The financial health of a company plays an important role in the life of the business. Failure to ensure that adequate revenue is generated and financial resources allocated and managed in an appropriate manner may affect the operations of any business in a significant way. This is why it is important to have qualified personnel to manage the cash flow and cash reserves of a firm. Businesses of different sizes may choose to employ a CFO. But what does a CFO do?
In order to fully understand the benefits of hiring these services for your business, you will need to know the key duties of the financial experts. In the corporate and investing worlds, every senior executive should know what does a CFO do. This will go a long way in helping them hire the right professional for the job.
Who Is the CFO?
A CFO, Chief Financial Officer, is a senior executive in charge with the responsibility to oversee the financial operations and activities of a company. Due to the diverse settings of CFO positions, the day-to-day duties of these financial experts vary widely. However, regardless of the setting, a CFO will report directly to the chief executive of the organization or company.
Anyone who wonders what does a CFO do should understand that the executive attends to both the short-term and long-term financial needs of a business.
- Short-term: The expert will seek to understand factors that drive cash flow;
- Short-term: They establish performance measures;
- Long-term: The financial officer will assess various financial risks;
- Long-term: Also, the CFO searches for the best opportunities.
By virtue of this position, the officer will be a strategic partner and adviser to the management. They will work with the management to improve operations, boost revenue and stabilize cash flow. Consequently, the business has a solid footing and keeps growing.
9 Key Tasks that the CFO Successfully Covers
So, exactly what does a CFO do? The answer to this question lies in the key duties and responsibilities of the financial officer. In any organization, the CFO has wide ranging responsibilities, all of which form the job description.
1. Controls Cash Flow
In any business, cash is king. This is why part of what a Chief Financial Officer does involves maintaining control of the cash flow position of the company. This means that the senior executive will have to:
- Understand the different sources of cash;
- Know how financial resources are utilized;
- Maintain the integrity of funds.
The expert will also be responsible for formulating policies for credit collection, payment of bills and purchasing.
2. Understands the Liabilities of the Company
What does a CFO do in terms of understanding the liabilities of a company? The professional is supposed to understand:
- Tax obligations;
- Statutory obligations;
- What is covered in loan covenants;
- All hidden liabilities;
- Legal contracts.
3. Supervises Departments
Depending on the size of an organization, a CFO will have a duty to oversee the operations of several departments.
- In supporting the accounting and financial functions of smaller organizations, the senior executive will supervise the Human Resource, IT, Accounting and Finance departments.
- However, larger companies may limit the supervisory duties to the Accounting and Finance departments.
4. Raises Capital
While finance is one of the key responsibilities of any CFO, the executive is also required to raise capital in order to meet the financial needs of the organization.
- This involves coming up with programs and policies that will facilitate the acquisition of the necessary capital.
- Also, the holder of this position will also negotiate procurement activities of both debt and equity capital.
- The CFO will also maintain the related financial arrangements.
5. Controls Records
Most companies have numerous financial transactions whose records they need to maintain in an accurate and appropriate manner.
- Some of the important financial records that the CFO will have to control include leases, real estate bids and insurance coverage.
- They also make sure that audits are completed in good time and statutory books are closed.
- However, a CFO will also see to it that the company complies with all its financial obligations and meets the set standards.
6. Budgets and Controls Business Expenses
Despite the difficult and ugly nature of the budget making process, it remains an important part of running any business. It is the responsibility of the Chief Finance Officer to oversee the entire process of coming up with a budget. This includes:
- Collecting the necessary input from different departments;
- Ensuring that the budgetary estimates are in line with the company’s performance;
- Controlling all business expenses.
7. Keeps Track of Financial Obligations
In order to comply with all the statutory requirements, industry standards and maintain a positive image among stakeholders, businesses have to meet numerous financial obligations. Through the CFO, businesses and organizations will be able to keep track of all their financial obligations. The financial officer will be in charge of actions such as contracts for:
- IT services;
- Raw materials;
- Other services and products that require financial commitment.
8. Monitors Company Performance
What does a CFO do when it comes to company performance? The professional needs to have a clear understanding of the business model of the company. By doing so, the financial officer will know how the business generates customer value. In the long run, the CFO will be in a position to use dashboards, balanced scorecards and analyze financial statements. So, after looking at these, they can determine the actual financial performance of the company.
9. Cultivates External Financial Relationships
- A CFO is also tasked with the responsibility to establish and maintain effective communication channels with financial analysts, investment bankers and shareholders.
- Apart from administering the necessary arrangements, they also maintain adequate capital for business operations.
To the Point
What does a CFO do? We live in a business world that is characterized by increased competition and uncertainty. Therefore, experts can help businesses to adapt and grow in an ever-challenging economy. So, the CFO will keep your business or organization going strong by playing the critical role outlined by these key duties.
In summary, businesses that need an expert to handle accounting and reporting, management and budgeting as well as strategy and planning should hire a CFO.
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