“What does a CFO do?”- is one of the most frequently asked questions in the financial world.
A CFO or Chief Financial Officer is a top-level executive of the firm who is responsible for managing the financial actions of the company. A CFO’s area of responsibilities is quite vast, which includes financial planning, taxation, and tracking cash flow, apart from comprehensively analyzing the firm’s financial health. Since they oversee the company’s finances and make sure that all reports are accurately and timely completed. The CFO is the highest financial position in the company.
Since the CFO dons multiple hats, if you think that their contribution is uni-dimensional, you couldn’t be more mistaken. Let’s take a quick look at the responsibilities shouldered by the CFO.
Key Duties and Roles of a CFO
Becoming a CFO calls for a certain degree of industry experience, of course, apart from advanced degrees and certifications in economics or finance. In recent years, the role of a CFO has shifted from merely compliance management to strategic planning. Below are listed some of the key duties performed by a CFO.
1. Managing & supervising the financial stack
Capital is one of the most important aspects of any business, and it becomes even more important in the case of startups. Managing and supervising the financial stack of the company are the key responsibilities of the CFO; however, there are times when the CFO also helps build capital from scratch.
Financial planning, tax compliance, expense management, and accounting are the other major tasks managed by the CFO. It wouldn’t be an exaggeration to say that a CFO is never off-duty. Although, depending on the complexity and number of tasks, the CFO might opt to outsource a few of them, there is still a lot on his table to be taken care of. That pretty much explains what is a CFO of a company and his/her importance.
2. Risk management & legal responsibilities
The CFO also deals with the legal department to mitigate potential legal risks by ensuring compliance at all times. Employee compliance documents are also thoroughly fact-checked by the CFO.
Owing to the in-depth knowledge of foreign laws, their significance increases even more in a startup.
Overseeing business operations is another prime responsibility shouldered by the CFO. From creating operational budgets to aligning them and keeping the business operations in mind, the CFO is also responsible for a plethora of other tasks, such as operations cost-benefit analysis and developing sales & marketing stacks.
In the initial phase of a startup, the CFO pretty much plays the role of the COO (Chief Operating Officer).
CFOs are also responsible for leveraging their acumen to accurately predict possible future outcomes, which include financial forecasting and modeling based on certain internal and external factors, such as the company’s past performance. The CFO also creates profit projections for the CEO and shareholders of the company.
CEO Vs. CFO
A CFO is the most senior financial officer in any company. From the organizational hierarchy and chart viewpoint, the CEO is the highest-level position; however, the CEO and the CFO work quite closely and collaboratively. CFOs directly report to CEOs. While the CEO remains the official face of the organization, the key decision-maker, and the voice for the press, the CFO plays the role of chief strategist, risk mitigator, and finance management.
The Bottom Line
A CFO is responsible for managing a plethora of duties for a company which includes financial & cash flow planning, profit projections, strategic planning, risk management, and compliance management, to name a few. A CFO can also be likened to a treasurer or controller; however, unlike a treasurer or controller, a CFO’s job is way more than mere bookkeeping and generating the company’s financial statements.