Chief Financial Officer (CFO) Defined: Role, Responsibilities and Skills

Monisha Chaudhary

28 Jul, 2023

CFO also is known as Chief Financial Officer is the senior executive in the company. The Roles of CFO is to manage and control the financial activities in a company. A CFO’s duty revolves around handling cash inflows and outflows in a company. A CFO is also responsible for drafting the financial planning as well as analyzing the company’s financial strengths and weaknesses and proposing corrective actions. 

A CFO is someone who manages the finances and accounting department of a company. The function of the CFO is relatable to that of the controller. They both make sure that the company’s finances are accurate, the financial report is authentic and must be completed in a timely manner.  

What Does A CFO Do?

The work of a CFO is defined under three main categories:

• Reporting

Reporting consumes a lot of CFOs time and particularly is the responsibility of the Controller’s group. Financial experts of the company sit together and prepare all the financial reports of the company required for shareholders, employees, lenders, governments, regulatory bodies. The job of the reporting team is to make sure that all reports must be prepared on time and are accurate in nature.

• Liquidity

The liquidity department makes sure that the company is meeting its financial requirements effectively and there is enough cash flow in the company. Usually treasury groups lookout for the cash in the company. Treasury group is efficient in handling the company’s cash balance and working capital, such as accounts payable, account receivable, and inventory.

• Return on Investment

The third most important thing a CFO does is help the company in meeting its financial goals. With the help of a CFO, a company can earn the highest possible risk-adjusted return on assets and return on capital. A CFO must be wise enough to identify the key areas of the company and how to turn those key factors into monetary factors. And this is when the financial planning and analysis team comes forward to help the CFO.

A CFO is also accountable for:

With the evolution of businesses and due to their complex and diffused structure- the CFO functions have become widened and evolved into a multi-focused position with the unprecedented need to become more accurate and responsiveness.

Anticipation

A CFO is not afraid to play with risks and is adaptable to the current scenarios where he must be willing to challenge conventional thinking when necessary.

Business Integration

Often CFOs with other business executives find themselves stuck in unproductive and conflicting goals. This lack of alignment or misalignment leads to inefficiency, lack of productivity, high cost and frustration. CFO is counted as one of those people of the organization who has the broadest view of the organization and is best positioned to ensure that the strategic plan, financial reporting, and budgets are fully blended in all aspects of business operations. 

Rigid CFOs cannot be entertained in any organization. They have to be flexible as it is their job to define and implement rules and measures along with taking care of the finances of the company.

Sustainable Growth Strategy

Cut-throat competition plays a major role in affecting the growth of the company. Increased competition from existing as well as new entrants in the market has made the target of achieving sustainable growth most pressing.

Modern CFOs has no qualms in breaking the old paradigm of number-crunching to become a strategic asset, and in the process creating real value in the enterprise. As per Sanjay Uppal, CEO of Straits Bridge Advisors, the CFO in this new role is responsible for developing and managing core elements of the business, acting as “deputy CEO” and board member, and using financial tools to gain strategic advantage. 

Risk Management

Risk is something unavoidable. Every now and then organizations have to face it. It becomes CFOs responsibility to manage the monetary risks of the company. Kent Potter, former CFO of the multinational chemical company LyondellBasell, is blunt about the importance of the CFO and risk management:

New Metrics

A skilled CFO knows that his area of operation is wide. A CFO has to be competent enough in scenario analysis and projections, as well as in predictive analytics and stress testing if they want their organization to stand strong in the global competition.     

Closure

Today’s CFO is not limited to handling the financial aspects of the company. In fact, they are the true renaissances who are experts in managing strategies, operations and people. It has become the need of their job to work across inter- and intra-organizational boundaries. The position of a CFO is equally demanding and encompassing, but can be exceptionally rewarding. No one really knows how the future of a CFO will evolve, but it is more likely to broaden.   

A CFO performs multiple functions and often it is wise to hire an organization that performs CFO services instead of hiring a CFO. Feel free to contact us for CFO services. 

Also, Read: Fintech Report 2019