Finance is an important concern for almost all organizations whether big or small.
However, as a company grows, its financial concerns also grow and so do the responsibilities of finance department.
Large businesses have Chief Financial officers to take care of the financial concerns of the organization.
The role of the CFO inside an organization has undergone a profound change over the past several years.
The CFO is now an important part of the C suite.
In general, CFO is responsible for the financial actions and decisions of the organization.
He is the most senior executive in an organization, responsible for important financial actions and decisions.
Apart from tracking the cash flow of an organization, the CFO is also responsible for financial planning and analysis and for analysing the company’s financial position and proposing corrective measures.
The CFO is at the top of the finance team in an organization.
He reports to the CEO and works closely with the board of directors.
Earlier CFOs uses to play only supportive roles and advised CEOs.
However, their role has undergone a significant transition over the last few decades.
They play a strategically important role in terms of setting the organization’s direction for the future and ensuring its success.
The role of the CFO has grown even important as the level of competition and uncertainty in the market have grown.
The CFO now plays a double role inside the organization.
On the one hand, as the finance head of the organization, he is responsible for overseeing the organization’s financial activities.
On the other he also plays an advisory role and advises the other executives over financial matters.
His aim is to help the organization meet its revenues and earnings goals.
However, he also advises the other department heads over maximizing revenues and cutting expenses without sacrificing customer satisfaction or the company’s image in the market.
Based on the level of complexity involved in the role of the CFO, companies want people in these positions that have solid experience and proven expertise in the area.
Often peole who are in these positions have advanced certificatiosn like MBA, or a graduate degree in finance and economics and the CFA designation.
If they have a background in investment banking, analysis or accounting, that also helps.
A CFO plays a significant role in deciding the firm’s investments, capital structure and managing the firm’s income and expenses.
In the longer run especially, the role of the CFO in ensuring the company’s success grows vital.
For example, if the marketing department is planning to launch a new campaign, the CMO may seek advice from the CFO to ensure that the project remains feasible and for setting the campaign’s budget.
One of the key responsibilities of the CFO is to present accurate financial information since several important decisions are based on the type of data and information they provide.
CFO’s role also involves ensuring financial compliance.
For example, the CFO has to ensure adherence to GAAP in the financial activities of the company established by the SEC.
Sarbanes Oxley has also laid some key requirements for the CFO.
These provisions include disclosure of important financial information and fraud prevention.
CFO’s role has evolved from being a data cruncher to being a strategic partner and adviser to the CEO.
Now, the CFO plays a strategically vital role in setting the company’s business strategy and deciding its long-term success.
According to glassdoor, the average salary of the CFO in the United States is $1,67,168 per year.
Another important aspect of a CFO’s role is forecasting.
The CFOs do not just report financial data.
A lot of their time is spent with financial planning and forecasting scenarios.
Apart from the company’s past financial performance, the CFOs also consider the other internal and external factors that may affect the company’s earnings like costs of operations, market demand, competition and other factors.
The CFO needs to oversee the internal financial reports like the balance sheet, P&L statements and other similar financial reports to maintain their quality.
He also helps shareholders and other important stakeholders understand the financial condition of the business.
He needs to check out that these reports are complete, accurate and in accordance with the Generally Accepted Accounting Principles (GAAP).
In this way, the CFO’s role involves a lot of strategy formulation and forecasting as well.
With time, the CFOs role has evolved and grown more challenging.
As a result, apart from industry knowledge and financial expertise, the CFO also needs to have leadership skills, risk assessment and management skills and experience in managing organizational growth.
His role is critical in ensuring the company’s fast growth.
He advises other department heads in several scenarios including product launch, market expansion and mergers and acquisitions.
As the industry environment is growing more competitive and uncertain, the CFOs will need to maintain a heavy focus on technology to drive superior growth and higher profitability.
Data and analytics are vital for any CFO with regards to making critical financial decisions and forecasting.
CFOs depend on automated reporting so they can devote extra time to forecasting and predictive analysis.
As such, the CFOs also need to be champions of digital technology.
Several new technologies including AI and cloud technology are changing the face of financial reporting and CFOs need to remain aware of how technological changes affect their role, demand and market dynamics and their firm’s position in the market.
Overall, CFO is one of the most critical positions in the C suite.
A lot of the company’s success depends on his input into crucial matters and strategy formulation.
His role has become more central to the company’s success compared to a few decades ago.
CFOs apart from being the chiefs of finance department also provide critical support to the CEO and other executives in the most critical matters related to the company’s future.
However, they also need to maintain their focus on the internal and external environments of the firm to excel in their roles.
Technological awareness is also equally critical for the Chief Financial officers, apart from accuracy of reports and a focus on compliance.