The role of a CFO has elevated from being a number-cruncher to a multi-faceted one in the last couple of decades. If we look closely, it’s easy to ascertain the reasons behind it. The last few years have seen a lot of upheavals, beginning from massive technological changes to severe recessions. These have resulted in a significant evolution of most positions in an organization, especially the C-suite and finance ones, including the role of a CFO.
Today, there are more moving parts than ever, some of which are entirely novel, but they continue to manage the core financial functions. So, the role of a CFO in an organization varies from one to another and it is vital to have clarity upon what kind of role you expect them to play for your entity. That’s only possible when you understand the various facets of a CFO’s position.
This article aims to dissect the role of a CFO in a company and break it down into multiple functions.
CFO as a Strategist
The CFO’s role in an organization as a strategist is invaluable. Their primary focus is optimizing shareholder value by improving business performance. This includes strategic scenario planning, decoding trends and uncertainties, and understanding key business drivers and their financial implications. The individual also escalates these to create an economic perspective to improve risk awareness and strategic decision-making to drive innovation and profitable growth.
The role of a CFO in strategic planning also necessitates translating the expectations of the capital markets and using them to maneuver internal business operations more efficiently. For this, they combine their present outlook with past organizational performance and use it to manage risk and prepare the business for the road ahead.
Once the broad strategies are in place, the CFO’s role in an organization shifts towards analyzing specific initiatives and business cases. In times that experience rapid business change, the ability to capitalize on trends would bode well for businesses in the long run.
CFO as a Leader
The CFO is the leader of the pack and has a vision of how they want to shape the organization. So, alongside being a strategist, they also work with other C-suite individuals, such as the CEO, on organizational mission, vision, and purpose. These are then aligned with the entity’s structure, strategy, and risk profile to develop a holistic environment for long-term growth.
When we talk of effective CFOs, we inadvertently refer to efficient managers and not those who seek control and command those below them in the organizational hierarchy. These individuals are empowerers who enable the workforce to flourish and perform at their best. For this, the role of a CFO also extends to taking help from experts beyond the company to ensure the team understands their job well and is able to perform at their best irrespective of the circumstances.
CFO as a Creator
The modern-day CFO is a catalyst for change by playing a key role in developing strategic ideas and shaping strategies. The role of a CFO in a startup or any other entity is to establish a value attitude and serve as a business partner to others in the C-suite and decision-making positions. As creators, their role is not only limited to generating new ideas but also extends to understanding how small changes can improve organizational performance.
A CFO also establishes a culture where everyone in the company feels free and welcome enough to express their views and explore strategic ideas. While the CFO doesn’t necessarily provide input on what customers need, their role is limited to developing an internal structure for accountability, improving execution, and streamlining processes to pave the way for holistic growth.
CFO as a Critical Thinker
A CFO is usually one of the most practical persons in a room and is known to not use their heart to make decisions. Rather, they prefer evidence, are open-minded and rational, and use their disciplined and clear approach for efficient decision-making. The evolving role of a CFO today requires them to be critical thinkers and think of every decision from a multidimensional viewpoint to ensure it proves beneficial for the business.
In an organization, we often see things getting heated up and tension building. So, the role of a CFO in a financial crisis or other issues is to be calm and use their expertise to help the company sail through difficult times. They also need to use their critical thinking chops to uncover the truth and challenge redundant strategies. For this, CFOs have to lead by example and showcase their abilities to push others in the team to be informed enough to make the right decisions.
CFOs as an Operator
The role of a CFO in a firm’s management is to find the right balance between efficiency and service levels. With the hat of an operator on, the CFO is required to adapt finance operating models to deliver growth. For this, they play the role of a leader during the planning and budgeting phases. While budget and resource allocation are the primary talking points, the role of a CFO is also to ensure that everything is achieved while being mindful of the organization’s financial constraints.
The CFO also plays a vital supporting role in small but key business areas to ensure that the organization’s vision and strategy goals are aligned and followed. For this, they choose the areas in which they can add the most value and find ways to get involved. Offshoring and talent management are often the subjects that benefit the most from CFO’s involvement.
The role of a CFO is to ensure that the processes are in place, and they proactively judge their competitors and the industry landscape to make the right adjustments before it’s too late.
CFO as a Steward
While the role of a CFO in firm management is a lot about strategy, they are also responsible for finding the right people to get the right job at the right time. As stewards, CFOs handle accounting, risk management, control, and asset preservation and ensure company compliance with financial reporting and control requirements. For this, they set out guidelines which contain timelines, milestones, and document decisions to ensure that the board has all the ingredients necessary to take the right calls.
As stewards, information quality and control placements are the top priorities for CFOs, and they weigh the decisions made to ensure the right balance between planning and emergence is achieved. In addition, they administer and set up a process to ensure that people are not overspending time on things that are less relevant to achieving organizational goals.
CFO as a Communicator
Communication is essential for businesses to gain the confidence of internal and external stakeholders. The CFO, having even the minute details of strategies in place, can act as an efficient bridge between the company and the people involved. The individual is one of the most efficient sellers within the organization and consistently sells strategies to insiders and outsiders to ensure that they make sense.
Often, some strategies may not make sense to some stakeholders, which may or may not be wrong. This can lead to differences that can make it difficult for the entity to achieve its goals. CFOs take the lead in such scenarios by communicating why the strategies make sense and ensuring that all the parties involved are on the same page.
CFO as a Proponent of Change
“Change is the only constant” is true for organizations across industries and sizes. The CFO, being the strategic lead, is responsible for successful transitions and improving the business’ ability to adapt to evolving marketing conditions. In addition to providing key financial advice and insights, the CFO’s role in an organization is to provide strategic guidance to drive growth and resilience.
For this, they work with the CEO and others in the C-suite to ensure success and holistic improvements throughout the organization. In addition, they are also responsible in preparing the workforce to be flexible and thrive across business scenarios. This, along with their financial analysis and insights, often prove to be the difference between success and failure in the long run.
Wrap Up
A CFO’s functions are multidimensional. Their role today extends beyond financial management, and they are seen more as strategic leaders responsible for critical thinking, risk management, operators, and more. These individuals possess the financial acumen and emotional intelligence to decipher an organization’s needs and play the requisite roles to drive the growth narrative.
While the role of a CFO in a small business is significantly different from that in a large one, the core functions rarely vary. Finding the right in-house or virtual CFO has become essential for every organization in the current, ever-evolving scenario. If businesses are looking for a more cost-effective and flexible option, hiring a Virtual CFO (VCFO) can be an excellent option. A VCFO provides similar expertise and lets businesses operate without the need for a traditional, full-time CFO.
With Myfinnar on your side, quit your search to find the perfect Virtual CFO. We are experts at understanding our clients’ requirements and finding the right professional to fit the role perfectly.
