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

Rami Ali | Senior Product Marketing Manager

Big public companies may have defined the CFO role, but the chief financial officer
position is becoming increasingly common in midsize and even small firms. Recent
postings for full-time CFOs on job-search sites include an emerging air mobility design and
manufacturing company in Massachusetts with fewer than 20 employees and a 94-bed
community hospital in Hawaii.
What’s driving that investment in expertise? Often, CEOs who are at a strategic crossroads
and recognize the value of an expert financial adviser who can help them grow market
share, and their businesses.
In short, smart companies now view the CFO position — both internal and on a virtual or
fractional CFO basis — as more of an investment than an expense.
There’s no doubt that a global pandemic made the value of an experienced hand on the
finance helm very evident. But our take is that there’s more to the rise of the CFO than an
economic crisis. Let’s look at the role, responsibilities and skills finance chiefs need to
serve their companies well.

What Is a Chief Financial Officer (CFO)?

A chief financial officer (CFO) is the highest-ranking financial professional in an

organization and is responsible for the fiscal health of the business. The CFO’s
responsibilities include, but aren’t limited to, building a top-notch finance and accounting
team, ensuring revenues and expenses stay in balance, overseeing FP&A (financial
planning & analysis) functions, making recommendations on mergers and acquisitions,
obtaining funding, working with department heads to analyze financial data and craft
budgets, attesting to the accuracy of reports and consulting with boards of directors and the
CEO on strategy.
CFOs may also help set technology direction, especially fintech, and make
recommendations on everything from supply chain to marketing based on their fiscal
insights and industry knowledge.
The most-valued CFOs are visionaries — they have an eye toward the future, work closely
with top leadership and aren’t shy about recommending strategic moves.

CEO vs. CFO

The chief executive officer (CEO) is a company’s highest-ranking executive. Depending on
corporate structure, the CEO may be responsible for all aspects of a company’s operational
and fiscal health, or a president may share some duties. The CEO is the official face and
voice of the company to press and analysts, the general public and, if applicable, the board
of directors.
CFOs are the most senior financial officers in an organization. They report directly to the
CEO and work closely with the board of directors.
While the CEO occupies a higher-level position from an org-chart standpoint, in high-
functioning companies, the CFO and CEO work closely and collaboratively, with CFOs
serving as sounding boards, strategists and risk mitigators.

Financial Controller vs. CFO

A financial controller is a CPA (certified public accountant) and often holds an MBA.
Financial controllers are responsible for preparing financial reports and analyzing financial
data. The financial controller is generally in charge of the accounting function in an
organization and reports to the CFO. A controller may be part of a team that includes
bookkeepers, accounts receivable/payable clerks, payroll specialists, tax preparers and
accountants.
The CFO relies on the reporting generated by accounting and the financial controller to
advise the CEO and board on the company’s strategic financial direction. The controller
and other functional specialists report to the CFO.

Key Takeaways
▪ What informs the need for a CFO is less company size than a desire for a strategic
adviser with deep financial expertise.
▪ CFOs are captains of a team that covers both accounting and finance and consists of
senior leaders, such as controllers and VPs of finance, and operational staff —
accountants, bookkeepers, tax specialists, data analysts.
▪ Serving as a CFO requires a background in accounting or finance and an advanced
business degree, generally including an MBA. But it also takes plenty of soft skills.

Chief Financial Officer (CFO) Explained

The chief financial officer (CFOs) holds the top financial position in an organization. They
are responsible for tracking cash flow and financial planning and analyzing the company’s
financial strengths and weaknesses and proposing strategic directions.
CFOs are accountable to both the organization and various regulatory entities and
authorities, including the Securities and Exchange Commission (SEC) in publicly held
companies. They are well-versed in both generally accepted accounting principles
(GAAP) and state and federal regulations, such as the Sarbanes-Oxley Act.

What Does a CFO Do?

The CFO’s role is twofold: Oversee the organization’s financial activities, including being
responsible for the finance and accounting professionals who perform operational
functions, and serve in a strategic advisory role for the CEO and C-suite peers.
Brainyard’s Winter 2021 Survey shows how finance and business leaders rank success
factors and how those priorities have changed over time.
Meeting revenue and earnings goals and keeping cash flow stable are clearly in the CFO’s
purview. Finance chiefs also advise department heads across the organization, assisting
them in both maximizing revenues, if they serve in a revenue-generating capacity, and
controlling expenses without sacrificing customer or employee satisfaction or the
company’s reputation.
The CFO helps select skilled staff for the finance team and works with departments to
allocate budget for human capital management.
CFOs put complex data — current, past and predicted financial results — in perspective
and help the CEO make sound financial decisions: Should we introduce this new product or
service? Can we afford to on-shore our supply chain? What are the tax implications of our
employees working from anywhere?

