Financial professionals working in companies may have different job titles depending on the firm and the industry. Regardless of what the position is called, proper management of the financial area is critical for any organization.
Anyone with access to the internet can look up a definition of what a Chief Financial Officer (CFO) is. According to Investopedia.com, a CFO is:
The senior executive responsible for managing the financial actions of a company. The CFO’s duties include tracking cash flow and financial planning as well as analyzing the company’s financial strengths and weaknesses and proposing corrective actions. The CFO is similar to a treasurer or controller because he is responsible for managing the finance and accounting divisions and for ensuring that the company’s financial reports are accurate and completed in a timely manner.
According to Marina, Guzik in her book CFO Techniques, the mission of the CFO is to:
Utilize their best abilities and partner with other senior managers in facilitation of the company’s commercial survival, stability, and growth.
There is a long list of essential tasks and responsibilities that can and should be accomplished by the CFO to help make the company successful. The list includes:
- Policies, Procedures & Controls – are tasks being done in a consistent fashion from day to day? Are adequate controls in place to protect company assets both tangible (i.e. cash, inventory) and intangible (i.e. patents, company secrets)?
- Capital Resources and Banking – does the company have adequate funding to satisfy its mission and for the owner to meet his/her goals?
- Cash Management – does the business generate enough cash to continue operations and make a reasonable profit (if a for profit business, of course)? Is the available cash used wisely?
- Information Analysis and Reporting -what do the financial results tell you? How do you report the results in a way that others can understand and use the information to make quality decisions?
- Accounting Management, Financial Statements and Audits – are procedures in place to process information (sales, inventory, collection of cash, etc.) quickly and accurately? Do the financial statements adequately reflect what the operations have done?
- Risk Management and Compliance – are processes in place to help the company mitigate and maneuver through the potential pitfalls of being in business?
- Strategic Planning – are plans in place to guide the company towards its mission? Are the plans reviewed and modified when and if necessary?
- Administration & HR – is there a proper level of “back office support” to handle the administrative functions of the organization?
Having a CFO (or any other position) in place will not assure success. It takes a team effort to make a company successful.
Without properly managed growth, companies can and will lose vision and focus on the company’s mission. Little mistakes turn into big mistakes, customers and employees leave, internal fiefdoms develop and teamwork stops which diminishes the energy, innovation and creative talents of key employees. Without vision, foresight and proper planning, the company can perish.
So what kind of company needs a CFO? Just the ones that want to be successful. You may likely need a full-time CFO if your company has $50 million or more in sales or 100 or more employees. However, even small and medium sized businesses can now team up with an affordable CFO on an outsourced basis. Whether full-time, part-time, permanent or temporary, the key is for the CFO to fully understand, support and the role of unleashing the creativity and leadership of the business owner.