What are the Most Important CFO Responsibilities and Challenges?

Does your company need a CFO? The decision of whether or not to hire a chief financial officer is one that companies of all sizes must make. That’s because the duties of a CFO are important for both a company’s day-to-day operations and its strategy for the future. While some smaller companies may be able to get by with the services of a CPA, as they experience growth, they will need additional financial leadership. What are the responsibilities and challenges of a CFO?

CFO Responsibilities

The CFO has a duty to nurture and protect the past, present, and future financial health of the company. The first duty of a CFO is controllership. Controllership duties involve providing the company’s past financial information to the company’s shareholders, analysts, employees, and creditors. The CFO is responsible for the collection and reporting of all historical financial information. He must ensure that the information is completely accurate and reported in a timely fashion. The company’s stakeholders will use this information to make critical decisions for themselves and the company moving forward. 

The chief financial officer is also responsible for the company’s finances in the present. He makes decisions about how the company will invest its money, taking into account risk and liquidity. Additionally, he is in charge of determining the company’s capital structure and deciding what is the most productive mixture of debt, equity, and internal financing at the present time, given the company’s current performance and challenges. 

Finally, the CFO must act as a financial seer of sorts. He has to know how the company is performing at every level as well as how the economy as a whole is performing. Using that information, he must predict how best to shepherd the company into the future in a way that protects its assets and allows it to best succeed in the future. 

These are the main categories of CFO responsibilities, but in reality how a CFO functions within a company will depend on the business’s needs. Those will be determined by what the company does and how large it is. A CFO of a smaller company may act more as a jack of all financial trades, overseeing different duties that might range from legal to human resources to corporate governance while a CFO of a large corporation will keep his eye on the larger picture.

CFO Challenges

Obviously, a CFO’s job will be complex, but the biggest challenge will involve taking the information about the company’s current operation and productivity and using it to achieve future financial objectives. Under normal circumstances, this takes understanding and experience, but a good CFO will work to make sure that the company can still remain profitable even if the economy hits a bump or, even worse, goes into recession. Part of that will mean being able to accurately predict the national and international economy and how a variety of factors, like shifting politics or trade deals, will affect the economy and the company directly.

There are tried-and-true methods to try to insulate a company from a recession. These involve closer monitoring of spending, better collections processes, and the use of tougher negotiation skills. More proactive CFOs will work to improve the company’s cash flow by locating new markets and revenue streams and will try to incorporate technology where it can save the company money and increase productivity. 

Essentially, the challenge of a good CFO will be to strengthen the financials of a company in much the same way that we’ve discussed in terms of exit planning. That might include restructuring the internal finance team so that financial reporting will be streamlined and any inefficiencies are eliminated. It could mean pointing out areas of the company that are underperforming so that management changes can be made or business systems can be created and implemented

Does your company need a chief financial officer? That’s a question any business owner must decide based on the company’s current performance, desired performance, or his own future goals. If you would like to discuss CFO responsibilities and how adding a CFO to your company can position it for additional growth, please do not hesitate to contact us at Prometis Partners. We are here to help. 

VINCENT MASTROVITO

vincent@prometispartners.com
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503