A Chief Financial Officer (CFO) plays a vital role in any organization. They oversee the company's financial health, ensuring that all money is handled correctly and that all appropriate risk management protocols are in place. They also serve as a liaison between leadership, the board of directors and the rest of the team for financial communications and strategy.
The CFO job description
The Chief Financial Officer role is often the highest financial position in an organization. The CFO is the senior executive responsible for providing financial clarity and support to their company's leaders.
CFOs are often responsible for overseeing the company's finances and providing guidance on how much money they have, where it comes from, and how it's being spent. They’re responsible for financial analysis and financial reporting. At the most basic level, they ensure that the company remains in compliance with regulations and laws regarding taxes and accounting.
Many Chief Financial Officers have an MBA in addition to an accounting or financial management background. They need to have a strong understanding of financial concepts and apply them to real-world situations that affect the business. They also need to understand financial technology and economic trends.
Strong communication skills are also essential, as the CFO frequently serves as a liaison between leadership, the board of directors and the rest of the organization.
Related reading: benefits of a fractional CFO
Differences between a CFO vs CEO
The roles of a CEO and CFO are sometimes misunderstood.
The CFO, or Chief Financial Officer, is tasked with overseeing all financial operations of a company. They are responsible for maintaining and improving the company's finances, including profits and losses as well as cash flow and debt. The CFO is also responsible for managing the company's finance and accounting team and overseeing all financial data, processes and policies. They also provide regular financial reports to stakeholders and investors.
The CEO, or Chief Executive Officer, is in charge of running the business itself. They oversee all day-to-day operations within the business and have ultimate authority over hiring and firing employees within their organization.
In some ways, the relationship between the CFO and CEO is similar to that of an attorney and their client. An attorney provides legal advice to their client so that the client can make informed decisions about their situation. In the same way, a CFO provides financial guidance to help the CEO make sound decisions for their business.
When to hire a CFO
As a business leader, you may be wondering when you should invest in CFO services. It’s not so much about the size of your company. It’s about a desire for a strategic adviser with deep financial expertise.
There are several good reasons why you might need a CFO right now:
- You're growing quickly, so you need someone who can keep up with your growth patterns and help you plan realistically for the company’s financial future.
- You want someone who will work closely with your management team to ensure that everyone is on the same page when it comes to critical financial matters.
- You want someone who will help you develop strategies that align with your long-term vision for your company.
Most companies do not start with a CFO on staff. However, having financial guidance from an industry professional will help you grow your business. This is where fractional CFOs are of tremendous value. A fractional CFO works on a part-time or fractional basis to provide critical expertise.
Duties of a fractional CFO
The role of a fractional CFO typically falls into two main categories:
- Financial management. From supervising the personnel in the financial department to preparing the organization's financial statements, the CFO is responsible for all things finance.
- Strategy and business advisory. The CFO is also responsible for advising the CEO and other members of senior management on how to invest or manage the organization's financial resources.
These seasoned finance professionals put complex data—current, past and predicted financial results—into perspective, assessing the company’s financial strengths and weaknesses and devising plans of action. They help the CEO make sound financial decisions, like:
- Should we introduce this new product or service?
- What are the tax implications of our employees working remotely?
- Can we afford to onshore our supply chain?
This forecasting is essential for ensuring that the company can marshal resources for expected growth. Here are some other areas where Chief Financial Officers play a key role:
- General financial planning
- Financial intelligence
- Cash flow forecasting
- Cash flow management
- Raising capital
- Preparing for business growth
- Succession planning
- Fine-tuning strategy
- Scaling existing systems
- Business planning