The function of the CFO has significantly changed during the past few decades. The CEOs today take for granted the historical responsibilities of the finance department, such as keeping books and records, financial reporting, and adhering to the law. Future CFOs will need to be able to use financial data to inform operational strategy and decision-making.
Table Of Contents
- Who is a CFO?
- What do they do?
- Roles of a Chief Financial Officer
- Benefits of Having one
- How to become a CFO?
Who Is a CFO?
The top financial state in an organization is held by the chief financial officer (CFO). They are in charge of keeping an eye on cash flow, creating a financial plan for the business, determining its financial strengths and weaknesses, and offering strategic advice.
One of the regulatory agencies and authorities that CFOs are required to answer to is the Securities and Exchange Commission (SEC) in publicly traded firms. They are knowledgeable about both state and federal laws, including the Sarbanes-Oxley Act, as well as generally accepted accounting standards (GAAP).
What Do They Do?
In addition to overseeing the organization’s financial operations and being in charge of the finance and accounting staff who carry out operational duties, the CFO also acts as a strategic counselor to the Chief exec and other C-suite employees. There are so many CFO training courses that helps us to be a CFO and understand the roles like:
- It is obvious that the CFO’s duties include achieving revenue and earnings targets and maintaining a steady cash flow.
- Additionally, finance directors provide guidance to senior managers across the entire organization, helping them to maximize revenue, if they have a revenue-generating role, and reduce expenses without compromising client or employee happiness or the brand name of the business.
- The CFO collaborates with departments to provide funds for human capital management and aids in the selection of qualified personnel for the finance team.
- To help the CEO make wise financial decisions, CFOs put complex data — including recent, historical, and projected financial results — into perspective: Should we launch this brand-new product or service?
Responsibilities Of A CFO
1. Cash Flow
The ability of a company to settle its short-term liabilities, or those that are due in less than a year, with easily available, or liquid, funds is referred to as liquidity. What the business owes compared to what it owns is typically expressed by a ratio or percentage to represent liquidity.
In order to have enough cash on hand to meet financial responsibilities, CFOs are concerned with making sure that payments are received in whole and on schedule.
2. Return On Investment
Ensuring a significant return on investment (ROI) for their firms is a strategic priority for CFOs. ROI is a metric for determining both the likelihood of a return on investment and the set amount of that investment. It considers the profit or loss of an investment as a proportion of the cost as a ratio.
Because present value, for example, is not taken into consideration by ROI, a pretty basic KPI, CFOs utilize additional information to determine whether a project would produce a strong enough ROI to be worthwhile.
The capacity of CFOs to accurately forecast anticipated future outcomes is an important aspect of their worth to a firm. Importantly, they don’t just report what is.
This comprises financial forecasting and modeling based on both internal and external variables that may have an impact on revenue and expenses, in addition to the company’s historical performance. It is the responsibility of the CFO to interpret the numerous departmental predictions in order to produce earnings for the CEO and stakeholders.
Internal leaders and external stakeholders can both benefit from financial reports such as balance sheets, profit and loss statements, and cash flow statements, and it is the responsibility of the CFO to certify that these assertions are complete and accurate in accordance with generally accepted accounting principles (GAAP).
Benefits Of Having a CFO
- Leadership abilities that help them put together a productive finance and accounting team. The CFO will create positions and allocate responsibilities once they have determined when a business needs to recruit, say, a tax specialist.
- Industry knowledge that allows a company to assess its competitors. There’s a reason B2C companies frequently try to poach CFOs from rivals, as happened when Netflix hired Activision’s finance director. The same goes for healthcare organizations and manufacturers.
- CEOs, especially those wanting to take their firms public, value the growth knowledge gained by successfully assisting former employers to develop, whether organically or through M&A. A CFO aids with capital allocation and opportunity identification.
- Risk assessment and management should take into account regulatory compliance as well as the risks associated with excessive debt and low liquidity, brittle supply chains, incorrect contractor selection, and poorly deployed technology.
How To Become A CFO
1. Get A Bachelor’s Degree First
Accounting or finance degrees will be desirable for CFOs. If you want to one day climb the corporate ladder, it can be general, but it needs to be in the appropriate universe.
Most business graduates won’t go on to become chief financial officers. It is possible to be an exception and obtain the CFO position by pursuing an MBA with a specialty in accounting or finance.
2. Get An MBA Or MSF Degree
The majority of those who are really committed to rising to the top of the accounting profession and becoming a CFO either pursue graduate education, a specialized certification, or both.
A Master of Business Administration (MBA) with an emphasis in accounting/finance or a Master of Science in Finance (MSF) has several advantages, but it is not necessary.
3. Get A Professional Certification, Like CPA Or CMA
It is advised that those who want to work as CFOs pursue an accounting certification in addition to their undergraduate and maybe graduate studies. Certified Public Accountant (CPA) and Cost Management Accountant are the two most well-known and regarded (CMA).
4. Establish A Solid Career
Your prior performance ought to speak for itself. So, construct it with purpose. Every position you hold can add to a body of work that amply illustrates your qualifications.
If becoming a CFO is your ultimate goal, you need to deliberately consider where you work and how to develop a network that will be of use to you.