Along with analytical skills, a CFO must have solid leadership and people skills. In global firms, CFOs must understand the finance and accounting rules and regulations in other countries. This term is used to describe a corporation’s top senior executives, including the chief executive officer (CEO), chief operating officer (COO), chief information officer (CIO), and CFO. When you hear the term chief financial officer (CFO), the first thing you may probably think about is corporate finances. If you asked any company’s CFO about what they do, you would probably be in for a three-hour conversation. There are plenty of benefits to achieving the prestigious status of CFO at any company.
The CFO sets financial policy and is responsible for managing government funds. From a CFO’s point of view, low employee satisfaction can lead to low productivity, which in turn can lead to low morale. To build agility in the marketplace, organizations need to retain smart, strong people. This bias for action could yield some big changes, even to core business functions. An effective CFO should make sure that every aspect of the business is always on the negotiating table—and should always be subject to a “grow or go” mentality. The best CFOs understand and communicate that it’s a losing bet not to take any risks.
The track to becoming a chief financial officer often starts with an entry-level job as an accountant or financial analyst. Next, a professional will take on leadership positions like controller or finance director to further hone their skills and spend time handling management-level responsibilities. This C-suite role oversees the work of finance directors and controllers who manage and guide the everyday activities of accounting and finance employees. Once upon a time, the position of chief financial officer was focused exclusively on finance and accounting functions. It was a cost-based role, and one that often mainly involved budgeting and reporting on past performance, as well as a certain amount of risk management.
Career Tools
Within the hierarchy of an organization, it’s easy to confuse the roles of a chief executive officer (CEO) and a CFO. While each takes on different responsibilities within a company, the CEO and CFO work as strategic partners and have a shared vision for the company’s continued success. A CEO oversees the entire company’s operations and holds the highest rank in an organization. The CFO, on the other hand, assumes the highest rank within the financial division of an organization, and CFO responsibilities focus on the financial management of the business.
- Meanwhile the governance aspect of the job is becoming ever more demanding, as regulatory frameworks are becoming increasingly complex.
- The best CFOs focus on frank dialogue with the CEO, the board, and the top team about the economics of the organization and clearly explain the consequences of making various trade-offs.
- Many CFOs have professional backgrounds in fields such as accounting, investment banking, or financial analysis.
- If your career aspirations include becoming a CFO someday, you’ll need a solid finance and accounting background.
Strategic Development
The cfo meaning information here will help you understand the duties, skills, and path to becoming a CFO. Types of CFOsThere are various types of CFOs, each with specific areas of focus and expertise based on the needs and nature of the organization. CFOs must also adhere to regulations such as the Sarbanes-Oxley Act, which include provisions such as fraud prevention and disclosing financial information.
There are some distinct differences among the three most important financial positions in organizations — CFO, finance director and financial controller. A CFO candidate is usually expected to have at least 10 years of experience in accounting or finance, five years of which must have been in a managerial role. CFOs must have a strong understanding of GAAP and other tax accounting principles and experience working with or reporting to the SEC. Given their job duties and the experience they bring to the table, it should come as no surprise that CFOs often earn top dollar.
Chief Financial Officer Responsibilities
In terms of technology, CFOs rely on sophisticated financial management tools and technology to analyze financial data, generate reports, and make informed decisions. They utilize enterprise resource planning (ERP) systems, financial planning and analysis (FP&A) software, data visualization tools, and other financial technology solutions. These tools enable CFOs to monitor performance, conduct financial modeling, and provide accurate insights to support strategic decision-making. CFOs are often seen as team leaders for other departments and employees throughout an organization. They also collaborate with other C-level executives, such as the chief information officer (CIO) on technology investments and strategy.
- Leadership experience is extremely important, and the next steps up the ladder may include roles such as controller, director of finance; internal audit manager or finance manager.
- While a CEO may create a new vision or strategy for the company, the CFO works closely with the CEO to achieve those goals.
- They frequently compete with chief operating officers (COOs) and chief strategy officers (CSOs) for the top position.
Financial modeling
Liquidity is usually expressed as a ratio or a percentage of current assets to current liabilities. CFOs measure liquidity using several financial ratios, including current ratio and quick ratio. As proof of knowledge in the field, obtaining both a bachelor’s degree and a master’s degree is essential for demonstrating dedication and ability to complete long-term projects.
