What is the role of a CFO in an organisation?
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December 15, 2022The Chief Financial Officer (CFO) is the most senior financial professional in the organization and is responsible for the fiscal health of the business. The major responsibilities of the CFO include, building a top finance and accounting team, ensuring the balance between income and expenses, overseeing financial planning and analytical functions, making M&A recommendations, fundraising, and working with the department. Leads the analysis of financial data and craft budgets, attests to the accuracy of reports and consults strategy with the board and CEO.
CFOs can also help set technology directions, especially fintech, and make recommendations on everything from supply chain to marketing based on their fiscal insights and industry knowledge. The most awarded CFOs are visionaries – they have eyes on the future, work closely with senior management, and are not shy about recommending strategic moves.
In this article, you will learn about the duties and responsibilities of the Chief Financial Officer in a firm.
Liquidity refers to an organization's ability to pay its short-term liabilities due in less than a year with readily available or liquid funds. Liquidity is usually expressed as a ratio or percentage of what a company owes to what it owns.
CFOs ensure that customer payments are made in full and on time and control expenses so that sufficient cash is on hand to meet financial obligations.
Return on investment (ROI)
Part of the CFO's strategic focus is ensuring a high return on investment (ROI) for the organization. ROI is a measure of the likelihood of getting a return on the dollars invested and the exact amount of that return. As a ratio, it looks at the profit or loss of an investment as a percentage of the cost.
Because ROI is a relatively basic KPI that doesn't take into account all the variables—for example, net present value CFOs add context to assess whether a project will deliver a robust enough ROI to be worth the investment.
Forecasting
Importantly, CFOs don't just report what is - a significant part of their value to the organization is their ability to accurately predict likely future outcomes. This includes financial modelling and forecasting based not only on the company's past performance but on internal and external factors that may affect revenue and expenses. The CFO is tasked with understanding forecasts at various departmental levels and creating profit projections for the CEO and shareholders.
Internal factors include sales trends, labour, and human resource costs, cost of raw materials, and others, while external data inputs may include opportunity costs of capital, shifts in market demand, emerging competitors, and advances in technology.
To monitor the external environment, CFOs can rely on government data, analytics firms, and trade and general media, supplemented by insights gained through trade and association memberships and input from board members, creditors, and others.
Reporting
Another responsibility of the CFO in an organization is Financial reports, including balance sheets and income statements, and cash flow statements, to help internal managers and external stakeholders understand the financial health of the business, and it is up to the CFO to certify that these statements are accurate and complete in accordance with generally accepted accounting principles (GAAP).
Although private companies are only required to file financial reports with the SEC if they have $10 million or more in assets and 500 or more shareholders, many firms produce these statements anyway so they are available should the company seek a bank loan or venture capital or equity financing.
Leaders
CFOs are the leaders of all other finance-oriented employees in the company. They provide guidance and supervision for others in the accounting process. As top executives in the industry, they are also a leader for every member of the organization and must model appropriate behaviour, work ethic, and communication skills.
Operators
CFOs must have a good understanding of how the company works. Excellent CFO make time to meet with other C-suite executives to stay up to date on business plans and actions. Their financial expertise and insights can help company executives make informed, data-driven decisions about the company's future.
Controllers
In the firm CFO is responsible for ensuring that the company complies with all financial regulations. He must use his knowledge to ensure that the company meets the necessary guidelines through thoughtful financial control and planning.
Strategists
The CFO, along with other C-suite executives, strategizes about the company's future. The CFO provides realistic budgets and projections that help shape potential efforts. They also often use their skills to prepare financial reports and projections for external stakeholders.
Wondering how to become CFO? contact us. We are the expert coaching providers in ACCA, CMA, IFRS, and Taxation courses, we guide students to achieve their dream goals.
CFOs can also help set technology directions, especially fintech, and make recommendations on everything from supply chain to marketing based on their fiscal insights and industry knowledge. The most awarded CFOs are visionaries – they have eyes on the future, work closely with senior management, and are not shy about recommending strategic moves.
In this article, you will learn about the duties and responsibilities of the Chief Financial Officer in a firm.
Role and Responsibilities of CFO in an Organization
LiquidityLiquidity refers to an organization's ability to pay its short-term liabilities due in less than a year with readily available or liquid funds. Liquidity is usually expressed as a ratio or percentage of what a company owes to what it owns.
CFOs ensure that customer payments are made in full and on time and control expenses so that sufficient cash is on hand to meet financial obligations.
Return on investment (ROI)
Part of the CFO's strategic focus is ensuring a high return on investment (ROI) for the organization. ROI is a measure of the likelihood of getting a return on the dollars invested and the exact amount of that return. As a ratio, it looks at the profit or loss of an investment as a percentage of the cost.
Because ROI is a relatively basic KPI that doesn't take into account all the variables—for example, net present value CFOs add context to assess whether a project will deliver a robust enough ROI to be worth the investment.
Forecasting
Importantly, CFOs don't just report what is - a significant part of their value to the organization is their ability to accurately predict likely future outcomes. This includes financial modelling and forecasting based not only on the company's past performance but on internal and external factors that may affect revenue and expenses. The CFO is tasked with understanding forecasts at various departmental levels and creating profit projections for the CEO and shareholders.
Internal factors include sales trends, labour, and human resource costs, cost of raw materials, and others, while external data inputs may include opportunity costs of capital, shifts in market demand, emerging competitors, and advances in technology.
To monitor the external environment, CFOs can rely on government data, analytics firms, and trade and general media, supplemented by insights gained through trade and association memberships and input from board members, creditors, and others.
Reporting
Another responsibility of the CFO in an organization is Financial reports, including balance sheets and income statements, and cash flow statements, to help internal managers and external stakeholders understand the financial health of the business, and it is up to the CFO to certify that these statements are accurate and complete in accordance with generally accepted accounting principles (GAAP).
Although private companies are only required to file financial reports with the SEC if they have $10 million or more in assets and 500 or more shareholders, many firms produce these statements anyway so they are available should the company seek a bank loan or venture capital or equity financing.
CFO’s other roles and duties
Depending on the organization, some Chief Financial Officer s spend most of their time working exclusively with other accounting staff and managing the company's finances, while others work with several departments. The CFO's main goal is to make sure the company can pay its bills and invest in its future. Common duties of the chief financial officer include:- Presenting financial reports to internal and external stakeholders
- Investments in increasing the company's capital
- Forecasting potential growth areas within the company
- Searching for strategic and financial opportunities for the company
Leaders
CFOs are the leaders of all other finance-oriented employees in the company. They provide guidance and supervision for others in the accounting process. As top executives in the industry, they are also a leader for every member of the organization and must model appropriate behaviour, work ethic, and communication skills.
Operators
CFOs must have a good understanding of how the company works. Excellent CFO make time to meet with other C-suite executives to stay up to date on business plans and actions. Their financial expertise and insights can help company executives make informed, data-driven decisions about the company's future.
Controllers
In the firm CFO is responsible for ensuring that the company complies with all financial regulations. He must use his knowledge to ensure that the company meets the necessary guidelines through thoughtful financial control and planning.
Strategists
The CFO, along with other C-suite executives, strategizes about the company's future. The CFO provides realistic budgets and projections that help shape potential efforts. They also often use their skills to prepare financial reports and projections for external stakeholders.
Wondering how to become CFO? contact us. We are the expert coaching providers in ACCA, CMA, IFRS, and Taxation courses, we guide students to achieve their dream goals.
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