CFO Responsibilities
 1. Liquidity
Liquidity refers to an organization’s ability to pay off its short-term liabilities — those that
will come due in less than a year — with readily accessible, or liquid, funds. Liquidity is
usually expressed as a ratio or a percentage of what the company owes against what it
owns.
CFOs are concerned with ensuring that customer payments are made in full and on time
and controlling expenses so that enough cash is on hand to meet financial obligations.
2. Return on investment (ROI)
Part of a CFO’s strategic focus is on ensuring a strong return on investment (ROI) for their
organizations. ROI is a measure of the likelihood of receiving a return on dollars invested
and the precise amount of that return. As a ratio, it looks at the gain or loss of an investment
as a percentage of the cost.
Because ROI is a relatively basic KPI that does not account for all variables — net present
value, for example — CFOs add context to evaluate whether a project will deliver
sufficiently robust ROI to be worth the investment.
3. Forecasting
Importantly, CFOs don’t only report what is — a significant part of their value to an
organization is their ability to accurately predict likely future outcomes. That
includes financial forecasting and modeling 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 making sense of the various departmental level forecasts to create profit
projections for the CEO and shareholders.
Internal factors include sales trends, labor and HR-related costs, the price of raw materials
and more, while external data inputs could include opportunity cost for capital, shifts in
market demand, emerging competitors and advances in technology.
To monitor the external environment, CFOs may rely on government data, analyst firms
and business and general media, supplemented with insights gleaned through trade and
association memberships and the input of board members, lenders and others.
4. Reporting
Financial reports including balance sheets and P&L and cash flow statements help both
internal leaders and external stakeholders understand the financial state of the business, and
it’s up to the CFO to attest that these statements are accurate and complete in accordance
with generally accepted accounting principles (GAAP).
Although private companies are required to file financial reports with the SEC only if they
have $10 million or more in assets and 500 or more shareholders, many businesses create
these statements anyway so they’re available should the company seek a bank loan or
venture capital or equity funding.

Members of the CFO’s Team

The key duties of the CFO position vary depending on the size of the organization, its
industry and whether it’s a public or private company but generally fall into three broad
functional areas: controller, treasury and strategy and forecasting.
Organizations may have professionals overseeing some or all of these roles and reporting to
the CFO.
1. Controller:
Controllers run day-to-day accounting and financial operations and often hold a CPA or
MBA. They are responsible for creating reports that provide insights into a company’s
financial standing, including accounts receivable, accounts payable, inventory and payroll.
2. Treasury:
The treasurer is responsible for the company’s liquidity, debt and assets. That includes any
investments the company may have, whether physical assets, such as buildings and
equipment, or financial investments.
3. Strategy & forecasting:
Strategy and forecasting involves using available data and reports, both internal and
external, to advise on areas including product development, market expansion, human
capital management, M&A and capital investments. It’s also where structured planning and
forecasting exercises, like scenario planning and FP&A, fall.
Controllers, treasurers and FP&A analysts are invaluable members of the team, but in all
these areas, the buck stops at the CFO’s desk.

Benefits of Having a CFO

CFOs guide the finance and accounting team and have a broad view of an organization’s
financial health, allowing the CEO as well as peers including the CMO, COO and VPs of
HR and sales to focus on their own goals and operational issues. While a CEO or COO may
have a background in accounting or finance, they generally don’t possess the same level of
technical acumen and experience that a chief financial officer brings to the table.
In addition, a CFO provides:
1. Leadership skills
that enable them to assemble a successful finance and accounting team. CFOs understand
at what point a company needs to add, for example, a tax specialist and will define roles
and assign responsibilities.
2. Industry knowledge
that enables a company to benchmark itself against peers. There’s a reason B2C often seek
to hire CFOs away from competitors, as Netflix did when it hired Activision’s finance
chief. Same for manufacturers and healthcare providers. Specialized expertise is key
in framing KPIs and metrics for various company types.
3. Growth experience
gleaned from helping previous employers successfully expand, whether organically or via
M&A, is invaluable to CEOs, especially those looking to take their companies public. A
CFO helps find investment opportunities and use capital wisely.
4. Risk assessment and management
, in terms of regulatory compliance but also the dangers that arise from too much debt and
too little liquidity, brittle supply chains, improperly hired contractors and poorly
implemented technology.
While hiring an experienced CFO is an investment, the return can be significant.

5 Top CFO Challenges

Today’s CFOs face challenges on multiple fronts, even as they benefit from ongoing
technological advances and the ability to analyze and forecast based on massive amounts of
data. These are the top five challenges facing CFOs:
1. Juggling too many responsibilities (51%):
As we’ve seen, this role is a broad and expanding one. A growing regulatory landscape,
rapidly evolving technology and massive market shifts worldwide squeeze CFOs from one
side, while difficulty finding and retaining the right accounting and finance talent adds
pressure from a time-management POV.
2. Managing cash flow (43%):
All organizations need runway, but maintaining a healthy cash flow is a balancing act.
CFOs must manage both incoming revenues and accounts receivables while keeping an eye
on outgoing payments and short- and long-term liability. Cash flow analysis is an ongoing
endeavor.
3. Developing accurate financial scenarios (43%):
Like cash flow analysis, scenario analysis is, or should be, an ongoing process. By guiding
thorough analysis of the potential impacts of a variety of economic conditions on the
organization’s revenues, CFOs can plan for both positive and negative outcomes.
4. Producing timely, accurate reports (37%):
Timely reporting has always been critical, but in a fast-paced global business environment,
access to information is the foundation of sound, strategic decisions and identifying and
avoiding risks. Moreover, the reports issued by the finance team, like P&L statements, can
make or break efforts to obtain financing.
5. Implementing tech for finance (33%):
CFOs are aided in their roles by increasingly sophisticated technology that can help with
both reporting and forecasting, including dashboards with built-in business intelligence.
But tech represents a significant investment in both capital and human resources.
We’re likely to continue seeing these challenges into 2021 as CFOs tackle the pandemic’s
lingering effects on sales, consumer demand and the workforce.

