Chief Financial Officer, more commonly referred to as the CFO, is a crucial leader in a business team and integral to business processes. The value, financial knowledge, and practicality they bring to a company’s decision-making process make them indispensable.
A CFO is a C-suite executive responsible for overlooking and managing all of a company’s financials. CFOs are responsible for reporting accurate historical financial information, making investment decisions, strategizing, forecasting risk, and more.
They lead and administer everything from accounting, payroll, and other operational areas. In short, CFOs are essential drivers of business success who act as controllers and treasurers.
CFOs can help navigate change effectively and efficiently, assist in making better financial decisions, and help bring about tremendous growth.
If you still wonder why you need a CFO for your organization, check out the reasons below.
A CFO sets up a budget for your company, ensures the team sticks to it, and manages revenues and other financials.
Whether small or large, every business requires accurate and seamless budgeting for success. A budget not only provides crucial information regarding operations, but it can also focus businesses on increasing their cash flows and profits.
Budgets help attract investors, prepare for emergencies, set sales goals, and pay off debt.
It is crucial to note that most CFOs don’t operate alone. Instead, they require a coherent, skilled, and a well-organized team.
The team a CFO leads is full of accredited and certified chartered accountants and financial analysts that advise them on many financial decisions. Getting those same degrees is now easier than ever. You can enroll in online masters in accounting to qualify to be on a CFOs team. Many CFOs work their way from these low-level or mid-level roles throughout their career to eventually land in the highly-coveted CFO role.
- Mitigating risk
Another critical function of a CFO is risk mitigation. Risk mitigation refers to moderating the adverse effects of potential risks to a company and lowering the company’s exposure to it.
Risk mitigation also includes developing a strategic and preventive action plan to reduce the damage a potential risk might cause. Risk management ensures better quality data, more effective decision-making, less guesswork, and fewer surprises in general.
A CFO carefully and precisely studies all risks of an organization and plans accordingly. They also maximize opportunities that exist while curbing these risks.
For instance, they prioritize payments during recessions, ensure all terms in different agreements are in line with the company’s best interest, and help manage operation during unprecedented crises, such as the recent Pandemic.
- High ROI
Return on Investment is a prime indicator of success for most businesses. A high ROI shows that your organization is competent, proficient, and qualified. ROI helps you measure profitability, achieve goal congruence, and perform comparative analysis.
In other words, ROI enables you to determine your investment efficiency and how much money your business can attract.
Similarly, the ROI can be increased by hiring a good CFO. Even if you are a startup, hiring a CFO is one of the best decisions you could make for your company.
A CFO does not only bring in more money by attracting investors, but they also look after budgeting, accounting, forecasting, and future growth of the company.
- Stakeholder relationships
A stakeholder relationship is vital because it helps build your company’s good reputation. A good reputation precedes you and increases customers’ level of trust. Strong stakeholder relationships also ensure the success of future products. You don’t have to incorporate every stakeholder’s suggestion but showing respect and concern helps increase engagement rates significantly. Positive stakeholder relationships also encourage open communication, reduce the chance of misunderstandings, and substantially raise accountability.
Even though managing relationships with stakeholders is crucial, it is extensively time-consuming. Instead of funders or business owners communicating with board members, investors, creditors, bankers, etc., it is better to let a CFO handle the dealings. A CFO coordinates with all stakeholders sends them regular reports, and maintains goodwill.
- Achieve business goals and objectives
A CFO ensures a business stays self-sufficient and always realizes its assets’ needs. A company that does not recognize the demand for its assets can never be successful.
CFOs are particularly essential for businesses struggling to meet targets and achieve set accomplishments. Setting goals is necessary because it helps lay a clear and focused direction for companies to follow.
Goals and targets motivate employees, create a positive work environment, and keep you accountable. They can also track progress and measure improvements or fallbacks in processes.
A CFO will help an organization realize its goals, set strategies, and ensure the company does not deviate from its objectives. CFOs also help identify areas of improvement to achieve set targets.
- More effective decision-making
One of the most vital advantages of hiring a CFO is improvement in decision-making. CFOs can influence strategic decisions significantly.
They review historical data, past performances, and current financial goals to clearly understand your company’s risks and opportunities. Moreover, CFOs translate accounting data into business insight, commercialize business strategy, and ensure decisions remain realistic throughout. The latter refers to a need for temperament if it spikes up in specific instances.
There are several benefits of good decision-making. For instance, it helps prevent mistakes, improves productivity, and saves resources. Improved decision-making also encourages employee participation, professional development enhances, and employee satisfaction rises.
- Ensure a productive workflow overall
Smooth workflow is vital if organizations want to succeed and thrive. Efficient workflow helps identify redundancies, increases accountability, reduces micromanagement, and improves communication.
It also means better customer service, improved quality of products and services, and more insights into business processes.
CFOs ensure that the financial side runs efficiently and without error. They take responsibility for handling and managing the entire accounts and finance department. In return, they foster growth and higher efficiency.
CFOs provide data-based insights, ensure timely revenue collection, and support the CEOs and other leaders. CFOs are also responsible for making and maintaining relationships with financial partners that can foster growth and raise the company’s accountability.
At this point, it is evident that hiring a CFO can be pretty advantageous for your business. However, the qualifications and skillset required from a CFO depend on your business nature and industry preferences. But overall, every CFO must have an accredited qualification, basic financial skills, leadership qualities, and an attitude geared for success.
Hiring CFOs can be costly, and some startups might find it unaffordable. However, one cannot ignore the fact that workflow efficiency and streamlining can only be possible with a CFO at the helm of the financial and business affairs.