In today’s fast-changing business landscape, the chief financial officer has moved away from the traditional role 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 a financial superpower. The growing business scenario in India happens solely because of the influential CFOs who look beyond traditional accounting and reporting, which sets the path to new heights. In the future, innovative technology services will lead to new market forecasting, which will 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 a vital 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 economic 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 offerings, capital budgeting, accessing debt and equity financing, and handling investor relations.
In addition to being the custodian of finances, CFOs usually advise the chief executive officer and the Board of Directors on the business’s strategic directions.
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 the company. Although the CFO is usually junior to the CEO under the general firm hierarchy, the CFO usually has 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 perform effectively.
The Advantage of Being a CFO
The role of a CFO has evolved over the years. With time, their jobs have become more demanding and challenging. A chief financial officer is constantly under pressure to cut costs and grow revenue. Their job constantly faces several challenges brought forth by economic uncertainty and new regulations.
The CFO’s role has changed from considering issues of compliance and quality control to business planning and changes in processes. The CFO is now a strategic partner to the CEO. Companies are influencing their strategies through increased profitability and continuing with higher profits, hence the demand for CFOs.
Role of CFO in Business Development
The CFO is now expected to be one officer who illustrates risks, measures business and financial performance, prescribes process procedures, and solves taxation and compliance issues. Thus, the CFO must delicately balance 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 help determine whether the campaign could be done or probably advise that there is little available to finance it.
Individuals in this role have a great deal of influence on the company’s investments and capital and how the company approaches its revenues and expenditures. This corporate officer works with the CEO in areas such as planning, evaluating costs and benefits, and sourcing 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 is responsible for supervising different aspects of the finance function, such as planning, budgeting, and forecasting. They use financial information to provide information on the company’s past business performance and future trends.
- Financial Reportage: Based on the organization’s operational results, the CFO is responsible for producing financial statements for 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 responsible for devising measures to minimize financial risks that might affect the company. These risks include fluctuations in exchange rates, rates of interest, and market prices.
- Capital Management: CFOs are responsible for the company’s capital structure, which must be perfect for achieving the firm’s goals. 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 fulfillment of all the corporation’s economic 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 expectations and analysts’ expectations. They also present financial statements and financial plans to the investment community.
Benefits of Appointing a CFO
CFOs direct the finance and accounting workforce and have an organizational overview, allowing the CEO and peers, including the heads of other organizational departments and VPs for human resources and sales, to concentrate on their working objectives and phenomena.
Though a CEO or COO may come from the accounting or finance profession, they will not have effective and practical experience as a real CFO. The CFO is the senior financial employee in the organization and is responsible for the management and direction of the company’s operations, including its accounting function, budgeting, economic 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 mergers and acquisitions or public offerings of securities.
- Risk Management: The CFO bears the responsibility of risk, specifically of carrying out and overseeing debt matters, ensuring the sufficient availability of cash to meet business needs, and abiding by regulations.
- Industry Expertise: Industry specialists, including many CFOs, add value for organizations, primarily 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 economic 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 now need to drive technologies, strategic innovations, and shifting consumer behaviours. Growth and efficiency, though, require cautious investment balanced by good cost considerations.
Effective working capital management remains a problem. However, AI-driven solutions should enable you to optimize your inventory and 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 the best accounting service at an affordable cost.
References
The Companies Act, 2013 (Act No. 18 of 2013)
