Traditionally CFOs do not look beyond their department to maintain the financial health of the organization . But now CFOs are increasingly becoming an internal catalyst for change, as every improvement helps them improve their core financial KPIs.

 The role of CFOs today has shifted from solely leading Finance teams to helping other departments to take decisions that impact the overall health of the organization.

Role of CFO has been changed from Technical and Fiduciary Expertise with a narrow financial focus to a business partner with strategic and operational focus leading a low cost finance organization. Where Management Reporting, Controllership, compliances and investor relation was the minimum requirement of CFO, Now CFO plays the major role  in operational decision making , to drive business Transformation , link strategic objectives with financial goal of the business.

Role and Challenges of CFO

CFO and the Financial controller

In general CFO and the Financial controller are treated as synonym of each other  but  they have significantly different roles within a company. The biggest distinctions can best be understood by breaking down the operations and responsibilities that come with each role.

CFO
Strategy Finance Controller
Reporting Day to Day Bookkeeping
  • Strategic planning
  • Stakeholder Management
  • Budgeting
  • Purchasing
  • KPI Development
  • Acquisition / Exit of M&A
  • Sophisticated Reporting
  • Deep Analysis
  • Scalable system
  • Process management
  • Internal Control
  • Team management
  • Day to day Accounting
  • Expenses Management
  • Client Management
  • CPA Support
  • Timely & Accurate Reporting
  • Rigorous Monthly closing

A Finance controller  is  directly involved in the financial department’s day-to-day operations , Besides he is  responsible for  Monitoring debts and compliance , Providing information to external auditors ,Providing financial information for tax filing

While A CFO is less directly involved in the financial department’s day-to-day operations compared to the controller. Main focus of a CFO is on  Economic Strategy and Forecasting  like Reviewing and comparing the company’s past and present financial situation ,Generating forecasts for the company’s financial future ,Predicting future scenarios and analyzing the best direction for the company’s success and Treasury Responsibilities  like Overseeing the company’s capital structure, Determining the best options regarding debt and equity & Analyzing issues related to the company’s capital structure. One can understand the difference through following table:

CFO Finance Controller
A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company A financial controller is a senior-level executive who acts as the head of accounting, and oversees the preparation of financial reports, such as balance sheets and income statements
Strategy vs. Tactic

The CFO plays a significant role in strategizing for the company’s future, pushing the organization forward, and advising stakeholders about important business decisions.

Strategy vs. Tactic

The controller, on the other hand, tends to carry out tactics that help with the day-to-day financial operations of the accounting department. These tactics enable the CFO to meet the company’s strategic goals.

The Chief Financial Officer prepares the  strategic planning for an Organization. He  identifies business risks and makes appropriate decisions to mitigate those risks. Meanwhile, the controller implements their tactics to strengthen the company’s accounting procedures
The CFO helps the CEO convince top  management of new ideas. Once those new ideas have been communicated to employees, they begin measuring results against the company’s goals The controller, however, looks for ways to improve the company’s profitability and primarily reviews the company expenses..
It is the CFO’s strategic leadership that steers the company in the right financial direction while creating greater company-wide accountability. A good financial controller will develop efficient and effective strategies to increase profit margins, increase employee productivity, and find cost savings

The accounting department may be miss critical opportunities if there is no one in the role of controller. Likewise, without a CFO, the larger fiscal picture is at stake and the company may not have an accurate forecast of future finances. The combined efforts of the CFO and financial controller can help the company realize the organisation vision.

Does Your Company Need a Controller or a CFO?

If you’re struggling to decide on whether your company needs a financial controller, a CFO, or both, here are some things to consider:

You may consider hiring a Finance Controller if Your company is growing rapidly, and you require accounting records based on Generally Accepted Accounting Principles (GAAP),Your accountant can’t keep up with all the financial data, You need to develop a budget and cash flow forecast ,You need financial management reporting

But if you  need someone to help you make decisions on investments, You need financial forecasts for your company, You’re in a transition stage, such as going through a merger, acquisition, or relocation,  there are issues related to the company’s capital structure one should consider for  hiring a CFO

The Role and Responsibilities of the Modern CFO

Today’s CFOs drive the direction and success of the organizations they work in.  There are four fundamental pillars of the role of the CFO

  • Leadership- Business Partners, communicator, Cross Functional, Influencer
  • Operations –Data Analysis, Profit Improvements
  • Controls – Identifying, Quantifying and Mitigating Risk,
  • Strategy- Support, evaluate, communicate

CFOs will have to create multiple action plans keeping in mind different scenarios that may occur in the future. This will ensure that the organization is prepared for varied possibilities to manage risk in such uncertain situations.

