The Chief Financial Officer, or CFO, of a company has primary responsibility for the planning, implementation, managing and running of all finance activities of a company, including business planning, budgeting, forecasting and negotiations. The responsibilities also extend to obtaining and maintaining investor relations and partnership compliance.
A Fractional Chief Financial Officer tends to do all of what is listed in the article, but also does all work from the bottom up. Meaning, instead of having a Staff Accountant, Controller, Treasurer, and CFO, the Fractional CFO will take on all positions to consolidate the accounting work into one person. The result is higher value for the client at a much lower cost.
This type of Chief Financial Officer tends to work best with startups to midsized businesses. There is no reason for, nor can most small businesses afford, a full time accounting staff.
With a Fractional CFO, they take full responsibility for all the work that is needed in the accounting of the company, but the cost is a fraction of the price of employing full time accountants, or the price paid for not having solid accounting in the first place.
You may be asking yourself, "What the heck does a 'CFO' do anyway?".
Well, a Chief Financial Officer...
Chief Financial Officer's Accounting Responsibilities
Develop foundation of all accounting activities: Someone has to lay out the plan and framework (processes) that will be the backbone of the accounting environment.
Complete all monthly close activities: For the user of the financial information, it may seem like accounting is just a printing of financial statements, but every month, there needs to be a process followed in order to get to those numbers in the financial statements.
Establish all financial controls and standard operating procedures: Financial controls safeguard the assets of the company by developing and implementing parameters, tests, and other methodologies to ensure the accuracy of the financial statements and deterrent of fraud.
Maintain accurate recording of the company’s capital structure: This includes the layout of business's ownership and other items such as Employee Option Programs.
Develop and maintain staff buildout and the accounting department (Treasurer-Controller-Staff Accountant-Inventory Accountant): It's the CFO's team and their success is dependent on the team that they put together.
Develop inventory systems for all raw materials, work in progress, and finished goods, including periodic physical counts: One of the more challenging parts of a CFO's job, accounting for inventory is significant way to understand what the real margins are of the company's products.
Establish all finance IT systems (inventory, accounting, accounts payable tracking, etc.): If you think of accounting as a road map, there are "highways" that either make the CFO's world one of ease, or hell on earth. Saving money with a cheaper program tends to result in higher costs down the line, so the CFO needs to make sure they are being smart about how they are piecing this map together.
Create all managerial reporting for month end, quarter end, and year end: One of the most important parts of a Chief Financial Officer's job is to be able to translate what the numbers are doing, to useful information that the owners or decision makers of the company use to drive the business.
Other items in a CFO's role: Negotiation and accounting for all capital expenditures, ensure there are effective internal controls in place to comply with Generally Accepted Accounting Principles (GAAP), develop internal auditing procedures, lead 3rd party auditors through quarterly and yearly financial audits, among others (i.e. Restatement).
Financial Planning Roles
Not only does a Chief Financial Officer have to master all of the money through an accounting language, but they tend to also have a lot to do with what to do with the assets of the company (financial planning) in order to create even more returns.
-Risk management by analyzing the company’s liabilities and investments. This includes vendor management and cost analysis between vendors.
-Investment strategies for cash and other liquid assets.
-Develop COGS analytics to ensure proper profit margins are being realized.
-Control and evaluate the company’s fundraising plans (financial instruments-LOC, loans, grants, and other financing activities).
-Develop cash flow protocols to ensure cash flow is appropriate for operations.
-Establish and maintain all pricing structures of products.
-Process improvement on all matters that affect the financial strength of the company.
-Manage overall profitability of the company which includes periodic cost analysis and cutting.
-Evaluate and advise on long range planning, introduction of new programs/strategies and regulatory action.
-Prepare cash flow, financial modeling, budget, and data analysis.
Whether it is law, tax, or company policies, the Chief Financial Officer is the safeguard against any potential liability that would be created by not following the rules.
-Compliance with all financial laws, taxes, and company policies.
-Develop tax strategies and maintain all tax filings.
-Creating/reviewing all formal finance, HR, and IT related procedures. This includes payroll compliance and employee benefits (health, dental, vision, life, 401k programs).
-Research and implement all insurance policies for the company.
-Maintain a high level of; integrity, honesty, and dependability with all internal and external parties.
Overall, the Chief Financial Officer's role and responsibility is to protect the business as you can see that all three of these categories are about creating an environment that cares for and accounts for all assets, liabilities, and capital of the company. They are the finance "bouncer" of the your business, so choose wisely!
Blue Collar CFO