The Chief Financial Officer (CFO) is equipped with enough financial knowledge to pilot the financial affairs of a business in the financial sector.
To become a CFO in any business organization, one must possess certain abilities and leadership skills. In this copy, you will learn what a chief financial officer is, the roles, responsibilities, qualifications, and requirements. You will also learn how to become a CFO and their average salary.
Who is a Chief Financial Officer?
The term CFO- chief financial officer- refers to a senior executive responsible for managing and overseeing of the company’s finances and financial activities, such as financial planning, financial risk management, financial reporting, signing checks, record keeping, and analysis of data.
It is the highest-ranking financial position in an organization and is responsible for the business’s fiscal health.
The CFO is also in charge of tracking all cash flow, estimating and analyzing the company’s financial strengths and weaknesses, and proposing corrective actions.
The chief financial officer is a financial controller who handles everything relating to cash flow.
What to note:
- A CFO is a senior executive
- A CFO is a member of the C-suite- a term used to describe the most important executives in a company, other members are the chief executive officer (CEO), the chief operating officer (COO), and the chief information officer (CIO).
- A Chief Financial Officer is similar to a controller or treasurer
- A Chief Financial Officer is the third-highest position in a company
Financial reports assessed by a chief financial officer must adhere to all financial standards.
You may also check out Financial Advisor: Description, Jobs, Companies, And Career
How to Become a CFO of a Company
Becoming a CFO (Chief Financial Officer) of a company is a significant achievement that requires a combination of education, experience, and expertise. Below are some of the steps you need to take to become a CFO:
- Get a Degree in a related field
- Gain industrial knowledge and expertise
- Explore interdepartmental opportunities
- Develop leadership and management skills
- Be Proactive
- Get a Degree in a related field: Typically, a bachelor’s degree in accounting, finance, economics, or business administration is required. A master’s degree in business administration (MBA) or finance may also be helpful. You should aim to get your education from a reputable institution that offers quality programs.
- Gain industrial knowledge and expertise: To become a CFO, you need to have a significant amount of experience and skill in finance. You can begin by working in entry-level finance positions such as financial analyst, accountant, or auditor. You can then progress to higher positions like financial manager or director, which will help you to build the necessary skills and experience for a CFO role.
- Explore interdepartmental opportunities: A CFO must have a deep understanding of financial management, including financial analysis, accounting principles, risk management, financial reporting, and tax planning. It is essential to have a broad understanding of the finance function to be successful in this role.
- Develop leadership and management skills: CFOs need to be strong leaders who can inspire, motivate and manage teams. Developing your leadership and management skills through training, mentorship, or executive education programs can be beneficial. Get a professional certification like Certified Public Accountant (CPA) licensure through state board approval or Certified Management Accountant (CMA) or Chartered Financial Analyst (CFA) licensure.
- Network: Building a network of professional contacts in the finance industry can help you to learn about new opportunities and keep up-to-date with industry trends. Attend conferences, join professional organizations, and engage with industry peers to build your network.
- Be proactive: Finally, Seek a solid career. Your track record should speak for itself. So, build it with intention. Seek out new challenges and responsibilities, take on leadership roles, and demonstrate your ability to make sound financial decisions.
What are the CFO Role and Responsibilities?
A CFO often has to fulfill a few roles within a company. They serve as leaders, financial advisors, and strategists.
Below is a compiled, comprehensive list of CFO’s roles and responsibilities that can be tailored to fit a company’s needs:
- Lead and manage the financial department and serve as a key point of contact for the financial department and auditors.
- Oversee the company’s financial planning and decisions such as budgeting, auditing, etc.
- Recommend financial strategies to the CEO by considering cash and liquidity risks.
- Review financial reports and determine methods to reduce costs and improve financial performance.
- Identify, perform and address potential financial risk management for the company by analyzing the organization’s liabilities and investments.
- forecast the organization’s financial standing based on financial and operational data and reports provided by the finance and accounting teams.
- Ensure cash flow is appropriate for the organization’s operations.
- Supervise and manage team of finance personnel (controllers, treasurers, analyst etc.).
- Support financial department in developing short and long term financial goals
- Overseeing the reconciliation of income and expense reports.
- Preparing and analyzing financial statements and documentation.
- Ensure compliance with the law, company’s policies and other regulating agencies.
- Support expansion by raising capital or taking a private company public.
- Create internal procedures and administrative guidelines.
- Oversee finance department heads and supporting staff and ensuring that all activities are current and up-to-date.
- Manage investment portfolios, analyze market trends, prepare and present reports to stakeholders.
- Control and evaluate the organization’s fundraising plans and capital structure.
- Designing financial models that will benefit different operating initiatives.
What are the CFO Qualifications and Requirements?
If you want to be a chief financial officer, you must have a degree in finance or a related field. An academic and professional background in finances, economics, and/or analysis.
To become a CFO, an essential qualification needed is a bachelor’s degree in the following related field:
- Business Administration
Economics covers a range of courses such as economic theory, economic development, labor economics, banking, and more.
Finance degrees have courses in cost accounting, financial modeling, corporate finance, investment analysis, portfolio management, and more.
An accounting track has courses in business tax accounting, financial accounting, managerial accounting, and auditing, as well as theory courses.
