CFO stands for Chief Financial Officer. This is a high-ranking executive position responsible for managing the financial actions of a company. From financial planning to risk management and financial reporting, they are the strategic partner and leader of a successful finance department.
In today's global and rapidly-evolving business environment, the role of the CFO position has become increasingly pivotal. A chief financial officer, CFO, is part of the C-suite class, the top executives in an organization.
In the same way a CEO (chief executive officer) manage and make decisions for the company as a whole, the chief financial officer makes manages and makes decisions about the finances. Other commonly known executives include chief operating officer and chief information officer.
Chief financial officers are responsible for overseeing financial operations, and they typically have a strong background in financial management.
What does a CFO represent?
A chief financial officer represents the true direction of a company's finances.
The CFO's responsibilities and roles are broad. As they are the leader of the finance department of a company, you can imagine why. Here's a list of some of the key duties and departments you will be influencing and controlling in your CFO position.
Financial planning and analysis
The CFO works on developing and managing the company's financial strategy, including budgeting, forecasting and financial analysis. They look at the financial performance of the company and analyze financial reports to dissect past performances and predict future trends.
The company needs the CFO's advice and expertise on decisions that will have major impacts on the trajectory of the company's financial strengths and financial policies.
Financial reporting and regulatory compliance
The CFO is responsible for the accurate and timely reporting of the financial statement and its disclosures.
They have to ensure the department and company are in compliance with accounting standards and using generally accepted accounting principles. Furthermore, regulatory entities have stringent guidelines each department must follow when it comes to reporting the finances. Stakeholders, investors, and the board of directors all want to be presented with competent and thorough financial information.
Risk management
Managing financial risks is another key responsibility of the CFO. In an ever-changing business environment that can span other states and cross country borders, the CFO must be able to perform a sound risk assessment of the landscape.
Treasury management
Chief financial officers also oversee the company's investments and cash flow as well as financial relationships. This includes managing the organization's liquidity, capital structure and overseeing its financing strategies.
Strategic planning
Shaping the company's strategy and direction is another crucial role CFOs have. This involves working alongside other senior executives to marry the financial strategy with the overall business strategy.
Their recommendations will directly influence the future success and growth of the organization's financial operations.
Leadership and team management
As one of the senior executives, chief financial officers are seen as the leader and mentor of the finance and accounting teams. They set the tone of the department and should foster a culture of financial accountability and high ethical standards.
How do people become CFOs?
Metaphorically speaking, education is the vehicle and hard work is the fuel that moves professionals toward success.
Becoming a CFO is a journey and not something that happens overnight. If it were easy, everyone would be doing it right?
Get a bachelor's degree
The journey to chief financial officer starts with a bachelor's degree. An undergraduate degree in accounting, business administration or finance is usually the most common. I completed my undergraduate degrees in business administration and accounting, which helped me when I became the CEO of my own insurance agency.
If you intend to work your way to CFO, start with a Bachelor’s degree in Finance or a Bachelor's degree Accounting.
Or, you could aim for more of the leadership and management education and choose a Bachelor's degree in Business Management.
Gain years of work experience
To advance to the CFO position, you will typically need to gain work experience in several key areas such as accounting, finance, auditing, management, consulting, etc.
The accounting professionals are a group where many CFO's are plucked from. I recommend starting off on the accounting team. Here, you can master financial statements, financial reports, compliance, cash flow, and the ability to analyze financial data. You will gain much-needed experience on how the Securities and Exchange Commission works.
The financial department is another great avenue on your way to the chief financial officer spot. A financial position, such as a chartered financial analyst, finance director, financial operations, etc. are some great roles to work toward.
Here you will work with strategic partners and look at economic trends while you will hopefully work closely with the CFO someday. Growing and learning in this department, among these financial professionals, is the perfect breeding ground for future CFOs.
Auditors and financial controllers work closely on compliance and quality control. This department may not be as glorious or boisterous as the other departments, but it is one that makes you valuable in understanding financial risk and oversight--a huge priority for CFOs.
Starting in the business management department is also a viable path. Management can mold you into the leader that CFOs need to be. Here you will learn conflict management, strategic direction and still keeping up with market trends.
You will carry with you the know-how of leading teams, managing cash flow and business strategic planning.
Financial consulting roles are also great as they offer experience with different industries and financial challenges. You will be able to use abstract thinking and find solutions from common to rare problems. These skills are very attractive when companies search for their next chief financial officer.
Get a master's degree
With the ever-increasing competition and complexity of the modern financial world, a master's degree has become the gold standard in the CFO's education repertoire. I went for my Master’s of Business Administration (MBA) degree, and I felt helped me run a successful small business in accounting and insurance.
If you want to aim your career path at the role of a CFO, you could complete a Master's in Finance or Accounting. These will all expand your undergraduate business, accounting and financial knowledge at the level companies are looking for. Rasmussen University does not offer degree programs at the master’s level that specialize in Finance or Accounting.
There are many online master’s in business administration degrees that allow you to work full-time and continue to gain valuable on-the-job learning and training.
CEO vs. CFO
What is the difference between a chief executive officer and a chief financial officer? It comes down to their area of leadership.
Both roles are C-suite executives who work closely with each other. Both of them are vital for the success of an organization. They both share a focus on leadership, strategic decision-making, communication and accountability.
However, the CEO focuses on the overall strategic vision, leadership and external representation of the company. They are responsible for setting and achieving company-wide goals.
The CFO will focus more on managing and optimizing the financial aspects of the company, including strategy, reporting and risk management. They work to support the CEO's vision through their financial expertise and planning. Essentially, their collaboration is crucial for ensuring that the company's strategy is both visionary and financially viable.
Looking for a role in Finance?
If you feel this is a path you'd liked to take, look deeper into what finance jobs are really like. If you aren't interested in management, finances or accounting—this is not the right direction for you.
As you noticed, the responsibility of a CFO is immense, but so are the rewards. Are you looking for a challenge? Do you have a knack or love of all things financial? If you caught yourself saying "Yes," then check out How to Become a Financial Analyst in 6 Steps
