicting models because they worked directly with them for years. However, they aren’t always the ones making the predictions.
One more tricky part of predicting is telling the CEO and Board of Directors what the results of your predictions will be. Once the CFO has those numbers and their meanings, they will share them with other C-suite members or investors to let them know about the company’s present and future financial health. After that, it’s their job to help everyone else understand.
Reporting on finances
Many CFOs depend on finance managers to make sure they pay their taxes and put together their financial statements. They put together financial records, but the CFO has to review all the data and give their OK. That way, you won’t miss anything or get it wrong.
Along with ensuring taxes are paid, CFOs are also in charge of ensuring their company’s financial records are correct and current. Public companies have to follow the rules for filing with the SEC, and it’s up to the CFO to give the company the information it needs.
Figuring out ROI
No matter your area, you can figure out your ROI. They all end up in the CFO’s office, though. This is because the Chief Financial Officer is eventually responsible for figuring out whether or not an investment is sound.
They can veto or offer alternatives if they don’t think a specific cost, piece of equipment, or process will bring in enough money to make it worth it. Plus, they can cut money from projects that aren’t working out and use the money and resources in other areas.
Plan for money matters
From what they know about…
- current cash flow and working capital
- ROI from different departments and their activities
- current company health according to financial metrics and ratios like the Rule Of 40
- trends within the company and outside its walls
- short-term and long-term objectives
- situational financial considerations like an upcoming product launch
Getting Along
The CFO is in charge of making sure that several laws and rules are followed:
ASC 606 (national) and IFRS 15 (international) rules say how to recognize revenue. Publicly traded businesses must follow the SEC’s rules. The Sarbanes-Oxley Act sets rules for corporate governance and financial reporting.
The chief financial officer (CFO) is also responsible for internal checks and ensuring the business follows all laws and rules. They work closely with inspectors to make sure they have all the information they need, and they are usually the ones who are ultimately responsible for any compliance problems.
The tech that chief financial officers and their teams use
Reporting on finances
Software for financial reporting simplifies the reporting process and lets you look at the numbers. Good finance teams use it to do the following financial tasks:
- Getting and combining data
- Making predictions and budgets
- Analyzing data
- Making sure payments are correct
- Making financial statements
- Closing the books
- Auditing
The software makes it easy for businesses to make limited reports and find important information.
Managing a Portfolio
Portfolio management tools like Quicken, Mint, and Personal Capital make it easier for the CFO to track all their finances in one place. They show all of your ats and debts at once, making it easy to keep track of things like stocks and bonds.
Planning and analyzing money (FP&A)
Businesses use FP&A software for many things, such as:
- Making budgets for income and spending • Using financial models and forecasts
- Looking at financial information to guess and decide what to do
Machine learning is used in FP&A tools to make financial planning and research better. They help CFOs develop tactics that make the company more profitable, bring in more money, and cut costs.
Platform for billing
Businesses get paid when people buy goods or sign up for services. In other words, they get most of their internal financial data from billing software.
Billing software sends information to • Accounting and banking software to record income at the right time.
- Software for financial reporting that shows dashboards and financial statements correctly how much money the business made.
- FP&A software to make financial models and predictions more accurate
Not only does it let the business get paid, but it also saves the whole finance staff time and keeps them from having compliance problems. Regarding financial software, the billing tool is the most critical first piece.
How Finance Trends Affect CFOs
The chief financial officers (CFOs) of companies in 2024 need to get their businesses ready for a coming slowdown, rising prices, environmental problems, bank failures, and more security holes.
To prepare for security risks, 79% of CFOs surveyed by PwC’s 2024 Global Digital Trust Insights Survey plan to spend more on cybersecurity by buying more software and hardware to keep themselves safe.
Another PwC study says that 40% of CFOs are setting up rules, guidelines, and controls for gathering climate data. And 53% say they are speeding up the digital change by using cloud solutions, AI, automation, and data analytics. These tools lower costs, make internal processes more efficient and make forecasts more accurate overall.
Early in 2023, Silicon Valley Bank and Signature Bank went out of business. This taught CFOs across the country an important lesson: they need to be very careful about who they do business with. CFOs worldwide learned how important it is to diversify as startup founders and business executives rushed to get their money out of these banks.
It’s hard to get ready for geopolitical war. Every once in a while, supply chains and workforces worldwide are interrupted. But the ones happening now, as 2024 begins, are much bigger and last longer.
One case is the war between Russia and Ukraine. Deloitte says that finance leaders need to look at their data, the holes in their security, and any new technologies that might make working with workers, vendors, and suppliers in other countries more flexible.
