Functions and roles of the CFO (Chief Financial Officer) has long gone beyond preparation of financial statements. You will agree with me that finance is the live blood of every organization, and that a lot goes into ensuring that the finances keeps flowing.
If the above is true, then the person who is to be charged with the responsibility of managing the affairs of a business is also indirectly charged with every aspect of a business that ensures that finances are optimally used. The CFO of this day and age must be a complete business advisor whose counsel business owners can rely on.
The objective of having someone in the C-suites to manage the financial affairs of an organization is to ensure that all other activities are coherently coordinated for the singular aim of delivering on the mission and vision of an entity.
10 Functions and Roles of a CFO
Although the prevailing circumstance of a company determines what areas the CFO should pay more attention to, the below 10 roles and functions of a CFO are now the norms for modern businesses.
- Finance strategy management: A fundamental role of the CFO is to assist organization in developing and directing its financial strategies. Finance strategy ranges from cost management to investment planning to every other thing in between. It is for example the function of the Chief Finance Officer to ensure that a company is not losing money as a result of poor working capital management. Establishing and continuously refining the finance strategy of a business is one area where CFOs that are up to speed make their name. The choice and sources of financing projects is part of the finance strategy that the CFO must deal with.
- Cybersecurity management: The world has become so connected that hardly would you see any business that does not have one connection to the internet or the other. This high rate of connectivity in turn created a major problem bothering around the security of the connected items. The connectivity of many devices is commonly referred to as the Internet of Things. Because of the fact that cybersecurity when not taken seriously may lead to massive financial loss to an organization, the onus lies on the shoulders of the CFO to ensure that all the ‘T’ are crossed and all the ‘I’ are dotted. A major role of the CFO in the area of cybersecurity is to ensure that all the staff of a business entity are trained in cybersecurity matter. Who do you think will be held accountable should a company fall victim of say ‘phishing’ scam and losses money? The answer is the CFO of course, so the function of championing a cybersecurity awareness is no other person but the CFO – he or she may have other persons within the business to hold accountable.
- Risk management and mitigation: Businesses operates in all kinds of risky environment and therefore needs to have a well-articulated risk management plan in place. This risk can range from reputational risk down to the risk of going bankrupt. The CFO being at the helm of financial affairs is saddled with the responsibility of ensuring that all forms of business and financial risks are well taken care of. I have in recent years seen CFOs adopting a risk based approach in this regards.
- Growth management strategy: Another role and function of the CFO is to determine the growth strategy that will be best for the business. Not adopting a suitable growth strategy is a major reason why business do not grow and failed out rightly in some cases. Growing too quickly or too slow is not the best for a business. An optimal level of growth must be sought in such a way that overtrading or under-trading is avoided and that is a function of the CFO.
- Tax planning and management: Again, this is another area that requires special expertise as tax planning is not as simple as preparing PAYE using excel. Tax planning in most cases bothers in gray area. The CFOs role is to ensure that companies are taking advantage of tax avoidance – which is a form of tax planning that is still within what the law allows.
- Human capital management: Some people will argue that this is not part of the job of a CFO but, a closer look will in fact reveal that the CFO has a major role to play in the area of managing the human capital of an organization. Take employee remuneration strategy as an example. The CFO being the finance expert at the top echelon of an entity is called upon to assist the human resource department in coming up with a package that will be a win-win for all.
- Technological advancement management: Of late, the call for CFOs to be fully involved in the acquisition of business technologies has become very loud that it can no longer be ignored. CFO’s role in most cases revolves around appraising the investment using available techniques. IT as the day passes bye is becoming more and more integrated into the fabrics of business operations and has as such made it necessary for someone with high level of financial expertise to be fully involved. To remain relevant as a CFO, a chief finance officer must be disruptive or be disrupted.
- Stakeholder management: Stakeholders can be disruptive when not properly managed. It is the role of the CFO using appropriate model to ensure that the correct action is taken at all time to keep all group of stakeholders happy.
- External audit management: The CFO work closely with the external auditors during the time of statutory audits. The CFO’s role in this regard is to ensure that all information that is required by the external auditors are promptly provided.
- Preparation of financial statements: Preparation of financial statements is the traditional role of the CFO. The financial statements must be prepared in accordance with the prevailing provision of the accounting standard of the country where the business operates from. This function of the CFO is the main reason why most organization requires that their CFO must be a qualified accountant. Preparation of the financial statements is the baseline function of every CFO, anyone who is not comfortable doing this has no business being a Chief Financial Officer.
Qualifications of a CFO
An individual that aspires to become a CFO must firstly become a finance professional. Part of becoming a finance professional entails joining a recognized finance professional body like; ACCA, CIMA, CFA, CMA, CPA or ICAN. I have also seen companies where the CFO has just an MBA. The problem with this setting is that the CFO will not be in a position to sign the financial statements. In this article, I have talked about the roles of CFOs in modern business settings. I hope you enjoyed it.