Big public companies may have defined the CFO role, but the chief financial officer positionis becoming increasingly common in midsize and even small firms. Recent postings forfull-time CFOs on job-search sites include a mining technology company headquartered inSydney, Australia, with fewer than 20 employees and a Web3 technology and ecommerce startupin Singapore.
What’s driving that investment in expertise? Often, CEOs who are at a strategic crossroadsand recognise the value of an expert financial adviser who can help them grow market share,and their businesses.
In short, smart companies now view the CFO position — both internal and on a virtual orfractional CFO basis — as more of an investment than an expense.
Increasing inflation, rising interest rates, talent shortages and a looming recession makethe value of an experienced finance professional obvious. But our take is that there’s moreto the rise of the CFO than an economic crisis. Let’s look at the role, responsibilities andskills finance chiefs need to serve their companies well.
What Is a Chief Financial Officer (CFO)?
A chief financial officer (CFO) is the highest-ranking financial professional in anorganisation and is responsible for the fiscal health of the business. The CFO’sresponsibilities include, but aren’t limited to, building a top-notch finance and accountingteam, ensuring revenues and expenses stay in balance, overseeing functions, making recommendations on mergers andacquisitions, obtaining funding, working with department heads to analyse financial data andcraft budgets, attesting to the accuracy of reports and consulting with boards of directorsand the CEO on strategy.
CFOs may also help set technology direction, especially fintech, and make recommendations oneverything from supply chain to marketing based on their fiscal insights and industryknowledge.
The most-valued CFOs are visionaries — they have an eye toward the future, work closely withtop leadership and aren’t shy about recommending strategic moves.
CEO vs. CFO
The chief executive officer (CEO) is a company’s highest-ranking executive.Depending on corporate structure, the CEO may be responsible for all aspects of a company’soperational and fiscal health, or a president may share some duties. The CEO is the officialface and voice of the company to press and analysts, the general public and, if applicable,the board of directors.
CFOs are the most senior financial officers in an organisation. They reportdirectly to the CEO and work closely with the board of directors.
While the CEO occupies a higher-level position from an organisation chart standpoint, inhigh-functioning companies, the CFO and CEO work closely and collaboratively, with CFOsserving as sounding boards, strategists and risk mitigators. With that said, CFOs must havea comprehensive understanding of how different departments operate and how their strategiestie into commercial goals.
Financial Controller vs. CFO
A financial controller is a CPA (certified public accountant) and often holds an MBA.Financial controllers are responsible for preparing financial reports and analysingfinancial data. The financial controller is generally in charge of the accounting functionin an organisation and reports to the CFO. A controller may be part of ateam that includes bookkeepers,accounts receivable/payable clerks, payrollspecialists, tax preparers and accountants.
The CFO relies on the reporting generated by accounting and the financial controller toadvise the CEO and board on the company’s strategic financial direction. The controller andother functional specialists report to the CFO.
Key Takeaways
- What informs the need for a CFO is less company size than a desire for a strategicadviser with deep financial expertise.
- CFOs are captains of a team that covers both accounting and finance and consists ofsenior leaders, such as controllers and VPs of finance, and operational staff —accountants, bookkeepers, tax specialists, data analysts.
- Serving as a CFO requires a background in accounting or finance and an advancedbusiness degree, with approximately half of Asian CFOs having completed an MBA orpostgraduate certificate, according to recruitment firm Hays(opens in anew tab), and 57% in AustraliaandNew Zealand(opens in a new tab).
- Being a CFO also takes plenty of soft skills. Asnoted by Hays(opens in a new tab), once aCFO hasthetechnical skills and career path laid out, the next stage of development shouldfocus onsoft skills, such as communication, presentation and the ability to influence.
Chief Financial Officer (CFO) Defined
The chief financial officer (CFOs) holds the top financial position in an organisation. Theyare responsible for tracking cash flow andfinancial planning and analysing the company’s financial strengths and weaknesses andproposing strategic directions.
CFOs are accountable to both the organisation and various regulatory entities and authoritiesfor publicly held companies, such as the Australian Securities and Investments Commission(ASIC), the Accounting and Corporate Regulatory Authority (ACRA) in Singapore, theSecurity and Exchange Commission (SEC) in the Philippines, the New Zealand CompaniesOffice (NZCO), or the Securities & Futures Commission in Hong Kong. They are well-versedin International Financial Reporting Standards (IFRS) as well as state and federalregulations.
What Does a CFO Do?
The CFO’s role is twofold: Oversee the organisation’s financial activities, including beingresponsible for the finance and accounting professionals who perform operational functions,and serve in a strategic advisory role for the CEO and C-suite peers.
