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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. But 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”. Therefore, 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. As a result, 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 both 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, but 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 Financial Officer) 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. Then 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.

To learn other ways to be a add value to your company, download the free 7 Habits of Highly Effective CFOs to find out how you can become a more valuable financial leader.

The role of the CFO

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3 Ways to Develop Financial Leadership

financial leadershipDo 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 don’t know what is really expected of a CFO. But they are also don’t know how they can develop the skills to meet those expectations.

3 Ways to Develop Financial Leadership Whitepaper

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.

If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs. Find out how you can become a more valuable financial leader.

financial leadership

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The Evolving CFO

There’s a Houston Business Journal recently entitled “The evolving CFO: How the rise of the machines turned CFOs from number-crunchers into leaders”. In the article, the HBJ interviewed leading Houston-area CFOs about how their changing roles. Technological advances in finance and accounting are dramatically shifting and creating the evolving CFO.

The Evolving CFO

One of the biggest changes is the need for CFOs to shift their focus. They cannot merely produce financials anymore. But get involved in the operational side to improve results.

Jim Wilkinson notes that CFOs “have to get out of their seat and go work with operations and help them figure out what to they should do from a financial standpoint to improve the profits.”

Rudy Gonzalez explains he wears many different hats in his CFO role at Amphora, Inc. – legal, contracts and human resources. Gonzalez says that, “In the small-company world, we really roll up our sleeves and get our hands dirty in a lot of different fields.”

Tony Ford, CFO of PG Professional Golf notes that “Ten years ago, CFOs…had to know financial statements. [But] now, they’re required to interact with sales, operations, and logistics to drive profitability for a company.”

In addition, you need to possess strong people skills. Many often overlook strong people skills and see them as a commodity in finance. Furthermore, good CFOs can work with non-financial people and explain to them the best things to do. Therefore, people skills are much more important.

But according to Wilkinson, the difference between the role of yesterday’s and today’s CFO is pretty simple. For example, a controller reports the numbers, a CFO drives the numbers.

Read the full article here. If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs.

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Controller vs CFO

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. The responsibilities can be compared and contrasted so that you can reach a comparison.

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). Although controllers typically come from an accounting background, the same cannot be said for CFOs. Because of the automation of the accounting process more and more CFO’s are coming from a financial or banking background.

Determine the 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 entrusted responsibilities of the CFO vs controller, check out the following list:

  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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Chief Financial Officer (CFO)

See Also:
American Institute of Certified Public Accountants – AICPA
Accounting Fraud Prevention using QuickBooks
Advisory Board Best Practices
Are You Collecting the Data You Need to Run Your Business?
How to avoid additional insurance premiums

Chief Financial Officer (CFO) Definition

The CFO, Chief Financial Officer, is the head of strategic accounting and finance functions of a company. The CFO’s responsibility is to have strong analytical, planning, and communication skills necessary to work with the company CEO, Board Members, and Senior officers. Common to the CFO position is 10 years of accounting or finance experience, of which 5 years must be served in a management role. CFO qualifications may be an MBA (master’s degree in business administration), CPA (certified public accountants), or CMA (certified management accountant) certification. In general, the chief financial officer roles and responsibilities require a strong understanding of GAAP and tax accounting principles, and perhaps even experience in reporting to the SEC.

Furthermore, to gain the role of the CFO requires experience in a position of responsibility for accounting or finance departments. Positions like Director of Finance or Accounting, Controller, etc. CFO responsibilities yield an expected salary of $85,000 – $350,000 plus bonus’ and incentives.

Chief Financial Officer Job Description

Common CFO job duties include the following:

  • Strategic direction of Accounting and Finance functions
  • Creating and enforcing accounting and finance policies, procedures, and internal controls
  • Recommendations and corrections with the purpose of ensuring the integrity of financial reports
  • Managing and overseeing independent auditors
  • Collaborating with Chief Information Officers on technological changes
  • Overseeing financial system upgrades and changes
  • Relating with investors
  • Mitigating business risks
  • Managing insurance and other financial protections
  • Retaining, hiring and training accounting and finance human resources CFO roles/responsibilities may include additional functions.

The above serves as a basic CFO job description sample.

Chief Financial Officer Example

For example, John is the founder of a company which rents homes, called Rentalco. John is pleased because the recession has caused demand for rental homes within his company niche to grow quickly. Thus, John’s company has grown from a small business to a thriving corporation. John wants to make sure he can manage a positive financial state for his company. While attending local Chamber of Commerce meetings John is introduced, by a friend, to CFO outsourcing with a company called “The Strategic CFO”. With this company John can temporarily hire a CFO to manage his company’s accounting and finance functions. In John’s case, this will allow him to maintain his company while he finds a permanent CFO for Rentalco. John is excited, meets with “The Strategic CFO”, starts by asking “What does CFO stand for”, and eventually hires a temporary CFO. His name is Rudy.

Temporary CFO

Rudy enters John’s company with a fresh perspective. First, Rudy looks at the company financials. Here, he sees a successful company. Then he looks closer to find that Rentalco is paying above the industry standard on property maintenance. Additionally, he notices that Rentalco has excessive insurance coverage for its needs. Rudy informs John of this situation. John and Rudy work together, John makes an effort to find a new source for property maintenance while Rudy contacts the Rentalco insurance agent and decreases their policy.

Next, Rudy monitors employees that work with receivables and payables. After noticing that they spend more time than needed in processing he notes a major redundancy in Rentalco payable paperwork. By removing an unneeded step in the process of payment Rudy is able to increase the efficency of this department and decrease it’s yearly cost.

Rudy, after thinking about what he saw in Rentalco financials, decides on another course of action. He expresses to John that dividend payments to investors of Rentalco are negatively effecting company free cash flow. By decreasing dividend payments, Rudy and John will be able to strengthen Rentalco free cash flow and further invest in marketing expenses. Rudy references his prior experience to create an estimation of company growth which will, after a short period, keep total dividend payments recieved the same while growing Rentalco market capitalization by approximately 5%.

Conclusion

The story of Rudy, John, and his company Rentalco is very common. The skills of a trained CFO can have enormous benefits to a company. John decides, after his experience with “The Strategic CFO”, that he will keep a CFO on staff for as long as his company can profit from it.

If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs.

chief financial officer

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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”.

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. If you want to learn more financial leadership skills, then download the free 7 Habits of Highly Effective CFOs.

strategic cfo

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Don’t Be A CFnO!

I once had a client who called his CFO a CFnO. 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.

Don’t Be A CFnO: Guide to Your Entrepreneur

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.

To learn more financial leadership skills, download the free 7 Habits of Highly Effective CFOs. Find out how you can become a more valuable financial leader.

CFnO

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CFnO

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