What Are the Roles and Responsibilities of a CFO?

The role of a CFO used to be fairly narrowly defined around the core CFO responsibilities of managing an organization’s finances. That’s still vital, of course, but the content and emphasis of the CFO role has shifted and expanded, connecting the CFO to aspects of a company that go well beyond pure finance and into strategic planning. This in turn has changed the center of gravity of the CFO role itself. 

In this article we’ll explore the roles and responsibilities of a CFO, why balancing between different priorities is central to success, and why strategy has become a dominant element of the role.

What is a CFO?

A CFO is a Chief Financial Officer; the executive primarily responsible for overseeing the company’s financial position. They’ll usually be a part of the leadership team, and be the head of the finance department or departments of the organization. 

CFOs used to be almost exclusively a role found in large companies, but as the role has changed it has been embraced by companies of almost any size. It’s not about the amount of money they’d be in charge of that determines whether a company wants a CFO, but rather whether the company needs someone with a strategic understanding of finance, how the business’ financial position may be affected by internal and external developments, and how to strategically position the company for best results.

Key CFO Responsibilities

The role of a CFO is a broad one, and so CFO responsibilities can be very wide. Depending on the structure and focus of an organization, what’s included in any specific CFO role may vary to match the needs of the company. Additionally, different CFOs prefer to break things down in different ways. These are some of the responsibilities that often fall under the CFO:

• Overseeing financial analysis, forecasting and financial planning
• Managing financial risk
• Balancing profit and growth
• Building, maintaining and investing in the finance team
• Acting as a key component of the executive team to ensure financial considerations drive the conversation, and that other topics are data-driven
• Ensuring company compliance such as with anti-money laundering regulations, fraud prevention regulations, KYC/KYB regulations etc.
• Ensuring the finance team is in compliance with the relevant security, privacy or legal requirements 
• Modeling good financial practices for the department and, through the department, for the entire organization
• Responsibility for funding, loans, investments and M&A, and the financial due diligence related to all of these
• Exploring what new technologies, products or trends might be able to do for the financial department or the financial position of the company

It’s important to note that the CFO is rarely personally responsible for all of these things. While they may take on one or more as direct projects or as a personal focus, in most cases they will have team members or departments to assist with or lead many of these responsibilities. 

Ultimately, though, the financial buck stops with the CFO. They might not have gathered the data or run the numbers, but they need to have confirmed confidence in the processes and people who did. 

They need to understand what lies behind results, and be able to interpret and explain them. And they need to have a deep enough understanding of how the business is doing and what’s ahead of it that they can make fairly accurate and sometimes inspired “back of the napkin” calculations when needed as part of strategic discussions.

The Role Behind CFO Responsibilities

The CFO responsibilities just discussed cover a wide range of areas and require diverse skills, in-depth knowledge and a lot of tact and drive. One aspect of the role that’s not always given as much attention as perhaps it should be is the importance of being able to balance needs and priorities that are in a sense opposites – and doing both at the same time.

Risk Management and Openness to Opportunities 

CFOs need to guide their organization in finding the right balance between on the one hand, maintaining an eagerness to explore new opportunities and on the other hand, avoiding and mitigating risk from many directions. 

This challenge is particularly intricate given that an overly conservative approach in which a CFO leans too heavily into risk avoidance and leans too far away from openness to new opportunities is in itself risky. Companies that try to avoid all risk by keeping things the same invite a different type of risk, either through lack of agility which means disaster when the unexpected inevitably hits, or through lack of competitiveness as the rest of the world moves on. 

Many CFOs, often in conjunction with their FP&A team, engage in scenario planning, sometimes using a platform such as Firmbase, in order to structure the process of finding the right balance for their company when it comes to risk and opportunity. 

Control and Oversight with Autonomy and Innovation

CFOs need to have a rock solid understanding of the financial foundations of their organization. Just to give an illustration, this includes knowing:

• What the key financial goals are for the year, for the entire company and broken down by team
• Where revenue is coming from, which teams are involved in bringing it in, and how they do that
• Which factors impact rising or falling revenue and expenses, both internal and external, and the status of these factors
• Breakdown of cash flow and how expenses work both in terms of accounting structure and in terms of how they function in the business
• Financial liabilities and connected impact
• Budget versus actual variance

Having a firm grasp on this and the many more elements required means having a strong sense of control and oversight over the financial reporting and reality in the organization. At the same time, though, CFOs need to ensure that this control isn’t coming at the cost of the professionals in their department, or elsewhere in the organization, having autonomy and the ability to innovate appropriately in the company. 

