CFO: Roles & Responsibilities
Being a CFO means that you are in charge of managing the accounting and financial aspects of the organization, including the establishment of policies and practices for ensuring that effective financial accounting and management are maintained. These duties can be summed up in the following categories:
Cash Flow Management
Cash flow is the lifeblood of any company and CFOs are experts at managing cash flow. The CFO knows exactly where money comes from and where it is spent and is also charged with establishing guidelines and procedures for bill payment, purchases, credit and collections and any other financial obligations.
The management of cash flow is at the center of all his or her role. The CFO may also be responsible for developing a model for accounting policies and procedures, as well as handling and disbursing company funds and securities.
In addition to tracking cash in and cash out, putting together cash flow projections on a regular basis is important to ensuring the long-term viability of your business. Forecasting your cash flow will predict how the decisions you make today will affect your business in the coming weeks and months. If you are unfamiliar with creating cash flow projections, then you should consider hiring an accounting professional to help you.
Budgeting and Expenses
Most owners already have some form of a business budget but the CFO role takes things a step further by conducting a budget-to-actual analysis. During this process, he or she will find ways to limit expenses and manage variations between projected and actual performance indicators. A good CFO should be able to provide these recommendations in the form of actionable steps that can be put into place immediately.
CFOs will also have experience with labor cost management to provide you with an analysis of the full-burden cost of each employee so you can make the most informed hiring decisions.
Financial Obligations and Liabilities
This aspect of the role involves coming up with strategies to pay down lines of credit, business loans and other financial obligations and liabilities. Liabilities refer to financing for business equipment or other necessity, like a leased vehicle or property. CFOs have the expertise to create a debt reduction plan for your small business so you can focus on building wealth a lot sooner.
As an ancillary duty, CFOs may negotiate financing deals for business expansion, thanks to their strong relationships with other financial professionals such as bankers. When applicable, the CFO is also responsible for handling the company's investments and providing stock option incentives.
CFOs evaluate performance against a number of metrics. One such metric surrounds revenue:
- Establishing a model for tracking revenue
- Breaking up revenue into identifiable streams to evaluate which products or services perform best
- Creating a foundation for reporting revenue on a routine basis
- Understanding projections; and
- Comparing year over year performance
You will also find that CFOs are responsible for putting together reports including:
- Cash flow reporting
- Over/under reporting
- Financial statements and balance sheets
- Revenue reports
- ROI reporting
- Expense reporting
These reports are often run weekly but could also be provided on a monthly or quarterly to give small business owners more insight into their finances.
A Note on Technology
When you take on the role of CFO for your own small business, you’ll also be responsible for selecting technology that meets your financial and reporting needs. This usually means using accounting software like QuickBooks Online, but could also point to a need for a larger reporting platform like a CRM.