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Finance glossary

What is a Chief Financial Officer (CFO)? Role & Responsibilities

Bristol James
5 Min

A Chief Financial Officer (CFO) is a member of a company’s executive team responsible for planning and overseeing all financial activities within a company. Generally, the CFO is the highest ranking professional on the finance side of any given business.

Key responsibilities falling under the role include managing financial budgets, forecasting, financial reporting as well as collaborating with the CEO and other C-levels to provide strategic recommendations. Depending on the size of the organisation, a wide range of people will report to CFOs, making strong leadership skills vital to the role.

Increasingly, many CFOs are getting involved in decision-making across all functions, requiring well-rounded business acumen and an in-depth understanding of the entire organisation.

Key responsibilities of a CFO

Budgeting and financial forecasting

Essentially, budgeting will look at the company’s financial goals over a specified period (usually year-by-year). This will include expected cash flow, expenses, revenue and debt. Over time they will measure this against the actuals as they are reported in real-time.

Financial forecasting is based on the future outcomes of the business by leveraging data from previous periods. A forecast will consider things like sales activity, price of materials, expected investments or costs, shifts in personnel, etc. This will help determine how a business should plan for the year but may be reviewed quarterly or monthly.

To put it simply:

  • Budget = company expectations for the year
  • Forecast = predicting what will be achieved

Assessing return on investment (ROI)

A continuous project for the CFO is to assess the likelihood that business activities will result in a net positive return on the initial investment. When a business case is brought forward, the CFO will look at the financial and time investments required to deliver the project. From here, they will assess the likely outcome from the project and provide advice to the business on whether it will result in a profit or a loss.

Monitoring liquidity & assessing risk

Understanding any debt acquired by the business over the course of the year is crucial for assessing liquidity. Liquidity is the ability for the organisation to pay off debts within a short period of time. This requires managing teams and communicating with the business if cashflow is coming in slow (e.g. fraud incidents, customers not paying bills on time, or other delays) or if there are other factors which may interfere with the ability to cover funds owed.

Internal and external reporting

A CFO will work extremely close with the CEO to keep them informed about the financial health of the business. Not only are there several internal reporting expectations, a CFO will also be required to deliver accurate updates and answer any questions to a Board of Directors on behalf of the organisation.

Providing strategic direction

As this is also a strategic role, not only does it require the ability to drill down into data and specific numbers, it also requires the ability to look at things holistically and provide strategic advice and direction on new proposals brought forward. CFOs provide direction and advice to other senior leaders, as well as reporting stakeholders if required.

The roles and responsibilities of a modern-day CFO – what does the role look like in 2024?

Although the role of CFO in any given industry will share some of the same key responsibilities highlighted above, depending on the size of the business (and potentially the industry), the true scope of the CFO role can be evolved to include responsibilities more in-line with a modern business landscape and the rate of innovation.

For example, many CFO roles now include responsibilities which may have previously fallen on the role of Chief Technology Officer (CTO). A recent McKinsey & Company article reviewed the results of their study on the changing landscape for CFOs, finding finance leaders need to reconcile their growing portfolio of responsibilities.

The article quotes Ankur Agrawal, a McKinsey expert, discussing the role CFOs now play in digitisation and new technologies. “Some of the core processes, such as payables and receivables management, have already largely adopted digital.”

So, what are some additional roles and responsibilities CFOs may be taking on today that differ from five years ago?

Acting on Environmental, Social and Governance (ESG) issues

PWC’s 2023 ‘What’s important to CFOs’ highlighted a growing need for CFOs to prioritise the need to gather data and insights on ESG in preparation for future policies and procedures around climate control.

Heightened focus on talent and retention

In this same report, CFOs cite talent attraction and retention as a serious risk. Given the change in landscape and the acceleration of new technologies, hiring the right skillset becomes increasingly more challenging – and important. Previously, CFOs may have been less involved in the recruitment process. However, a growing need to have the right people in the right roles has added a new level of CFO involvement.

Invest in cyber security and digital transformation

We recently cultivated a report on The State of Cyber Fraud Defence in 2023, where we interviewed 500+ finance professionals to get their stance on cyber security. The number of attacks in Australia alone have grown year-on-year by 73%, putting immense pressure and stress on organisations to tighten their security measures. In the report, we found 60% of CFOs say they’re concerned about fraud going undetected in their organisation.

CFOs need to look at ways to invest digital transformation and automation to replace manual and high-risk tasks. For example, business email compromise (BEC) scams are growing – this is where falsified invoices are sent to accounts payable teams for processing. In this situation, CFOs are putting technologies such as Eftsure in place to ensure payments are going to the right place, not into the hands of scammers.

How to become a CFO

Like most senior leadership roles, the path to becoming C-level can look very different from person to person. However, being a Chartered Accountant is a professional designation, so there are standard certifications any CFO would have completed before beginning their journey.

Generally, most CFOs would have:

  • Accredited undergraduate degree (likely in business, economics, finance or accounting)
  • Certified Public Accountant (CPA) certificate
  • In some circumstances, depending on the nature of the undergraduate studies, a CFO may also possess a master’s in business administration (MBA), but this isn’t always necessary.

Then begins the career path to CFO. Depending on the size of the company, it can take a while to work up to this level. However, it’s all related to the industry, size of the organisation and specific work experience on an accountant’s CV.

In summary:

  • A Chief Financial Officer (CFO) is the top-ranking member of the executive team responsible for planning and overseeing all financial activities associated with a specific company.
  • Key responsibilities include: budgeting and financial forecasting, assessing return on investment (ROI), monitoring liquidity and assessing risk, internal and external reporting, and providing strategic direction
  • The role of CFO is continuously evolving to suit the rate of innovation, meaning today’s CFOs will also often oversee talent and retention, often focusing on corporate ESG and overseeing technology and cyber security
  • All CFOs will have their own journey to the top, but most will have completed an accredited undergraduate degree and received their Certified Public Accountant (CPA) certificate

 

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