Finances are a very important part of any business – that’s what keeps them going, after all. However, poor financial management can destroy a good business.

Therefore, a business’s success heavily depends on how well it controls not just the operational aspects of the business, but the financial side as well. This is where a chief financial officer (CFO) steps in. 

The CFO's role is traditionally known to only deal with numbers. But today’s CFO has grown and settled into a more dynamic decision-making role. Greater opportunities for integration have made this possible through powerful technologies, e.g., artificial intelligence (AI), enterprise resource planning (ERP) systems, cloud processing, etc.

This integration has empowered the contemporary CFO to contribute to more strategic decisions of businesses since almost every other portfolio affects the finances of the business most of the time. 

That being said, here’s a short guide about what a CFO does and how they can help your business: 

What Does A CFO Do? 

A CFO is responsible for planning, strategizing, organizing, and managing the financial affairs of a company. This role may take on a unique look depending on the business and its line of operations. The CFO is the go-to person who handles all the finance-related matters in the business. They also make decisions accordingly. 

Also, businesses should closely integrate every department with the finance department for its financial integrity to remain intact. It should account for all the money that flows into and out of the business.

Luckily, with help of automation and technology, CFOs can make decisions faster. Also, even better is the option to use virtual CFO assistants. They do the work that a normal CFO would do, but at a fraction of the price with greater efficiency. Integrating virtual CFO services has never been easier.

Why Are They Important? 

CFOs are part of the C-suite along with other members, such as the chief executive officer (CEO) and chief operating officer (COO). These are all extremely highly demanding roles, but they complement each other. CFOs essentially head the finance department.

While smaller businesses may not need a CFO, the usual trend is that the bigger the business gets, the more complicated finances are, and the greater the need for a CFO to manage finances.

Also, CFOs are there to provide leadership in the department of finance. It’s not just about the numbers, it’s also about integrating the finance department with the rest of the business. Essentially, the CFO is the mouth for the finance while the COO is the mouth for the other departments. They need this integration to make decisions that will help move the company forward.

Roles of A Chief Financial Officer 

• Budgeting and Forecasting 

The CFO works intimately with the finance team to establish the various budgets that a business requires, e.g., operational budget, advertising budget, payroll budget, etc. Budgets are an important tool as far as providing direction is concerned.

Also, budgets as a prerequisite to making accurate forecasts. Forecasts provide a projection of the future performance of the business. Forecasts help the CEO to prepare for what’s coming ahead. The decision-makers can then plan around the budget and forecast. After all, the CFO is the CEO’s business partner. They set the direction in which the business should go. Forecasts are important tools in that regard. 

• Tax Management 

The CFO ensures that a company’s taxes are calculated correctly and that they pay their tax obligations accordingly. An implicit prerequisite here is that the CFO should understand tax laws extensively. 

• Advisory Role 

Since the CFO reports directly to the CEO, the CFO should give strategic advice to the CEO as much as it pertains to their portfolio. The CFO will have the best insights into how the company is performing financially.

Since finances are intimately linked with other operational areas of the business, the CFO usually has constructive advice on how to optimize specific processes in certain departments to improve business performance. The modern CFO’s role isn’t limited to dealing with numbers and finances. It’s more dynamic. Therefore, CFOs are an important advisory link in today’s business structure. 

• Investment Management 

The CFO is also responsible for managing the business’s current investments as well as seeking possible investments that may appeal to the business.

They are the business’s investment advisors. Therefore, they should understand the dynamics of investment to ensure that the company’s investments are managed efficiently. A CFO is best suited for this role because they are the ones who know the most about the investment structure and portfolio of a company. They can offer solutions on how to optimize their portfolio. 

• Communicating With Banks And Financial Institutions 

CFOs can play the role of negotiator if the business wants to secure finances from an investor or financial institution. Because businesses always have an eye for expansion, it’s quite common for them to look at financial institutions to borrow money to finance their expansion projects.

Since the CFO is usually the head of financial planning, they would know how much money they need and the acceptable proportion of debt that the business can handle. 

Conclusion 

In today’s contemporary business landscape, technology is a common feature in all business spaces. The modern CFO either has the technological tools to help them make quicker decisions, or the CFO is completely virtual. The utility of the CFO position shouldn’t be undermined given the potential value that they can create for the business.

Managing finances is a crucial part of business success. If the finances fail, the business fails. Adding a competent CFO to your team will yield positive results in the long run.