CFO Responsibilities In Today’s Changing Business Environment
In a business landscape transformed over the years by digitization, adaptation and ever-evolving approaches to bottom-line success, the role of Chief Financial Officer (CFO) has come to mean different things to different people. A title that was once reserved for leaders overseeing financial numbers alone is now coined by many to evoke a wide array of management, strategy and business growth responsibilities.
The truth is a CFO’s job responsibilities vary depending on the size of the company, its ability to hire a full-time C-suite and its understanding of the functions required to maintain financial health and success. Whether you are a business owner shouldering the added responsibilities of a CFO, seeking opportunities to fulfill this position internally or considering outsourcing the effort, it is important to grasp what the title actually involves in today’s fast-paced and fluid business environment.
In this article, we explore the increasingly pivotal role of CFO in greater detail, highlighting both the traditional functions and more modern duties often associated with the position. Following are some of the most common responsibilities expected of a CFO in the current business world.
Financial Strategy & Leadership
As C-level executives, CFOs are responsible for strategizing how the business can increase its value and achieve its intended goals. The first and most fundamental aspect of this effort involves fully understanding and becoming invested in the business’s ultimate WHY.
A CFO is unable to design effective financial strategies if they do not comprehend the end game those strategies are meant to accomplish. Therefore, it is incumbent upon any CFO to ensure they are broadly focused on why the business exists in the first place, what its objectives really are and how various financial strategies serve to support those aims.
Some businesses, for example, are concentrated on growth first, profitability second. Others are more concerned about maximizing profitability and cash flow at their current size. Still others may be interested in reinventing themselves with a new business line or simply creating a healthy bottom line for an eventual sale. Whatever the case may be, it is the responsibility of the CFO to work in accordance with these targets, ground them in financial reality and help lead other members of the team toward those ends.
Metrics Administration & Analysis
The CFO is typically the driver of metrics in a business, defining an insightful set of KPIs and metrics for both the company at large and its various internal groups, as well as ensuring those metrics align with business objectives. Identifying the financial metrics that truly matter for a business is a combination of science and art, and a good CFO will intuitively know which ones are most valuable to focus on.
This is all part of providing an accurate picture of how the business is performing and exactly what is driving that performance. At the end of the day, a CFO must have their finger on the financial pulse of the company, and metrics are the vehicle to meeting that challenge head on. In addition to choosing and setting those metrics, the CFO is expected to implement systems and reporting to measure them, then interpret the resulting financial data. It is this very data that’s needed to inform critical business decisions and improve overall profitability.
Metrics lend vital insight to some of the most traditional responsibilities of a CFO, such as budgeting, cash flow management, forecasting, tax administration and financial compliance. They enable a CFO to provide strategic financial oversight and guide key business decisions, particularly as they pertain to expenses, financing and capital considerations.
Forecasting & Budgeting
As each year progresses, the business will fall behind on some metrics and hopefully start pacing ahead on others. Aside from simply knowing how the company is pacing toward annual metrics, a CFO must be able to influence operating decisions along the way, which boils down to having an annual forecast that is updated each month, at a minimum.
Forecasting is an incredibly significant part of business management that supports an array of other elements impacting company growth. A CFO is responsible for making educated predictions about the financial future of the company based on income generated from all sales channels during a specific time period.
In addition to its relevance to new investors and business lenders, this information can be used to determine budgeting decisions, including those related to staffing, marketing and other aspects of the business. CFOs are wholly tasked with creating and analyzing the business’s budget to anticipate future expenses, understand how the company is handling its spending and make decisions that positively affect the bottom line.
Communication, Supervision & Financial Relations
A CFO is both an advocate for and steward of financial health and success. For full-time internal CFOs, this usually means that part of the job entails forging relationships within and outside the business to support its financial goals, which may include:
- Clearly communicating to everyone in the company what to focus on
- Aligning each group and individual with the same top-level company objectives
- Rendering frequent performance feedback
- Reporting to shareholders and other C-suite members
- Providing thought leadership to the owner and other relevant entities
- Potentially overseeing a range of departments and employees beyond the scope of finance and accounting, such as HR and IT teams
Outsourced or fractional CFOs, on the other hand, serve in less of a managerial capacity and more of an influencer role. Even so, they may be expected to engage in external financial relationships, like those with bankers, investors and governing financial bodies.
Managing The CFO Balancing Act
As you can see, the extent of a CFO’s responsibilities can be wide and complex, a challenge that many startups and small businesses struggle to address in the face of limited resources and other business strains. Regardless of a business’s size or status, however, having CFO-level management and insight is absolutely essential. That’s why some businesses opt for outsourced support or fractional CFO services.
With this option, the business can fulfill vital CFO responsibilities, from financial planning and top-level strategy to cash flow analyses, investment planning, GAAP compliance and everything in between—benefitting from broad experience and objective fiscal insight without the burden of talent acquisition and unnecessary administrative costs. In today’s changing business environment, it is more important than ever to secure proper financial strategy, oversight and support in whatever manner works best for the company.
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