The role of Chief Financial Officer (CFO) is one that continuously evolves. Where CFOs were once technical authorities, they’ve now taken on a broader position and play a vital part in developing strategy and long-term planning.
With this growth in role and scope, the way a CFO renders services has also changed. Where CFOs used to be prized, retained resources, the CFO as a service model has been developed to cater to smaller businesses that may not be able to afford to retain a full-time CFO.
An ever-expanding role that becomes more critical by the day
A CFO’s job description has, at least historically, always had to deal with a company’s books. In terms of three broad categories, it entails: reporting, liquidity, and financial planning and analysis. Reporting involves overseeing the compilation and eventual publication of a company’s existing financial data, liquidity involves managing investments in order to ensure it is able to meet current cashflow requirements, while financial planning and analysis involve forecasting future cashflow and discovering potential avenues for investment, helping secure the corporation’s bottom line. This meant working in a purely managerial capacity, with technical aptitude involved in some of the more critical decisions.
The modern CFO must possess skills that were traditionally considered irrelevant to the role. Hard skills like technical expertise and an in-depth knowledge of accounting and reporting are a given, but these are now accompanied by a need for wider-focused skills. It is through these skills that a virtual CFO also thrives. Let’s take a look at the top 5 ways that a CFO adds value to any business.
1. Leadership from a financial perspective
The modern CFO is often tasked with overseeing processes and programs that affect an organizations growth overtime, such as corporate restructuring, mergers, acquisitions and more. A CFO formulates and interprets the strategic directives needed to reach these goals, which are then communicated and carried out.
As an effective business partner, today’s CFO relies on leadership and communication skills to oversee and manage big changes like these. Even when there aren’t any major developments, a CFO leads the finance department from the front, taking an active role in ensuring operational sustainability. This brings us to our next point…
2. Managing operations
A CFO must be well-versed in the internal practices, as well as the domain, of their company. They use this knowledge, along with their financial expertise, to ensure that a business does not pursue short-term interests that jeopardize its long-term financial goals. The CFO must be forward-thinking and planning ahead at all times.
To this end, a CFO sits with the heads of other departments to formulate and then help execute a financial plan that maximizes profits while also ensuring organizational cohesion. This is a complex and critical process, and a CFO’s duties involve playing a central role in it, all the while keeping an eye on the finance department as well.
3. Developing and instituting controls
A remnant from the modern CFO’s classical counterpart, a CFO’s duties also involve shaping policy to meet statutory and compliance requirements. A CFO, especially one at the helm of a small business finance department, must foresee how the business’s operations will scale with growth, making sure to plan for any issues that may arise due to explosive growth.
It helps to look at the CFO’s role using a sports contest between two teams as a metaphor. Where the first two aspects that we discussed dealt with a CFO handling their team’s ‘offense’, ensuring profits and facilitating growth, a CFO is also critical to their team’s ‘defense’, in protecting those profits and ensuring growth lasts and can be sustained. Compliance may seem insignificant in this regard, but a CFO with an eye for detail can mean the difference between a company seeing profits or facing law suits.
4. Ensuring a cohesive strategic outlook
One of the most open ended and important aspects of a CFO’s job description involves helping form a business’ strategic outlook. A CFO looks at the strategy goals developed by other departments, puts them through the wringer to figure out if they’d be profitable, and then figures out how to manage the business’s finances to fund them without compromising on operations. But it doesn’t end there.
Regardless of whether a campaign is successful, a CFO then oversees the number crunching involved in determining the scale of this growth, while making sure that this process is accurate and fruitful as possible. In this capacity, a CFO is effectively watching out for the interests of people at every level of the company, from the employees, to the executives, and most critically, the shareholders. Remember: a CFO still vets a company’s books and manages what goes out in annual and quarterly reports.
5. Outlining, managing, and meeting growth goals
As a key player who sees to the company’s finances, a CFO invariably has a role in deciding how much cashflow is available to a company for specific purposes. While this may start with the formulation of a business’ yearly goals, it doesn’t end there by any means. The CFO plays an active role in all functions that may see rapid and unprecedented growth or obsolescence. This means staffing and IT considerations, as well as maintaining a bird’s eye view of developments in the tech field. With enterprise resource planning gradually becoming the norm in organizations around the world, finance as an institution has been tied to technology in a way that we could never have foreseen. A CFO’s technological aptitude is, therefore, a vital part of what makes them so essential to a company’s future, especially that of a small business trying to stake its claim to success.
As one of a company’s chief strategic influencers, the CFO enjoys a great deal of power while also shouldering a great deal of responsibility. Finding someone reliable to fill this role can be difficult, and it’s not as if top-of-the-line executives shop around for employment opportunities. This is why many small and emergent businesses will either opt to leave the CFO seat empty, or simply have to do so, with an aim to fill it someday.
As providers of Virtual CFO services, we attempt to bridge the gap between these businesses and the essential expertise that they need to ensure maximum possible growth. We’ve helped businesses from all manner of sectors go from earning in the hundreds of thousands, to earning in millions, and eventually tens of millions–we’d like to help your business do the same. Schedule a consultation today and find out what Arete can do for you.