A 2021 Brainyard Survey shows how finance and business leaders rank success factors and howthose priorities have changed over time.
Meeting revenue and earnings goals and keeping cash flow stable are clearly in the CFO’spurview. Finance chiefs also advise department heads across the organisation, assisting themin both maximising revenues, if they serve in a revenue-generating capacity, and controllingexpenses without sacrificing customer or employee satisfaction or the company’s reputation.
The CFO helps select skilled staff for the finance team and works with departments toallocate budget for human capital management.
CFOs put complex data — current, past and predicted financial results — in perspective andhelp the CEO make sound financial decisions: Should we introduce this new product orservice? Can we afford to on-shore our supply chain? What are the tax implications of ouremployees working from anywhere?
CFO Responsibilities
Liquidity
Liquidity refers to an organisation’s ability topayoff its short-term liabilities — those that will come due in less than a year — with readilyaccessible, or liquid, funds. Liquidity is usually expressed as a ratio or a percentage ofwhat the company owes against what it owns.
CFOs are concerned with ensuring that customer payments are made in full and on time, andcontrolling expenses so that enough cash is on hand to meet financial obligations.
Return on investment (ROI)
Part of a CFO’s strategic focus is on ensuring a strong return on investment (ROI) for theirorganisations. ROI is a measure of the likelihood of receiving a return on dollars investedand the precise amount of that return. As a ratio, it looks at the gain or loss of aninvestment as a percentage of the cost.
Because ROI is a relatively basic KPI that does not account for all variables — net presentvalue, for example — CFOs add context to evaluate whether a project will deliversufficiently robust ROI to be worth the investment.
Forecasting
Importantly, CFOs don’t only report what is — a significant part of their value to anorganisation is their ability to accurately predict likely future outcomes. That includes financialforecastingand modelling based not only on the company’s past performance but on internal and externalfactors that may affect revenue and expenses. The CFO is tasked with making sense of thevarious departmental level forecasts to create profit projections for the CEO andshareholders.
Internal factors include sales trends, labour and HR-related costs, the price of rawmaterials and more, while external data inputs could include opportunity cost for capital,shifts in market demand, emerging competitors and advances in technology.
To monitor the external environment, CFOs may rely on government data, analyst firms andbusiness and general media, supplemented with insights gleaned through trade and associationmemberships and the input of board members, lenders and others.
Reporting
Financial reports including balance sheets and P&L and cash flow statements help bothinternal leaders and external stakeholders understand the financial state of the business,and it’s up to the CFO to attest that these statements are accurate and complete inaccordance with accounting standards that are relevant to businesses operating in variousAsia Pacific regions. While the International Financial Reporting Standards (IFRS) provide abroad grounding for organisations throughout the region, other standards such as theSingapore Financial Reporting Standards, the Philippine Financial Reporting Standards andthe accounting standards laid out by the Australian Accounting Standards Board apply tobusinesses in specific countries
Private companies in Australia are required to prepare and lodge financial statements and adirectors' report to ASIC each financial year — and have the accounts audited — unless thecompany is eligible for an exemption. Similarly, Singapore incorporated companies arerequired to file financial statements with ACRA(opens in new tab)(except for those which are exempted),Filipino corporations must provide the SEC(opens in new tab)with a general information sheet and auditedfinancial statements and New Zealand companies must supply NZCO(opens in new tab)with audited financialstatements. Many businesses create these statements anyway so they’re available should thecompany seek a bank loan or venture capital or equity funding.
Members of the CFO’s Team
The key duties of the CFO position vary depending on the size of the organisation, itsindustry and whether it’s a public or private company but generally fall into three broadfunctional areas: controller, treasury and strategy and forecasting.
Organisations may have professionals overseeing some or all of these roles and reporting tothe CFO.
Controller:
Controllers run day-to-day accounting and financial operations and often hold a CPA or MBA.They are responsible for creating reports that provide insights into a company’s financialstanding, including accounts receivable, accounts payable, inventory and payroll.
Treasury:
The treasurer is responsible for the company’s liquidity, debt and assets. That includes anyinvestments the company may have, whether physical assets, such as buildings and equipment,or financial investments.
Strategy & forecasting:
Strategy and forecasting involves using available data and reports, both internal andexternal, to advise on areas including product development, market expansion, human capitalmanagement, M&A and capital investments. It’s also where structured planning and forecastingexercises, like scenario planning andFP&A, fall.
Controllers, treasurers and FP&A analysts are invaluable members of the team, but in allthese areas, the buck stops at the CFO’s desk.