Changing Role of the CFO Modern Functions

Companies that look at the CFO role as more about reporting, less about strategy are or will
soon be at a disadvantage. Yes, finance chiefs need to ensure that they and the management
team have timely data to support decisions. But strategic planning and collaboration across
all parts of the business are what drive success.
Thus, it’s no wonder that CFO surveys consistently show that evolution. Especially in small
and midsize businesses, CFOs tend to wear many hats. Not only are they doing the
traditional CFO job, they’re assessing cyber security risks, managing system and data
integration, filling talent needs and evaluating new technologies like Blockchain and AI.

When Should You Hire a CFO?

Organizations should consider hiring a CFO when the CEO and more junior financial staff
no longer have the skills to adequately evaluate the organization’s fiscal standing, assess
cash flow, forecast future financial needs and inform business strategy. Some experts
advise $10 million in annual revenue as a marker that it’s time to hire a full-time CFO. But
don’t forget that part-time/fractional and virtual CFO-as-a-service offerings are available.
While many organizations may wait to create this role until they begin to experience
financial challenges, we recommend a more proactive stance. Ask yourself:
Are we beginning to pursue a growth strategy? If so, you’ll need deep insights into
P&L, income and cash flow statements. Who will look at the books if you spot an
acquisition opportunity? Banks and other potential investors like having a CFO attest to
accuracy and completeness. Oh, and have you calculated your valuation multiples lately?

Do we have a sound, repeatable planning and budgeting process? If not, you lack a firm
financial foundation. Ad hoc is no way to run a business.
Are we using our data fully, and not just in the obvious areas? For example, are we
mining ecommerce data to inform customer success programs? CFOs tend to champion
data use.

Do we feel confident in financial reporting requirements? For example, were intangible

assets impaired due to the economic downturn? If so, how will you account for that?
Then there are industry-specific considerations. For many manufacturers, retailers and
distributors, the pandemic revealed weaknesses in supply chain operations that an
experienced CFO can help address.

CFO compensation in public companies is typically a mix of cash and stock. In both public
and private businesses, remuneration is based on a number of factors, from company size
and industry to geography, experience, seniority and how many finance/accounting
divisions or departments report in to the CFO. In 2021, the highest-paid CFO by a wide
margin was Goldman Sachs’ Stephen Scherr, at $20.2 million total comp. Among all
companies, U.S. CFO pay as of early 2021 averaged $394,235, according to Salary.com
data. But at smaller companies, pay hovers between $150,000 and $200,000, according to
salary and job sites.

CFO Qualifications & Skills

Serving as a CFO requires a background in accounting or finance and an advanced business

degree, generally including an MBA. CFOs must also have experience analyzing data to
make recommendations on financial and organizational strategy.
In addition to having "hard skills," including understanding generally accepted accounting
principles (GAAP), budgeting and data analysis, today’s CFOs need to have solid
leadership and management chops — the "soft skills" of effective communication, conflict
management and negotiation.
Individuals in this role must forecast and offer strategic direction to the organization based
not only on internal data but also on the external environment — regulatory, market and
macroeconomic — and be able to advise on industry-specific challenges and opportunities.
Finally, CFOs need a firm grasp of financial technology, or fintech — its ongoing
evolution, options available and their applications, how to make financially sound decisions
about IT investments and infrastructure and how to communicate to and educate staff to
ensure full adoption across the organization — if tech is not used, there goes your ROI.

Technologies CFOs Use

CFOs and their teams rely on technology to analyze the massive amounts of data available
to them. Modern financial management software helps with informed decision-making,
freeing up time to focus on strategy and the critical advisory role.
CFOs need core financial reporting, audit and compliance capabilities and should also look
for integrated systems that can help in FP&A, treasury and capital structure and allocation,
regulatory compliance and corporate portfolio management and modeling.
Today’s CFOs are working long hours — 54% of CFOs in a recent Brainyard survey say
they’re working 50 hours or more per week — and juggling a lot of responsibilities. But the
return is a fulfilling job where senior financial professionals are able to take advantage of
their experience and work closely with CEOs to build not only great companies but
rewarding careers.

Fuente

Rami, A. (24 de julio de 2023). Chief Financial Officer (CFO) Defined: Role, Responsibilities and Skills.
Oracle NetSuite. https://www.netsuite.com/portal/resource/articles/accounting/chief-financial-
officer-cfo.shtml