I jumped at the opportunity, and while I initially was encouraged to take the operations manager job with the new company, as we started working with VCs to get funding, I ended up taking the CFO role. Both operational and strategic CFOs understand financial functions within a company. Strategic CFOs analyze financial processes and practices in a business to identify plans for the future. An operational CFO who looks at the past and present, to eliminate spending and inefficiencies. CFOs may work in corporate settings or take on roles in government agencies. CFOs may also delegate duties and focus on a specialization within financial oversight and leadership.
I had interned there the prior summer and found the environment very exciting. It was fast-paced and everyone expected the best effort from their teammates. It was a very collaborative environment, especially because the finance department played a business partnership role with other departments. I would sit on staff meetings with the operations managers, engineers, and the marketing team. This taught me the value of being part of a team and why it’s important everyone holistically understands a business’s operations. With elevated levels of responsibility comes an increased salary as well.
CFOs will, of course, need to work their way up to the position, and most are appointed internally. Many start out in the accounts or finance departments as staff accountants or tax preparers. Leadership experience is extremely important, and the next steps up the ladder may include roles such as controller, director of finance; internal audit manager or finance manager.
CFOs need discipline, initiative, dedication, and time-management skills as well. A bachelor’s degree supplemented by significant experience can lead to a job as a CFO, but many companies prefer CFOs with a master’s degree. I was progressing through a career at Intel, from a financial analyst, to senior analyst, to manager and then controller. The company grew dramatically while I was there, and decision-making processes and management structures became more formalized. After I received my MBA from Indiana University, I chose to go to work for Intel.
CFO qualifications and skills
Financial software systems must accommodate ongoing changes in the way financial accounting is regulated. Artificial intelligence is increasingly part of financial software; it can be especially helpful with forecasting and financial analysis. This aspect of a CFO’s duties also includes economic forecasting and modeling.
The CFO’s duties include tracking cash flow, financial planning, management of financial risks, record-keeping, and financial reporting. The role has always been a central one to large public companies with multi-million revenues, but is becoming increasingly common in medium-sized and even small firms. Many start-ups, indeed, now hire a chief financial officer when they first start raising capital. While the job is often seen as a step towards becoming a CEO, the latter role is the one where the buck truly stops, with the CEO responsible for the organization’s entire operations. The position of CFO shouldn’t be confused with that of financial controller, with the latter being focused less on financial strategy, and more on the organization’s day-to-day financial operations. A significant part of a CFO’s workplace includes boardrooms or designated meeting spaces within the corporate office.
As such, they determine the best mix of debt, equity, and internal financing. Addressing the issues surrounding a company’s capital structure is one of the most important duties of a CFO. New additions to the role include involvement in cybersecurity and environmental, social, and governance initiatives — the latter in particular being of increasing interest to shareholders. Meanwhile the governance aspect of the job is becoming ever more demanding, as regulatory frameworks are becoming increasingly complex. Over the years, the job has evolved, with an Accenture survey in 2022 revealing that 93% of CFOs agree that the responsibilities they’re now entrusted with feel much greater than in the past. CFOs are now expected to be commercially minded strategic thinkers who can react to changes and influence decision-making across the organization.
Take your performance to the next level by learning finance skills through Udemy’s online courses. That means an innovation is only as good as the process set up to accomplish it. CFOs are uniquely positioned to mobilize new projects, because their success depends on their mastery of efficiency and productivity—more so than other C-suite roles. Because the CFO signs off at each stage of a new process, they are uniquely suited to help implement a stage-gate process toward innovations. The best CFOs collaborate closely with their colleagues, particularly the CEO and chief human resources officer (CHRO), to direct capital toward attracting, teaching, and retaining talented employees. With the advent of the digital economy, rapid technological change, and increased economic uncertainty and investor scrutiny, the CFO role has become more forward- and outward-facing.
CFOs collaborate with investors, lenders, and key stakeholders to evaluate the company’s financial performance and drive profitability. CFOs with the right balance of experience, education, people skills, strategic planning capabilities, drive and integrity typically are candidates for top corporate jobs. They frequently compete with chief operating officers (COOs) and chief strategy officers (CSOs) for the top position.
