The Chief Financial Officer has now moved away from the traditional role in today’s fast-changing business landscape and has become a lot more than merely a numbers person. The CFO is an enabling strategist guiding his company through a changing marketplace. Financing, once so confined to the bookkeeping role, has become the living heart of our business success. Through this blog, we will discover the role of the Chief Financial Officer in business development.
Introduction
Our nation is moving towards becoming the financial superpower. The growing business scenario in India happens solely because of the influential CFOs who lookout beyond traditional accounting and reporting, which sets the path to new heights. In the future, innovation technology services would lead to new market forecasting, which would enable CFOs to foresee risks and potential failure at an early stage. There are various reasons they evolved, such as the cumulative impact of factors that converged because of the growing requirements of businesses in a constantly changing economic landscape.
A CFO plays an important role in making opportunities for growth from both organic and inorganic means possible.
Understanding the term CFO
A chief financial officer is a higher-ranking executive who assures the management of the financial actions of the company. He tracks the flow of cash, undertakes financial planning, and analyses the financial strengths and weaknesses of the company and, therefore, proposes strategic directions. The job of a CFO encompasses, without being limited to, regulatory compliance, budgeting, cash-flow management, financial planning and analysis, scenario modelling, guiding the CEO on potential mergers and acquisitions targets, preparing for initial public offers, capital budgeting, accessing debt and equity financing, and handling investor relations.
In addition to being a custodian of finances, CFOs usually handle the task of advising the chief executive officer & the Board of Directors on strategic directions on doing business.
Exploring the CEO vs CFO
The CFO and CEO in an organization differ from each other. Nevertheless, CFOs must work in very close proximity with other senior executives of a company, like the CEO. These executives are sometimes called the C-Suite of the company, which is usually the highest in command, making decisions for a company. Although the CFO is usually junior to the CEO under the general firm hierarchy, the CFOs will usually have the top decision-making power on all matters related to the Finance department of their firm.
Skills and Qualifications
A CFO will also have certain qualifications. This is also a senior position and, hence, adequate work experience is a must. The profile usually includes a strong background in finance and accounting or in any other related field. They are usually holders of an advanced MBA or a Certified Public Accountant (CPA) designation. Beyond technical expertise, a good CFO needs to have strong leadership skills and excellent communication and analytical skills to play out effectively.
The Advantage of Being a CFO
The role of a CFO has evolved through the years. And, with time, their jobs have become much demanding and challenging. A chief financial officer is a position constantly under much pressure to cut cost and grow revenue. Their job constantly faces several challenges brought forth by economic uncertainty and new regulations.
The CFO role has changed from considering issues of compliances and quality control to business planning and changes in processes. The CFO is now a strategic partner to the CEO. The companies are influencing company strategies through profitability increase and continuing with higher profits, hence the demand for CFOs.
Role of CFO in Business Development
CFO is now expected to be one officer who illustrates risks, measures business and financial performance, prescribes process procedures, and solve taxation and compliance issues. The CFO is thus to perform a delicate balancing between what the business demands – speed of implementation and the role of processes.
The CFO also interacts with other managerial Staff and is an essential player in comprehensible organizational performance with specific emphasis on the long term. For example, if the marketing department is proposing a new campaign, the CFO would be of help in determining that the campaign could be done or probably advise that there is little available to finance the campaign.
Individuals in this role have a great deal of influence on the companies’ investments, capital and how the company approaches its revenues and expenditures. This corporate officer works with the CEO in areas of planning, evaluation of cost and benefits, and sourcing for funds for specific projects.
Responsibilities of a CFO
The responsibilities of a CFO are different and quite diverse in terms of covering a wide range of financial actions. He is responsible for the following actions –
- Financial Planning and Analysis: The CFO stands responsible for supervising different aspects of the finance function, such as planning and budgeting, and forecasting and planning. And they use financial information to give information on the company’s past business performances and its future trend.
- Financial Reportage: Based on the results of the organization’s operations, the CFO is responsible for production of financial statements for the internal and external management and the board of directors. These reports offer a summary of the organizational financial strength and operational results.
- Risk Management: CFOs are held responsible with coming up with measures to minimize financial risks that might affect the company. And which involve, for instance, the risks associated with fluctuation of exchange rates, rates of interest and market price fluctuation risks.
- Capital Management: CFOs are responsible for the company’s capital structure, which has to be perfect for the achievement of the goals of the firm. They also control the company’s cash flows in an effort to maintain a healthy and ready position with cash to meet the company’s obligations.
- Financial Compliance: CFOs are responsible for the timely fulfilment of all corporation’s financial laws and the production of the necessary records. They also ensure the internal control of their company in fighting fraud and financial wrongdoings.
- Investor Relations: CFOs are consequently responsible for preparing investor relations’ and analysts’ expectations. They pass financial statements and financial plans to the investment community.
Benefits of Appointing a CFO
CFOs direct the finance and accounting work force and have an organizational overview making the CEO and peers including the head of other organizational departments and VPs for human resources and sales to concentrate on their working objectives and phenomenon.
Though a CEO or COO may come from accounting or finance profession, they will not have effective and practical experience as a real CFO. The CFO is the senior most financial employee in the organization and is responsible for the management and direction of the company’s operations including its accounting function, budgeting, financial forecasting and management of financial risks.
Some companies may even think that it is not necessary to have a CFO, but actually, there are many benefits to having a CFO as your company grows. Below is a list of some of the benefits that come with the appointment of an individual in this post.
- Leadership: CFOs have a wealth of knowledge and experience in creating and mobilizing an efficient and effective finance team.
- Strategic Growth: Such qualified CFOs can assist companies in their expansion through the mergers and acquisition or through public offering of securities.
- Risk Management: CFO bear the responsibility of risk, specifically, of carrying out and overseeing matters of debt, the sufficient availability of cash to meet business needs, and of abiding by the regulation.
- Industry Expertise: Industry specialists, who are many CFOs, add value for organizations, especially by helping organizations compare performance with relevant competitor organizations.
Conclusion
The CFO is the highest-ranking executive in relation to managing the finances of an enterprise. It is similar to that of a treasurer or controller. However, while the controller or accountant takes care of bookkeeping and the financial statements of the company, a CFO is obligated to come up with the financial plans.
The role of CFOs in fast-changing organizations in India is changing. They have to be more than just the traditional financial manager. They need now to drive technologies, strategic innovations, and shifting consumer behaviours. Growth and efficiency, though, require cautious investment balanced by good cost considerations.
Effective management of working capital remains a problem, however, AI-driven solutions should enable you to optimize your inventory and your demand forecasting. This would depend on CFOs, who would embrace their role as strategic leaders building the future of an organization within their expanded role. Contact Kanakkupillai for best accounting service at affordable cost.
References
The Companies Act, 2013 (Act No. 18 of 2013)
https://www.icsi.edu/home/