The CFOs need to establish a robust communication system to convey the right message to customers, vendors, internal Stakeholders and Investors. For example implementing cost-cutting measures will require communicating the need to the employees and opening new line of credits will demand that the investors are aware of the organization’s strategies.

The companies require a healthy cash flow to ensure smooth functioning of operations, managing daily expenses, and keeping the supply chain well-oiled and the company continues to have a strong balance sheet with required working capital. CFOs should look at implementing strong measures to reduce the sales receivables cycles and minimize all kinds of spending within the organization.

Digitization is very necessary to quickly generate data, analyze, and prepare plans on an almost daily/ hourly basis. Where  organizations, even today, continue to use the old manual processes, it is very important  for CFO To digitize documents  for and by banking channels including digital LC, digital BL etc., for exports and imports to bank the money with adequate care and system and processes.

CHALLENGES OF CFO

Being a CFO, or a business owner acting as your own CFO, can be incredibly stressful, and it just gets more so the larger the company you manage. CFO has to face many challenges in an organization:

Speedy insights at key decision points

In a survey of finance leaders, 77% of CFOs admitted that major business decisions have been delayed due to stakeholders not having access to data in a timely manner. The CFO Team has to be ready to analyze from multiple angles quickly and plan and forecast efficiently to keep your company competitive.

Collaboration with business leader across Organization

CFO works as a strategic adviser to help the business grow, CFO  and his team can start collaborating more and more effectively and proactively  with business leaders across the organization. CFO Team should consolidate data into a single source of truth for organization,  it helps to  do scenario planning quickly that allows to assess the impact of changing market conditions or make strategic decisions that help drive the business

Cost Challenges

Due to the rising cost of wages, salaries and benefits, capital expenditures, regulatory changes and compliance updates, IT and cyber security upgrades, as well as external economic uncertainties. CFOs are regularly asked to manage these costs in response to investor pressures and the competitive goals and strategies of business leadership. Though Cost-control measures help to ensure profitability but putting off capital investments, recommending layoffs or switching to lower-quality vendors could have negative long-term effects on the business.

Economic Uncertainty

Client bankruptcy and non-payment are real risks that CFOs must find ways to mitigate.  The COVID-19 pandemic has created uncertainties in nearly every market, adding to the challenges faced by CFOs. Concerns about a global economic recession, altered operations due to lockdowns and social distancing mandates.

Trade Credit insurance is one way to do so. Credit insurance coverage protects businesses from non-payment of commercial debt and  makes sure that  invoices will be paid , cash flows are maintained, capital is protected, loan servicing and repayments are enhanced and earnings are secure and insure  companies to reliably manage the commercial and political risks of trade that are beyond their control,.

Payment Delays Due to COVID-19

Payment delays have accelerated to become an even more significant issue in the current Business Environment. After covid-19   pandemic where Sales volume went down, Delay in payment was the most common risk for most of the Business.

Finding and Retaining Talent

Building out an effective financial team is becoming increasingly challenging in the modern business environment. Ideal candidates should have a great deal of experience and expertise in data and analytics on top of sophisticated accounting, auditing and compliance knowledge and skills. As a CFO, you want to assemble a team of people who understand and embrace the latest technology and tools and who have the flexibility to learn and integrate new programs and processes as the need for them arises.

Cyber security

Cyber security is a major concern for every business, as breaches can lead to devastating financial consequences for organizations and their stakeholders. As the head of the finance team, the CFO needs to make sure your entire team understands and engages with protective measures and strategies to guard against phishing, hacking and other external attacks. The CFO   must monitor data security compliance among all employees within the organization. In addition, it’s imperative to stay up to date with compliance laws and regulations to minimize company risks and guide strategies that ensure continued profitability and accountability.

Many businesses don’t hire a CFO, They are not big enough and financial tasks can largely be done by the founders on their own, most startups can’t afford a CFO as they largely command high salaries at a certain point as a business scale, CFO services become essential for the successful continued growth of a business. CFOs glean their experience from a multitude of roles and come with a diverse skill set. This unique experience is one of the main reasons why they are now seen as the key driver of growth in modern-day corporations. The CFO is an investment in the protection and maximization of company profits and savings.

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