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The Role of the CFO (Chief Financial Officer)

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How Does a CFO Bring Value to a Company?

The Role of the CFO (Chief Financial Officer)

The role of the CFO (Chief Financial Officer) has been changing over the past twenty years. Originally, the role of the CFO revolved around producing and analyzing the financial statements. However, because of the computerization of the accounting function the need for accounting skills in performing the roles and responsibilities of a CFO diminished.Though the job description of a CFO (Chief Financial Officer) remains broad the tasks comprising that function fall into four distinct roles.

The Strategist CFO

The first role of the CFO is to be a strategist to the CEO. The traditional definition of success for a chief financial officer was reporting the numbers, managing the financial function and being reactive to events as they unfold. In today’s fast paced business environment producing financial reports and information is no longer enough.

CFO’s in the twenty-first century must be able to “peak around corners”. They must be able to apply critical thinking skills, along with financial acumen, to the long term goals of the organization.

The CFO as a Leader

The second role of the CFO hand in hand with the first one; that is one of a leader implementing the strategies of the company. It is no longer sufficient for a CFO to sit back and analyze the effort of others. The chief financial officer (CFO) of today must take ownership of the financial results of the organization and senior management team.

The chief financial officer of today must be responsible for providing leadership to other senior management team members, including the CEO. The CFO’s role can sometimes force them to make the tough calls that others in the organization don’t or can’t make. Occasionally, this can mean the difference between success and failure.

The CFO as a Team Leader

The third role of the CFO is that of a team leader to other employees both inside and outside of the financial function. Not only will a coach call plays for a team, they are also responsible for getting the highest results out of the talent on their team.

An aspiring and successful coach will produce superior results by finding the strengths of their team members and obtaining a higher level of performance than the individuals might achieve on their own. The role of the CFO (Chief FinancialOfficer) is to bring together a diverse group of talented individuals to achieve superior financial performance.

The CFO with Third Parties

Last, but not least, the role of the CFO is that of a diplomat to third parties. People outside of the company look to senior management team for inspiration and confidence in the company’s ability to perform. In almost every case the financial viability of the company is vouched for by the CFO.

The CFO’s role becomes that of the “face” of the company’s sustainability to customers, vendors and bankers. Often these third parties look to the CFO for the unvarnished truth regarding the financial viability of the company to deliver on it’s brand promise.

Today’s Role of the CFO

In today’s fast paced environment the role of the CFO is extremely fluid. One day the CFO might be developing a compensation plan for employees and the next day taking their bankers on a tour of the facilities. Consequently, to be a successful CFO in the future you must be a more multi-functional executive with financial skills.

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3 Ways to Develop Financial Leadership

confused CFODo you feel like you have the talent to be the best CFO you can be, but you aren’t sure how to develop the financial leadership skills you need to get there?

If so, you’re not alone.  Many financial professionals are not only confused about what is really expected of a CFO, but how they can develop the skills to meet those expectations.

Over my 25+ years consulting with entrepreneurial companies, I’ve discovered that there are really 3 ways you can get these skills.  Click here to read a white paper we recently published outlining what they are and how to decide which one is right for you.

 

 

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Controller vs CFO

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Controller
Controller Definition
Controller Duties

Controller vs CFO

In order to fully understand the relationship between a Financial Controller vs a Chief Financial Officer (CFO), one needs to understand what the responsibilities of each are. That way, the responsibilities can be compared and contrasted so that a comparison can be reached.

A Controller is responsible for the accounting and record keeping of an organization. Additional responsibilities can include management of information technologies, insurance, sales tax reporting, federal income tax reporting, outside CPA audits and human resources. Controllers are in essence responsible for the financial and regulatory compliance of the Company. Think of controllers as the “historians” for the company.

Though a CFO is ultimately responsible for the financials of a company, the role of the CFO is more encompassing. They will often review the financial statements, but, that is only to get a prospective of past performance. The CFO will take then those numbers and analyze them to improve future performance working closely with operations and management. CFO’s are key in developing and implementing strategy for the company to achieve it’s goals.

(NOTE: Want to take your financial leadership to the next level? Download the 7 Habits of Highly Effective CFO’s. It walks you through steps to accelerate your career in becoming a leader in your company. Get it here!)

