"Chief Financial Officer", or more simply, the CFO, is a role that has evolved enormously over time. Once, a CFO was seen merely as an accountant whose main tasks focused on working with balance sheets and financial metrics. Today, however, the role of a CFO has changed drastically and goes far beyond the remit of an accountant or head of accounting.
In today’s business world, the CFO plays a crucial role in the strategic planning and direction of a company. As part of the executive management team, the CFO works closely with the CEO (Chief Executive Officer) to define the company’s overall strategy and direction. In doing so, the CFO takes into account both the financial aspects and the corporate strategy.
The position of CFO is particularly important for the stable growth of a company. Through their work, CFOs ensure that the company remains financially healthy, complies with legal requirements, and is well positioned to meet future challenges. They are responsible for strategic financial planning, the control of financial risks, and the provision of accurate and timely financial information to management and other key stakeholders.
The tasks of a modern CFO
The tasks of a CFO can vary depending on the company and industry, but some basic responsibilities remain constant. Here are some of the most important tasks of a modern CFO:
- Financial leadership: The CFO is responsible for the overall financial leadership of the company. This includes financial management, monitoring and managing liquidity and cash flow, as well as risk management.
- Strategic planning: As a member of the executive management team, the CFO is also involved in the strategic planning and direction of the company. This includes assessing growth opportunities, investments and acquisitions, as well as monitoring financial metrics and performance indicators.
- Reporting and compliance: A CFO is also responsible for financial reporting, compliance with legal regulations, and adherence to tax laws. This requires a deep understanding of the relevant financial indicators and how they affect the company.
- Budget planning: The CFO plays a decisive role in budget planning and the allocation of resources within the company. He monitors the company’s financial performance and ensures that funds are used efficiently.
- Stakeholder communication: Finally, the CFO is often the face of the company to auditors, financial institutions (banks), investors and other stakeholders in financial matters. He or she provides financial reports and analyses, communicates the financial strategy and answers questions about financial results.
- Internal information sharing: The Chief Financial Officer of a company must ensure that both management and other managers have an overview of the company’s financial situation. This also includes sharing analysis results, recommendations for action and decisions.
The CFO in the context of the corporate structure
In the corporate hierarchy, the CFO reports directly to the CEO and is part of the top leadership team. In larger companies, the CFO usually has a team of finance and accounting experts reporting to them, who support the execution of the company’s financial functions.
In addition, the role of the CFO can vary depending on the size and needs of the company. In smaller companies, the CFO may also take on tasks in operations, HR and IT. In larger companies, the CFO’s role can be more specialized and focus more on strategic financial planning, investment decisions and raising capital.
The requirements for a modern CFO
The role of the CFO has changed significantly in recent years. While it is still important to be able to read and understand balance sheets and income statements and, in line with this, to have a good understanding of numbers and data, modern CFOs must also possess strong strategic and operational and leadership skills.
Some of the most important skills a modern CFO needs are:
- Leadership skills: CFOs are often members of the top management level and must be able to lead teams and steer the company’s financial strategy. They must also be able to communicate effectively with various stakeholders, including management, employees, investors and external partners.
- Business acumen: A CFO must have a deep understanding of the company’s business model and industry. He or she must be able to assess the impact of business decisions on the company’s finances and provide corresponding recommendations for action.
- Risk management: The CFO must be able to identify and manage both financial and operational risks. This includes identifying potential risks, developing strategies to mitigate risk and ensuring that these strategies are implemented.
- Strategic thinking: CFOs must be able to think and act strategically. They must be able to understand the company’s long-term vision and strategy and translate this into concrete financial plans and goals.
- Technological skills: With the digitalization of the business world, CFOs must also be technologically savvy. They must be able to use modern financial processes and tools to improve the efficiency and effectiveness of the company’s financial functions.
Interim management in the finance area
Interim management is a temporary form of business management. First, the question arises: What is an interim manager CFO? An interim CFO is deployed when a company needs to respond quickly and effectively to an acute need. This can be the case for a wide variety of reasons.
Using an interim CFO also makes a lot of sense when transformations or changed situations in the company need to be managed professionally, but also when it comes to “tailoring” an individual solution for a very specific situation. The scope may range from a few individual person-days to an agreed fixed workload.
Unpopular measures can often be implemented more easily by external parties than by long-established superiors. This can include, among other things, corporate restructuring or the introduction of new processes and (IT) systems.
Companies benefit from the experience and independence of an interim CFO and from their expertise. They receive the full expertise of an experienced CFO in a cost-effective way. As a manager for a limited time, he assumes responsibility for the finance function from day one.
External CFO service
While an interim manager usually takes on the CFO’s tasks in the company only for a limited period, the scope of activities can also be outsourced in the long term through an external CFO. In particular, small and medium-sized enterprises often forego an internal CFO for financial reasons. External CFOs, also known as CFAs (Chartered Financial Analysts), offer a perfect solution for this. Working with a CFA offers the following advantages:
- Experience and track record (you can assume that the CFA is already advising various companies and has mastered similar challenges)
- Objectivity and flexibility
- Variable costs instead of fixed costs (the service is only used as needed)
- The networking of CFAs
CFOs and digitalization
Digitalization has fundamentally changed the role of the CFO. With the increasing use of technology in all aspects of business life, it is more important than ever that CFOs are technologically savvy and able to use new technologies effectively.
One example of such technology is the automation of financial processes. By automating tasks such as accounting and reporting, CFOs and their teams can save time and resources that they can then devote to more strategic and value-adding tasks.
Another example is the use of big data and analytics. By systematically analyzing financial data, CFOs can gain deeper insights into the company’s financial performance and make better decisions.
Overall, digitalization is a great opportunity for CFOs to improve the efficiency and effectiveness of the company’s financial functions. However, it is important that they have the necessary technological skills and knowledge to use these technologies effectively.