Roles of Chief Financial Officer
The corporate structure is ever evolving in an endeavour to strategically position companies to achieve the best possible results. This is more prevalent in the large companies that have been expanding throughout the world. The biggest challenge created has been how to effectively organize the operations of a company that has a turnover of millions of dollars per year. Whereas previously the Chief Executive Officer (CEO) was the paramount leader of all company operations, most of them now delegate a lot of power to other executives in the company. This includes the largely influential position of Chief Financial Officer (CFO)
Most large companies now have a two tier corporate hierarchy which is well explained bythis website.On the first tier is the board of Governors or directors elected by shareholders. The second tier level is the upper management. These individuals are hired by the board of directors and are responsible for the day to day running of the company. The top manager is called the Chief Executive Officer and directly below is the Chief Financial Officer. The chief financial officer is widely regarded as a senior vice President and is largely responsible for checking the financial health and integrity of the corporation. This is a very senior position which comes with a lot of roles which are demanding.
The financial downturn that shock the world in 2008 has meant that a lot of companies are now placing more emphasis on the financial side of the company so that there is greater financial prudence. This has meant that CFOs are now emerging with greater responsibilities than ever. The following are some of the roles undertaken by the CFO.
1. The CFO has an important role of being the overall finance department supervisor. The CFO has to be aware of all that is going on in the accounting and finance departments. The important role would be to ensure that resources are used in the best possible way and procedures are being followed on a daily basis. The CFO has to ensure managers in the department give feedback any new developments. If they are any problems the CFO must together with the other managers fix it so that the daily operations of the company are smooth.
2. The CFO has to be the bridge between the company and the board of directors. The board of directors are keen to hear financial performance of the corporation. It is the role of the CFO to update the board and the share holders by preparing the annual and interim reports and presenting them. The CFO is accountable for the accuracy of the financial reporting especially for the publicly listed companies. Besides just reporting on the performance of the company it is critical that a CFO be innovative by recommending new policies and procedures that can be deemed effective to grow the balance sheet of the company.
3. It is also important for the CFO to act as the ultimate financial ambassador of the corporation. There will be a lot of interactions with other companies, investment bankers and other important stakeholders who are critical for the operations of the corporation. It is essential that the CFO maintains a good working relationship with these partners and supervise and oversee any of the transactions carried out so that the company is not prejudiced of money in the deals. The CFO also has the role to design investment policies with the company investments funds.
4. The company performance largely lies with the CFO.A good set of financial results is largely credited to the management team with the CFO largely receiving most of the praises. Similarly also a poor set of results would see the CFO being widely condemned. So the CFO must ensure that the control of the cash flow through the establishment of effective accounting system which has good auditing standards. This means designing effective controls for credit, purchasing, collection and limiting the amount of money that can be stolen by both employees and business partners.
5. One of the most critical roles of a CFO is to finalize the company’s budget. This is no easy task because a lot of departments within the company will submit a budget that is over the company’s resources. It is ultimately the CFO who will have to decide how the company resources will end up being allocated. For an example the CFO will have to decide whether the company will have to expand the marketing budget or cut it. This is not an easy exercise because all these decisions must be explained to the board of directors.
6. The CFO also has to oversee and assess the risk elements of the various business deals which the company is in. This could include investment of funds, expansion plans and dealing with mergers and acquisitions. During company meetings the rest of the team will be relying on the facts and figures from the CFO to enable them to make a sound business decisions. Identifying and assessing the risk is so vital in the job of a CFO because they will tell the board areas in which the company must either invest or move out before any danger of losses. So forecasting is an important role and helps in cutting business losses
7. The CFO must always initiate and engage with the chief executive officer on the potential growth prospects and long term planning for the corporation to the best of their ability. Using all the experience that would have been gathered over time the CFO then becomes an important person to be relied on by the CEO to offer useful ideas.
With the increasing rate of globalisation that has created a lot of big corporation it is envisaged that the CFO will continue to play an influential role in the growth of corporate world. The CFO is expected not only to envision the future but to lead the way there.
