Why the Role of CFO is vital in MIS and Board Reporting?

Ashish M. Shaji

01 Feb, 2021

CFO, also known as Chief Financial Officer, oversees the financial operations in an organization. They manage all aspects of financial matters and decision making. CFOs have a very critical role to play in an organization as an organization cannot survive if it doesn’t actively investigate and safeguard its finances. This article will discuss Why the Role of CFO is vital in MIS and Board Reporting?

What is the role of CFO?

The role of CFO can be best understood under the following heads:

• Cash flow

CFO has to control the cash flow position throughout the company. They are also required to understand the sources and uses of cash and maintain the integrity of funds, securities, etc. A modern day CFO also has the authority to establish accounting policies and procedures for cash collections and various other financial obligations. It is the most essential role of a Chief Financial Officer.

• Company Liabilities

A CFO of a company has to understand the liabilities of the company as a company has a number of legal liabilities therefore, the CFO has to watch out for the liabilities.

• Financial Relationships

The CFO maintains lines of communication with financial analysts and shareholders. They administer banking arrangements and maintain adequate sources of capital.

• Financial Obligations

As a CFO, one is required to approve all agreements concerning financial obligations and actions that require a commitment of financial resources.

• Budgeting and Expense control

This is another essential role of CFO to oversee the budget process and compare the company’s actual performance with estimates.

How do CFOs work?

In an organizational structure, a CFO reports to the CEO and gives great input in the investments of the firm, revenue structure, and financial management. They provide their contribution to the overall success by working with other senior executives. When the marketing team brings about a new campaign, CFOs ensures that it is financially feasible and then allocate funds. A CFO can also assist the CEO with different predictive cost-benefit analysis and funding initiatives. The CFO heads over the financial industry, and they may assume the role of CEO or COO or the president of the company in the future.

Responsibilities of a CFO

The following are the responsibilities of a CFO:

• CFOs drive the financial planning of the company. This is an essential responsibility of the CFO;
• Another responsibility of CFO includes performing risk management by analyzing the liabilities and investments of an organization;
• They decide on investment strategies by considering cash and liquidity risks;
• It is the responsibility of the CFO to control and evaluate organizations’ fundraising plans and capital structure;
• Chief financial officers ensure that cash flow is as per the operations of the organization;
• Supervising all finance personnel such as controllers, treasurers, etc. is the responsibility of the CFO;
• They also manage vendor relationships;
• CFO prepare current and forecasting reports;
• They set up and oversee the finance IT system of the company;
• They have to ensure compliance with the law and company’s policies; and
• Finally, they are required to manage a team of financial controllers and analysts.

Role of CFO in Management Information System (MIS) and Board Reporting

The Management Information System (MIS) focuses on the information related to the organization and also technology systems. CFOs analyses the issues of the business and makes designs and maintains computer applications in order to solve the problems of the organization.

Board reporting is an effort to streamline the process of financial reporting and providing the directors meaningful and timely financial information. It involves the preparation of a complete checklist for senior management defining the key performance indicators^[1] (KPI). Hence it is a consolidation and redesigning of financial reports, financial analysis report, investment report, etc. It involves both external and internal reporting through the preparation of detailed MIS reports.

Conclusion

The role of CFO has become much challenging and diverse because of increased regulations on finance function, increased disclosure level, and increased governance and oversight. There are companies that are increasingly looking for CFO who can analyse their company’s data. CFOs got an important role to play in the financial set up of a company therefore, you don’t want to take the risk of not taking its services.

Read our article:Why CFO should move away from numbers?