To find the right balance in this area, CFOs need a clear vision about the priorities and values of their team and their role in the company, and to convey these to their department and more widely in the company. If this strategic vision is shared, and employees are supported in taking independent action that is in line with that strategy, then autonomy is possible within the bounds of financial responsibility. 

Of course, it’s ultimately up to the CFO to track that that’s working out well in practice, by making sure that the company metrics are as expected. When things look like they might be going on track, it’s also down to the CFO to step in appropriately. 

Managing Up, Managing Down, Managing Sideways

CFOs play a vital role within the executive team. In many organizations they may be only second or third in importance after the CEO. As a result, they must simultaneously manage communication, reporting, gathering feedback and ensuring comprehension and buy-in from three distinct groups in their organization:

• The executive team itself
• The finance team
• The company’s board of directors or equivalent

Once again, succeeding in this challenge requires clear strategic vision. This should come primarily from the CFO’s role as part of the executive team, which enables them to both influence and understand the company’s goals, priorities and values. 

Although the CFO is “part of the team” in a sense as both an executive and department head, they are also unique in that they are ultimately responsible for the financial actions and underlying financial stability of the company. It is their responsibility to ensure that, as far as possible, they don’t deliver any surprises to the groups of which they are a part. 

As far as possible, communication should be carried out clearly, routinely and – when there is something controversial or complex on the agenda – well in advance of key meetings. 

CFOs need to invest in individual relationships with key players in all three groups, and important one-to-one conversations are as important in ensuring sound financial communications as influential presentations. 

Reporting and Predicting

CFOs also need to balance between deep insight into their organization’s financial picture, very much grounded in the recent past and the present, and an awareness of the challenges just around the corner. 

This future-focused view must combine knowledge of the company’s strengths and weaknesses with research into the industry in which it operates and also data on wider market trends that may impact business. 

The challenge of reporting versus predicting means balancing both the two views of time, between the past and the future, and also an “in the weeds” perspective with a high level view. It’s a lot to expect, but both reporting and predicting are essential aspects of the role. 

Many CFOs and their teams rely on dedicated software, such as the platform Firmbase provides for FP&A teams, to help them juggle, analyze and resolve all of the data successfully to achieve their dual aims. 

Communication is a CFO Responsibility

CFOs have a lot on their shoulders, but they can’t do any of it alone. Succeeding in this complex but fulfilling role requires the support, input and combined effort of stakeholders and professionals across the organization. 

For this reason, CFOs often view communication as a key element of their job. Many will have strict routines to ensure regular sessions, conversations, emails, presentations etc. with relevant people internally, whether those are face-to-face, in small groups, or large clusters. 

CFOs have the ability as part of their role to set the entire financial culture of an organization, which can be exceptionally powerful in terms of ensuring that budgets and constraints are understood, financial strategy is clear across different levels, expenses are dealt with appropriately and with the right balance between departmental autonomy and executive direction, and so on. 

To achieve active collaboration across an organization, it’s essential for different departments to have their voices heard and concerns listened to, and for discussion about why compromises are necessary to be open, honest and focused around what’s best for the company as a whole. All of this comes ultimately from the CFO, the driver of the business’ financial culture. 

CFO Responsibilities: Strategy, Strategy, Strategy

If there’s one thing that all of the elements in this article have in common, it’s that a CFO’s responsibilities require a fundamental focus on strategy that needs to underlie day-to-day activity, quarterly planning, annual goals and 3-5 year plans. 

When non-financial professionals think about finance in their company, they sometimes imagine a spreadsheet. The role of a CFO is more like working with a three dimensional model of a complex organic entity that’s turning and moving all the time. Navigating this successfully, including the human aspect without which nothing else will be achieved, requires strategy. 

CFOs need to know where the company is financially, what feeds into that, what possible futures look like – including the risks and possible opportunities – and how to get to the version they’d like to see with minimum risk. 

At the same time, they need to retain the agility and flexibility to adjust on the fly as things change, support and guide other functions in their interactions with the financial components of their job, and encourage their own team to evolve and grow along with the company. 

It’s not a job people take because it’s easy. But it can be enormously satisfying, successful and impactful for the right person who enjoys the right kind of challenge.