Benefits of Having a CFO
CFOs guide the finance and accounting team and have a broad view of an organisation’sfinancial health, allowing the CEO as well as peers including the CMO, COO and VPs of HR andsales to focus on their own goals and operational issues. While a CEO or COO may have abackground in accounting or finance, they generally don’t possess the same level oftechnical acumen and experience that a chief financial officer brings to the table.
In addition, a CFO provides:
Leadership skills
that enable them to assemble a successful financeand accounting team. CFOs understand at what point a company needs to add, for example, a taxspecialist and will define roles and assign responsibilities.
Industry knowledge
that enables a company to benchmark itself againstpeers. There’s a reason B2C often seek to hire CFOs away from competitors, as Netflix did whenit hired Activision’s finance chief. Same for manufacturers and healthcare providers.Specialised expertise is key in framing KPIs and metrics for variouscompany types.
Growth experience
gleaned from helping previous employers successfullyexpand, whether organically or via M&A, is invaluable to CEOs, especially those looking to taketheir companies public. A CFO helps find investment opportunities and use capital wisely.
Risk assessment and management
, in terms of regulatory compliance butalso the dangers that arise from too much debt and too little liquidity, brittle supply chains,improperly hired contractors and poorly implemented technology.
While hiring an experienced CFO is an investment, the return can be significant.
5 Top CFO Challenges
Today’s CFOs face challenges on multiple fronts, even as they benefit from ongoingtechnological advances and the ability to analyse and forecast based on massive amounts ofdata. These are the top five challenges facing CFOs:
Juggling too many responsibilities (51%):
As we’ve seen, this role is a broad and expanding one. A growing regulatorylandscape, rapidly evolving technology and massive market shifts worldwide squeezeCFOs from one side, while difficulty finding and retaining the right accounting andfinance talent adds pressure from a time-management POV.
Managing cash flow (43%):
All organisations need runway, but maintaining a healthy cash flow is a balancingact. CFOs must manage both incoming revenues and accounts receivables while keepingan eye on outgoing payments and short- and long-term liability. Cash flowanalysis is an ongoing endeavour.
Developing accurate financial scenarios (43%):
Like cash flow analysis, scenarioanalysis is, or should be, an ongoing process. By guiding thorough analysis of thepotentialimpacts of a variety of economic conditions on the organisation’s revenues, CFOs canplan for both positive and negative outcomes.
Producing timely, accurate reports (37%):
Timely reporting has always been critical, but in a fast-paced global businessenvironment, access to information is the foundation of sound, strategic decisionsand identifying and avoiding risks. Moreover, the reports issued by the financeteam, like P&L statements, can make or break efforts to obtain financing.
Implementing tech for finance (33%):
CFOs are aided in their roles by increasingly sophisticated technology that can helpwith both reporting and forecasting, including dashboards with built-in businessintelligence. But tech represents a significant investment in both capital and humanresources.
We’re likely to continue seeing these challenges into 2023 as CFOs tackle economic factorswhich affect sales, consumer demand and the workforce.
Changing Role of the CFO
Companies that look at the CFO role as more about reporting, less about strategy are or willsoon be at a disadvantage. Yes, finance chiefs need to ensure that they and the managementteam have timely data to support decisions. But strategic planning and collaboration acrossall parts of the business are what drive success.
Thus, it’s no wonder that CFO surveys consistently show that evolution. Especially in smalland midsize businesses, CFOs tend to wear many hats. Not only are they doing the traditionalCFO job, they’re assessing cyber security risks, managing system and data integration,filling talent needs and evaluating new technologies like Blockchain and AI.
When Should You Hire a CFO?
Organisations should consider hiring a CFO when the CEO and more junior financial staff nolonger have the skills to adequately evaluate the organisation’s fiscal standing, assesscash flow, forecast future financial needs and inform business strategy. Some experts advise$10 million in annual revenue as a marker that it’s time to hire a full-time CFO. But don’tforget that part-time/fractional and virtual CFO-as-a-service offerings are available.
While many organisations may wait to create this role until they begin to experiencefinancial challenges, we recommend a more proactive stance. Ask yourself:
Are we beginning to pursue a growth strategy? If so, you’ll need deepinsights into P&L, income and cash flow statements. Who will look at the books if you spotan acquisition opportunity? Banks and other potential investors like having a CFO attest toaccuracy and completeness. Oh, and have you calculated your valuationmultiples lately?
Do we have a sound, repeatable planning and budgeting process? IIf not, youlack a firm financial foundation. Ad hoc is no way to run a business.
