The CFO’s role has evolved tremendously over the last several decades, expanding beyond reporting and compliance to include business strategy and digital transformation. The main responsibilities in the past were to reduce costs, optimize finance processes, and “keep score” by gathering data, running reports, and summarizing data. But CFOs now focus on supporting business model transformation—not just optimizing finance processes—but automating them. Today’s CFOs have broad, strategic responsibilities. They report directly to the CEO and have a fiduciary responsibility to the Board of Directors and shareholders. CFOs are expected to be not only stewards of the finance department, but also strategic catalysts of company growth.
This is not to say CFOs have relinquished their responsibility for cash-flow management, regulatory compliance, or financial reporting. The CFO is still ultimately held accountable for the financial health of the business—first and foremost.
The key duties of the CFO also vary depending on an organization’s size, industry, and whether or not it’s publicly traded. CFOs generally support and influence three critical functions: controllership, operations, and strategy and forecasting.
Though the role of the CFO has greatly expanded, financial stewardship is still a central responsibility of the position. Many large enterprises employ chief accounting officers, but it is still the CFO who is ultimately responsible for regulatory compliance, closing the books in a timely and accurate manner, controlling costs, and managing cash flow across the organization.
Partially assuming the role of the financial controller, the CFO is responsible for ensuring that the day-to-day accounting and financial operations are running smoothly. CFOs will also review and approve reports that provide greater insight into the company's financial standing.
When it comes to financial stewardship, part of the CFO’s job is installing a proper risk management framework to protect against fraud and unauthorized user access. Risk management software helps organizations meet compliance and regulatory mandates, such as the Sarbanes-Oxley Act (SOX) and General Data Protection Regulation regulation (GDPR).
Closing the books in an accurate, timely manner is also vital for financial stewardship. CFOs are constantly looking for ways to close the books faster using automated account reconciliation software. Not only does this facilitate faster SEC reporting, but it also gives the CFO more time each quarter for budgeting, scenario planning, and M&A strategizing.
Liquidity and treasury management are also a central part of the CFO’s role. The treasury aspect of the CFO's position includes responsibility for the company's debts, assets, and liquidity. In terms of assets, this includes both physical assets, such as buildings or equipment, but also financial investments. And as for a company's debt, the CFO works to reduce it while ensuring no more is accrued.
Liquidity refers to an organization's ability to pay off its short-term liabilities—those that will come due in less than a year—with readily accessible, or liquid, funds, namely cash and marketable securities. 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.
CFOs must manage both incoming revenues and accounts receivables while keeping an eye on outgoing payments and short- and long-term liability. Real-time analytics and accurate cash-flow forecasting is crucial, not only for long-term planning, but also for ensuring a business can pay its bills as they become due—on time, every time.
Strategy and forecasting
CFOs are in a unique position to partner with the CEO to influence the future direction of the company. Internally, the CFO advises departments in a variety of areas, including product development, new business models, digital transformation, and human capital management. Externally, the CFO analyzes market trends and expansions and influences decisions, such as global expansion, M&A targets, and capital structure.
CFOs rely on FP&A to put complex data—historical, current, and predicted financial results—in perspective in order to answer important questions and help the CEO make sound financial decisions, such as:
- Which products and product lines are driving profitability, and which ones aren’t?
- If revenue declines by 10%, will the company still be profitable?
- How much should we invest in property, plant, and equipment(PP&E), and when?
- Should we raise debt or equity financing, and when?
- What impact will an acquisition or divestiture have on the bottom line?
When creating these forecasts, the CFO considers a variety of factors in their calculations, including:
- Sales trends
- The price of raw materials
- Shifts in market demand
- Macroeconomic data
- Emerging competitors
- Advances in technology
- Risks to the enterprise: market, geo-political, cyber threats, and regulatory changes
- Environmental, social, and governance criteria
CFOs often purchase specialized planning software to develop forecasts and conduct what-if analysis for a variety of contingencies: new products, new business models, acquisitions, divestitures, international expansion, supply chain chaos, economic downturns, and a host of others.