Courses in Business admin will cover things like organizational leadership, strategic planning, business ethics, resource management, and financial management. They are usually part of a plan that includes an MBA.
While not mandatory, a master’s degree in the following fields may help your chances of becoming a chief financial officer:
- Master of Business Administration (MBA)
- Master of Public Administration (MPA)
- Master of Accounting for Financial Analysts
- Master of Accounting for Financial Managers
- Master of science in finance (MSF)
How much does a CFO Earn?
The average yearly salary of a chief financial officer (CFO) can vary based on several variables, such as the candidate’s degrees and experience, the company’s size and geographic location, and the company’s type.
In the US, according to Salary.com 2022, the average salary range for a Chief Financial Officer within the bottom 25th percentile is between $315,834 per year,, while those in the 50th percentile (median) is $415,427 and the 75th percentile is $530,802 per year.
The salary will change depending on your location, job level, experience, education, and skills.
In Nigeria, the starting salary of Chief Financial Officer is between ₦1,819,000.00 and ₦2,140,000.00, whereas the maximum salary range is between ₦15,600,000.00 and ₦17,940,000.00.
Minimum Annual/ Maximum Annual Pay
But the average annual base Salary of a CFO is- ₦7,383,000.00/year
In addition, many CFOs take most of their compensation into stock options, bonuses, or other variable compensation.
What are the Differences Between the CFO Vs CEO
Most people outside the business world often get confused with the roles played by the CFO and of the CEO. These two take-ups on different but equally important responsibilities in an organization, which will include:
- Ranks and Key Responsibilities
- Reporting relationships
- Growth and Development
- Risk Management
- Managerial responsibilities
CFO is the Chief Financial Officer while the CEO is the chief executive officer.
#2. Ranks and Key Responsibilities
The CFO assumes the highest-ranked financial position in the company.
The main focus of a CFO is the financial management of the business.
The CEO assumes the highest overall rank in the company, with the leading role of overseeing the operations from sales to the administration of the entire company.
The CFO is in charge of the financial support of the corporate strategy, ensuring that sufficient cash is available to cover strategic needs and alleviate risk.
The CEO is responsible for the general strategy of the organization and the procedures used to accomplish that strategy.
The CFO builds relationships with all financial stakeholders, institutions and private investors.
For instance, the CFO attends meetings with private investors to discuss the latter’s interest in the company or with bankers to create lines of credit.
The CEO builds relationships with all stakeholders and is the public face of the company, making speeches and meeting with community leaders and the press.
#5. Reporting relationships
The CFO reports to the CEO and sits with the board of directors. While the CEO generally says to the company’s board of directors.
The CFO is responsible for, and handles, related quantitative and qualitative financial tasks. While the CEO makes decisions based on the CFO’s financial analyses.
#7. Growth and Development
The CFO finds and grooms personnel within areas of accounting and finance only. While the CEO finds and prepares employees within the firm for management positions.
The CFO usually comes from a finance/accounting background. While, The CEO may come from any background (including sales, operations etc).
#9. Risk Management
The CFO evaluates risks and gains related to finances. While the CEO evaluates risks and gains related to business.
#10. Managerial responsibilities
The duties of the CEO are broad, involved, and complex, and are set by the board of directors. While the duties of the CFO involve overseeing financial activites and are set by the CEO.
What to note:
The CEO may be the owner of a company or may be appointed by the board of directors and is responsible for the success or failure of the company and for maintaining a broad oversight of each department to ensure the company retains its budget and market position.
The CFO reports directly to the CEO and is also a member of the board of directors.
CFO Job Survey Outline
According to a survey by Russell Reynolds’, CFOs are most often hired from within, but only with the right experience. Within Fortune 100 companies, he deduced that:
- 69% of CFOs were promoted to the role internally
- 70% of these internal hires had been with their employer for at least 11 years
- 41% had more than 20 years of tenure
- Only a small percentage (15%) had been with the company for five years or less before being promoted.
- And about 31% of CFOs in Fortune 100 companies were brought in externally and 57% of these external hires came with previous CFO experience.
- A CFO needs operational knowledge related to accounting, finance, and general business practices and an ability to think strategically and see the big picture.
- Companies generally look for advanced degrees or commensurate experience and because of the significant impact of technology on all aspects of business, including finance, today’s CFOs must also be familiar with the software required to run a modern finance and accounting operation.
A CFO is often the highest financial position and the third-highest position in a company, playing a vital role in the company’s strategic initiatives.
People interested in becoming a CFO must have an academic and professional background in finances, economics, and analysis and also should be well-versed in both generally accepted accounting principles (GAAP).
What are the differential roles between the CEO, the CFO and the COO?
The Chief Executive Officer (CEO) oversees the overall business operations of a company and reports to the board of directors. While the Chief Financial Officer (CFO) is in charge of the financial operations of a company and reports to the CEO. And the Chief Operations Officer(COO) handles the day-to-day administrative and operational functions of a company and also reports to the CEO.
What Should a Company's financial officer know?
A CFO should know The operations, products, customers, vendors, and suppliers of all the employees, the shareholders, and the market.
What personal qualities make a great CFO?
Able to deliver bad news without placing blame
Able to deliver good news and attribute credit
Have the view of themselves as a team member