Are we using our data fully, and not just in the obvious areas? For example,are we mining ecommerce data to inform customer success programs? CFOs tend to champion datause.
Do we feel confident in financial reporting requirements? For example, wereintangible assets impaired due to the economic downturn? If so, how will you account forthat?
Then there are industry-specific considerations. For many manufacturers, retailers anddistributors, the pandemic revealed weaknesses in supply chain operations that anexperienced CFO can help address.
Can we afford to hire a CFO?
CFO compensation in public companies is typically a mix of cash and stock. In both public andprivate businesses, remuneration is based on a number of factors, from company size andindustry to geography, experience, seniority and how many finance/accounting divisions ordepartments report to the CFO. In 2021, the highest-paid CFO in Australia was MacquarieGroup’s Alex Harvey, who reportedly(opens in new tab)received A$8 million in compensation that year.According to Salary.com data from early 2021, the average CFO salary in Australia isA$422,136, but salaries can vary greatly from A$256,067 right up to A$772,128. In Singapore,CFOs earn an average of S$365,741 according to Salary.com (2021), but compensation typicallyfalls between S$221,383 and S$521,474.
CFO Qualifications & Skills
Serving as a CFO requires a background in accounting or finance and an advanced businessdegree, generally including an MBA. CFOs must also have experience analysing data to makerecommendations on financial and organisational strategy.
In addition to having "hard skills," including understanding the International FinancialReporting Standards (IFRS) or the country-specific accounting standards that are modelled onthem, budgeting and data analysis, today’s CFOs need to have solid leadership and managementchops — the "soft skills" of effective communication, conflict management and negotiation.
Individuals in this role must forecast and offer strategic direction to the organisationbased not only on internal data but also on the external environment — regulatory, marketand macroeconomic — and be able to advise on industry-specific challenges and opportunities.
Finally, CFOs need a firm grasp of financial technology, or fintech — its ongoing evolution,options available and their applications, how to make financially sound decisions about ITinvestments and infrastructure and how to communicate to and educate staff to ensurefull adoption across the organisation — if tech is not used, there goes your ROI.
Technologies CFOs Use
CFOs and their teams rely on technology to analyse the massive amounts of data available tothem. Modern financial management software helps with informeddecision-making, freeing up time to focus on strategy and the critical advisory role.
CFOs need core financial reporting, audit and compliance capabilities and should also lookfor integrated systems that can help in FP&A, treasury and capital structure and allocation,regulatory compliance and corporate portfolio management and modelling.
Today’s CFOs are working long hours — 75% of Asian CFOs work at least 46 hours per week onaverage, whilst 8% work more than 65 hours(opens in newtab) — and juggling a lot of responsibilities.But thereturn is a fulfilling job where senior financial professionals are able to take advantageof their experience and work closely with CEOs to build not only great companies butrewarding careers.
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CFO FAQs
Is a CFO an accountant?
While a CFO may have an accounting background, that is not necessary to achieve success inthe CFO role. Accounting encompasses activities around AR, AP and maintaining financialrecords. While CFOs depend on these activities, many chief financial officers have a broaderfinancial skill set and focus more on managing assets and liabilities, planning futuregrowth, business strategies and risk management. Unlike an accountant, the CFO providesforecasts and makes strategic recommendations on organisational direction to the board, CEOand other senior leaders.
What is the CFO in charge of?
Chief financial officers hold the top financial position in an organisation. They areresponsible for forecasting the organisation’s financial standing based on financial andoperational data and reports provided by the finance and accounting teams and advising theCEO and board on strategic direction.
Is the CEO higher than the CFO?
The CEO is the chief executive officer of a company and is above the CFO on theorganisational chart. CFOs often work closely with the CEO and weigh in on high-levelstrategic decisions. Both the CEO and CFO have a direct conduit to the board or directorsand are entrusted with the organisation’s stewardship.
How do you become a CFO?
CFOs generally come up through the ranks, holding a variety of financial positions, such asVP of finance or controller, before rising to the C-level. Many also have deep businessbackgrounds, often hold dual degrees in business and finance and/or an MBA and have gainedindustry-specific expertise. Experience at lower responsibility levels positions financeprofessionals to achieve the CFO role.
What qualifications are needed to become a CFO?
CFOs need operational knowledge related to accounting, finance and general business practicesand an ability to think strategically and see the big picture. Companies generally look foradvanced degrees or commensurate experience.
Because of the significant impact of technology on all aspects of business, includingfinance, today’s CFOs must also be familiar with the software required to run a modernfinance and accounting operation.
