Responsibilities of a CFO: What Your CFO Does for Your Business

If you’re a business owner looking to hire a Chief Financial Officer (CFO), then you’re likely wondering about the responsibilities of a CFO and how they help you move your business forward. The role that a CFO fills is an important one for a growing business, but not many entrepreneurs know exactly how such an executive keeps things moving forward.

In this post, we’ll take an in-depth look at the duties of a CFO and what they do to ensure that your company continues following the path that you have shaped for it.

So keep reading this page to learn more about the responsibilities of a CFO. The information you find here will help you understand what you need to look for from the person who handles your company’s financial future.

What Does a CFO Do?

Everything that a CFO does can boil down to being able to provide a company’s executives with timely and accurate information. This information helps the company executives to make decisions on what they need to do to help the company stay in business and to grow.

Underneath all of that, the managerial duties of a CFO allow a business owner like you to answer important questions related to your growth.

These can be questions like:

  • When do I hire new employees?
  • Is it viable for me to open a second location?
  • Will I be able to offer a new product and turn a profit doing it?
  • Am I costing my products/services correctly?
  • Why is my business losing money?
  • Where did all of my cash go?
  • How much capital will I need for a new venture?

As your company grows, these are questions that you will ask yourself. A good CFO will be able to answer them in language that you and your executive team can easily understand. As in many industries, finance has its own unique jargon that can bog down those who aren’t experts in the subject.

But knowing what it all means is paramount to a company’s continued development, so having a good CFO who can translate terminology into language you can understand is something you want to look for.

What are Some CFO Performance Measures?

When questioning the responsibilities of a CFO, think about anyone else that you have worked with who was a specialist in a certain subject and how well that person was able to answer questions.

The same metric can apply to a CFO.

Since your business is only as strong as your financial position, you want to make sure that your CFO can answer any and all questions you have about your company’s financial position.

These questions can range from simple ones like “are all bills being paid on time?” to more complicated questions like “how can I borrow more money from my bank?”

At the end of the day, you can tell if a CFO is doing his or her job by how comfortable you are with working on other parts of your business while that CFO focuses on the financial aspects.

What are some Dashboard Metrics that my CFO uses?

The responsibilities of a CFO and the way one manages your company’s finances often deal with certain ratios and metrics.

These can include items like:

  • Working Capital – Also known as “invisible cash” this is a term applied to your current assets minus your current liabilities.Working capital is the cash that your company uses in its day-to-day operations. I like to refer to it as “invisible cash” because only a portion of it resides in your bank account. The remainder that you can’t see in your bank account is still in your company; supporting your accounts receivable, inventory, and accounts payable. It can get complicated, but there are exercises that your CFO can walk you through to help you understand the concept better.
  • Current Ratio – This is the term used to describe your current assets divided by your current liabilities, and paints a clear picture of how well you’re able to pay back short term debt obligations.This is an important metric to keep track of to ensure that your bills are able to be paid on time, so your business operations can continue without interruption.
  • Debt to Equity – This is a measurement of the proportion of equity and debt you use to finance your assets.You want to keep track of this metric because, as the saying goes “you have to spend money to make money.” However, you want to be prudent with debt, so that your profits and cash flow are not negatively impacted by too much debt service. Your CFO can tell you what the optimal amount of debt should be for your company which will depend on a number of business-specific factors.

These are just three of the many metrics whose tracking falls under the responsibilities of a CFO. It’s also important to remember that the CFO provides recommendations on how to keep your business healthy from a financial perspective and how to stay out of financial trouble. The CFO’s role doesn’t usually involve making decisions regarding those recommendations. The ultimate decision is up to the business owner.

By taking into consideration the input from the CFO, a business owner can have all of the financial information required to guide the company to long-term success.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

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