What Is A Chief Financial Officer? What Are Their Responsibilities?
by Shahnawaz Alam Job & Career 19 September 2023
The role of a chief financial officer has been shared across many of the large public companies. However, the latest business trends find a CFO working closely with the CEO or a COO.
A chief financial officer is a C suite executive who is responsible for the economic success, investment of their funds, and the supervision of the company’s capital structure and the cash flow, track and manage the cashflow of the company and provides the company with different strategic decisions to the company.
They also review the company’s financial reports and ensure that every financial decision and transaction is according to plan. Different online job posting websites are now crawling with more job roles for a CFO nowadays than ever.
So, what is this job role about? Go through this blog post to learn about the role of a chief financial officer.
What Is A Chief Financial Officer?
A chief financial officer is the top-ranking economic role within an organization. They are responsible for the organization’s financial well-being, and they maintain the company’s fiscal health. Some of their typical responsibilities include –
- Building a solid financial and accounting team.
- Ensuring the expenses are maintained well.
- Supervising FP and A functions.
- Making valuable recommendations related to mergers and acquisitions.
They also have to work to find and obtain funds and work with different departmental heads to analyze budgets and financial data. However, their roles are not limited to these responsibilities only. They have to work with different departmental heads to craft budgets, check the accuracy of the reports, and also work with the CEO or the COO for different financial strategies.
Their responsibilities go beyond the ones mentioned here. CFOs also work for the business to find different technology-related directions. They work to recommend other fintech solutions to their employers.
Making necessary supply chain and marketing recommendations according to their industry knowledge and insight into the fiscal data.
CFOs are valued professionals with a good vision for the future. They are always ready with solid leadership qualities and financial knowledge to provide a company with the necessary economic direction.
What Are The Responsibilities Of A CFO?
Since you know who a chief financial officer is, it is time that you learn more about their responsibilities in the organization. Here are the many roles and responsibilities a CFO has to take care of –
Liquidity
A company always has a fair amount of dues and debts to repay. The organization’s ability to pay off these due debts not more than a year away puts them in a financially stable position.
One of a CFO’s many responsibilities is to ensure their fund’s liquidity. They control expenses and ensure that their customers’ payments are made in full and on time. They provide that the company has enough cash to maintain any of its financial obligations.
Return On Investment
As a CFO, a professional needs to ensure that the company has a strong return on the total investment they make for business operations. The ROI of an organization allows businesses to measure the possibility of receiving a specific amount in return for the investments made. As a ratio, it oversees the gains and the losses front of the investment made by the company.
Forecasting
One of the many essential responsibilities of a CFO is to accurately forecast the company’s financial situation and work accordingly to dodge specific financial crises.
They can do financial forecasting and create models according to the company’s past performances. They also have an insight into external and internal matters that can affect the company’s expenses and revenue growth.
Some common internal factors would include trends related to sales, labor, costs associated with HR, and raw material prices.
Some external matters that could affect the company’s sales would include changing market demands, new competitors, and working against advanced technological equipment.
CFOs usually go through different government data, analyst firms, businesses, and the popular media to collect external data.
Financial Reports
A chief financial officer also attests that different financial reports made within and for the organization are accurate. Standard financial information like the balance sheet, cash flow statements, and the P&L statement of the company are necessary for the internal team leaders.
They can better understand the company’s financial standing by going through the financial reports. A Chief financial officer is responsible for ensuring that all these reports are accurate and in accordance with GAAP.
Why Does An Organization Need A Chief Financial Officer?
As said earlier, a CFO has complete knowledge of an organization’s financial health. They can share their view with the COO, CEO, and other C-suite executives and help make positive financial decisions.
They can solve many organizational issues through their insights into the company’s finances and spread the effect of their decisions to the organization’s operational level.
Aside from their financial expertise, a CFO can help the business by providing another necessary service through their different skills, such as –
Leadership Skills
A chief financial officer can build a strong accounting team through their strong and capable leadership skills. They understand when to hire a financial expert for different economic roles and how to develop and manage a team of all these professionals.
Industry Knowledge
Most B2C companies seek to hire a financial expert from their competitors. A CFO has a tremendous financial knowledge of the industry they operate under. They provide their specialized skills to frame the KPIs and metrics for different companies.
Growth Experience
A Chief financial officer usually helps their CEOs expand their companies (organically or through M&A). Their experience with their previous employers can also be valuable to their new employers.
Bottom Line
When a company hires a chief financial officer, it makes an excellent investment that can lead to significant profit and achievement. It is no wonder that the role of CFO is among the highly coveted professional positions in the finance department. Usually, they need to be skilled in managing company finances and have various other soft and hard skills to become a CFO.
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