A chief financial officer, or CFO, is essentially the person holding the purse strings within an organization, overseeing every aspect of its finances. The CFO will provide financial advice to the CEO and board on, for instance, potential mergers and acquisitions, budgeting and obtaining debt and equity financing. There are significant regulatory responsibilities. The position of CFO is one of the most senior roles within a business, and, as you’d expect, requires a high level of education and experience. Here’s a look at what the job involves, and how to work your way up to the role.
What Is A CFO?
The CFO is one of an organization’s most senior executives, forming part of the C-suite and reporting directly to the chief executive officer to help shape the company’s financial operations and strategy, as well as managing accounting and day-to-day budgeting.
The role has always been a central one to large public companies with multi-million revenues, but is becoming increasingly common in medium-sized and even small firms. Many start-ups, indeed, now hire a chief financial officer when they first start raising capital. CFOs are found in every type of industry and organization. While the job is often seen as a step towards becoming a CEO, the latter role is the one where the buck truly stops, with the CEO responsible for the organization’s entire operations. The position of CFO shouldn’t be confused with that of financial controller, with the latter being focused less on financial strategy, and more on the organization’s day-to-day financial operations.
What Does A CFO Do?
On a day-to-day basis, an organization’s chief financial officer will build and manage the finance and accounting team, balance revenues and expenses and handle all financial planning, while working with the CEO and board on general strategy.
The job also involves handling functions such as capital budgeting, obtaining debt and equity financing, and managing investor relations. When required, the CFO will also advise on potential mergers and acquisitions targets and initial public offerings. There’s a strong element of regulatory compliance to the job, with the CFO required to make sure that the company’s financial reports are accurate, comprehensive and submitted on time. The CFO usually leads the teams covering accounting and finance, including controllers and VPs of finance, along with middle-ranking and more junior staff such as accountants, book-keepers, tax specialists and data analysts.
What Are Necessary Skills And Qualifications Of A CFO?
The job of chief financial officer requires far more than just a good head for figures. Soft skills that are vital to the job include the ability to lead a team, liaise with other stakeholders and negotiate effectively, along with problem-solving and attention to detail.
Data analytics and strategy are both becoming an increasingly important part of the job as, to an extent, is cybersecurity. In a 2019 report, Deloitte identified four functions making up the role of the CFO: steward, ensuring compliance; operator, providing essential services; strategist, giving financial leadership; and catalyst, stimulating change. In terms of education and qualifications, CFOs will need a solid background in accounting or finance, and an advanced business degree, probably an MBA. They often also hold professional certifications such as Certified Public Accountant — probably the most common qualification — Chartered Accountant, Chartered Financial Analyst, Certified Financial Planner or Certified Management Accountant.
Why Is It Important To Have a CFO?
Organizations of all sizes have always needed someone to keep an eye on finances, but, in the past, it tended to be only the very largest firms — those with a turnover of $50 million or more — that had a dedicated CFO.
That, though, is changing, with more medium-sized businesses, and start-ups in particular, introducing the role. A CFO can be instrumental in creating a financial plan aligned with business goals, managing risk, controlling costs and improving cashflow. They can also be extremely influential when a business is, for example, going through a merger, acquisition or IPO. Companies that aren’t yet ready for a CFO will typically have a financial controller instead, heading the accounting department, overseeing daily accounting operations and managing accounting staff — but stopping short of making strategic decisions. Other firms rely on an outsourced, part-time CFO, or hire one on a per-project basis.
What Is The Average Salary Of A CFO?
Given its seniority, the role of chief financial officer is a generally very well-paid one. According to Salary.com, the average CFO salary in the U.S. is $441,037, with the range typically falling between $334,103 and $565,829.
Pay varies considerably from city to city, with CFOs in San Francisco pulling in 25% more than the national average; the lowest pay is in Miami, where it’s 3.5% lower. Meanwhile, according to financial industry staffing agency Vintti, the best-paid industries for a CFO are technology, with a median salary around $430,000, followed by finance and insurance, where it’s around $385,000, and healthcare, with a median of $340,000. At the lower end of the scale are retail, education and non-profits, where median pay is $270,000, $225,000 and $210,000 respectively. Not surprisingly, larger firms pay more, with salaries at large corporations topping $500,000, compared with less than $150,000 at small businesses.
How Can You Become A CFO?
The educational requirements for a CFO are pretty rigorous, with most successful applicants for the job having a degree in finance, accounting, business management, business administration or banking. Most will also have an MBA.
CFOs generally also pick up professional certifications along the way, for example as Certified Public Accountant, Chartered Accountant, Chartered Financial Analyst, Certified Financial Planner or Certified Management Accountant. CFOs will, of course, need to work their way up to the position, and most are appointed internally. Many start out in the accounts or finance departments as staff accountants or tax preparers. Leadership experience is extremely important, and the next steps up the ladder may include roles such as controller, director of finance; internal audit manager or finance manager.
What Is The Future Of Chief Financial Officer Roles?
Once upon a time, the position of chief financial officer was focused exclusively on finance and accounting functions. It was a cost-based role, and one that often mainly involved budgeting and reporting on past performance, as well as a certain amount of risk management.
Over the years, the job has evolved, with an Accenture survey in 2022 revealing that 93% of CFOs agree that the responsibilities they’re now entrusted with feel much greater than in the past. CFOs are now expected to be commercially minded strategic thinkers who can react to changes and influence decision-making across the organization.
New additions to the role include involvement in cybersecurity and environmental, social, and governance initiatives — the latter in particular being of increasing interest to shareholders. Meanwhile the governance aspect of the job is becoming ever more demanding, as regulatory frameworks are becoming increasingly complex.
Bottom Line
The role of chief financial officer is steadily increasing in importance, and is often second only to that of the CEO. There’s greater emphasis on strategic decision making, rather than simple accounting tasks, and a new focus on environmental, social and governance functions.