Origins Of Comptroller vs Controller

The difference between a Controller vs CFO is primarily one of perspective. A Controller focuses on compliance and historical record keeping or, in other words, tactics; while a CFO focus on planning and future performance (i.e.: strategy). Though controllers almost always come from an accounting background, the same cannot be said for CFO’s. Because of the automation of the accounting process more and more CFO’s are coming from a financial or banking background.

Value of a Controller vs CFO?

How do you determine the value of a Controller vs CFO? Maintaining the financial records of a company, while important, often is not perceived as a high value added function. Due the historical nature of the job closing the books is necessary to planning and strategy, but is often not the key driver of future performance. On should note, however, that a CFO can not do their job with good financial information.

So how does a CFO vs Controller add value? A good CFO should be able to influence how prices are set, efficiencies in the use of labor and assets and the optimum allocation of resources. As a result, a CFO should be able to improve profitability 1% to 2% of sales. Depending on the revenue of an organization this amount can be equal to hundreds of thousands of equity! No wonder the salary of a CFO vs Controller is often 45% to 50% higher.

What is a Controller?

A financial controller is an individual in a company that is the head of the accounting division within the company. In order to understand the Controller vs CFO relationship, it makes sense to understand what a controller does first. This list of responsibilities for the controller is an extensive one:

  1. The controller needs to have a complete and thorough knowledge of all the accounting procedures in a company.
  2. In addition to the procedures, a controller needs to have extensive knowledge on the software that goes in to the financial business.
  3. Payrolls need to be accurately and timely surrendered.
  4. Compiles the data from weekly job reports.
  5. Maintain all bank accounts and cash balances.
  6. Be able to prepare financial reports whenever necessary
  7. Assist in internal control between jobs and employees.

Clearly the job of a controller is an extensive one. However, the CFO carries much more responsibility than the financial controller. This extra responsibility transfers into the paycheck as well.

What is a CFO?

In terms of the responsibilities that are entrusted to the CFO vs controller, a short list is as follows:

  1. The Chief Financial Officer has a much larger role in an organization than does a financial controller.
  2. While the controller is the head of the accounting in a company, the CFO is responsible for, and has to observe every financial and operative function of the organization.
  3. A controller looks after the accounts, while the CFO has to be aware of all the business operations in a company that relates to the controller’s accounts. In addition to understanding the interrelation of the financial system.
  4. The Chief Financial Officer must be able to identify heavy business risks and make appropriate business decisions regarding those risks.

As stated before, because the CFO vs Controller has more responsibilities assigned to the job, the pay is also better as well. According to www.payscale.com, the maximum salary for a financial controller is $126,373 while the average maximum salary for a Chief Financial Officer is $237,051. If the training is available and attainable, it makes sense to take the extra practice and training necessary to become a CFO if one is concerned with earning a more positive paycheck.

Regardless of whether you are a CFO or Controller, you should strive to be the financial leader in your company. Download the free 7 Habits of Highly Effective CFOs to find out how you can become a more valuable financial leader.

controller vs CFO

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controller vs CFO

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WSJ highlights being a “strategic CFO”

The Wall Street Journal published an article today highlighting the need for more CFO’s to be strategic in their view of both their role and the results expected of them. The WSJ has three main requirements for a CFO to be a “Strategic CFO”.

First, the CFO should be forward thinking not just historical. Second, they should be involved in all aspects of strategy. Finally, they should broaden their view of the company’s environment beyond just preparing the numbers.

This article is a great starting point for questioning the traditional role of a CFO. Let me know your thoughts.

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Don’t Be A CFnO!

I once had a client who called his CFOs, “CFnOs.” He had had five CFOs in a seven-year period. He felt frustrated as they were always telling him why he couldn’t achieve the sales growth he wanted rather than helping him get there. As a result, he saw them more as an obstacle and less as a team player.

To their credit, some of their comments were probably accurate with respect to aggressive growth; however, their approach made them ineffective as leaders.

When working with entrepreneurs, tell them, “We can do anything you want, but we can’t do everything at this time.” Ask them what they want to do first. And remember, you should be leading them to succeed, not serving as a roadblock to their success.

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