A company is only as good as the amount of money it earns and the integrity of the people who manage it.
If money is the lifeblood, who controls its flow?
Investopedia defines a chief financial officer as:
“A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company. The CFO’s duties include tracking cash flow and financial planning, as well as analyzing the company’s financial strengths and weaknesses and proposing corrective actions. The CFO is similar to a treasurer or controller because he [or she] is responsible for managing the finance and accounting divisions and for ensuring that the company’s financial reports are accurate and completed in a timely manner.”
A company is only as good as its finances. Without adequate funds, no company can run its day-to-day operations smoothly. At the same time, a lot money sitting idly in the company indicates that the company has raised much more than it needs and cannot allocate such resources appropriately. It then becomes increasingly important for a CFO to develop a proper strategy to control and manage the company’s finances effectively and efficiently.
3 Main CFO Functions to Run a Successful Business
#1 Control Function
The control function is the backward-looking job of the CFO, in which he or she analyzes the company’s financial information, matches it with desired financial goals, calculates deviation and causes, and then initiates steps to rectify the situation.
#2 Treasurer Function
The CFO is responsible for the company’s present financial condition, so he or she must decide how to invest the company’s money, taking into consideration risk and liquidity. Additionally, the CFO must ensure that the company’s capital structure has a balanced mix of debt, equity, and internal financing so that there never is a situation of low working capital.
#3 Strategy Function
Forecasting and strategizing become an extremely essential part of the CFO’s job. A CFO must be able to identify and report what areas of a company are most efficient and how the company can capitalize on this information.
Skills Required by CFO
#1 CFOs must be able to adapt to new and changing technology.
As technology advances, so does the ease with which businesses are run. With the latest developments in artificial intelligence and machine learning, it is getting easier to analyze large chunks of data and create reports and forecasts almost immediately. If CFOs do not take advantage of technological advancements, they are only opening the door for increased risk.
#2 CFOs must manage large volumes of data efficiently.
Businesses today run and thrive on data. Data analysis not only helps improve the company’s offering, it also helps obtain cost-effectiveness and manage the business more effectively and efficiently than ever before.
#3 CFOs must avoid a myopic view.
A myopic view refers to shortsightedness. If a CFO only focuses on the company’s operations and does not factor in or analyze elements of the company’s external environment that have an impact on the company’s performance, he or she will do no good. PESTEL which stands for Political, Environmental, Social, Technological, Economic and Legal factors must be considered while drafting the company’s targets and working strategies.
#4 CFOs must have knowledge of different fields.
The CFO essentially needs to be able to oversee, report and, in some cases, control the amount of capital that every department needs or operates on. He or she must have adequate knowledge about the various operations of these different departments to budget efficiently.
With these skills, a CFO’s job is made much more manageable and such a position can be far more impactful for the company goals.