The role of a Chief Financial Officer (CFO) of a company comes with great responsibilities. Investment expert Gennady Barsky believes that while the position often comes with great challenges, the largest one remains fully understanding the responsibilities and fulfilling them in the best way possible.
The CFO of a company is accountable for all accounting and financial matters. “CFOs must establish the five P’s – policies, processes, procedures, programs, and practices – in the company. These five Ps ensure a well-maintained financial structure for a company,” Mr. Barsky said
1. Maintaining the cash flow
One of the key responsibilities of a Chief Financial Officer is to control the position of cash flow throughout the company. A CFO must be thorough with the sources and uses of cash and has to keep the integrity of funds and securities intact. Since cash rules the business world, regulating the flow of cash is one of the most important responsibilities of a CFO.
2. Assessing the company liabilities
The second most important responsibility of a company’s CFO is to comprehend the position of all the company’s liabilities. These include statutory & tax obligations, legal contracts, and hidden liabilities in the form of contingencies, leases, or insurance summaries, and expectations from loan covenants and/or the board of directors.
3. Monitoring the company performance
Another core responsibility of a CFO is to closely monitor the company’s performance. This could be achieved by gaining a complete understanding of the company’s business model since it helps in generating customer value. “Another way of boosting the company performance is through translating the operational metrics into performance measures,” says Gennady Barsky.
4. Department Supervision
The Chief Financial Officer of a company is also in a supervisory position to accounting, finance, IT and HR. The CFO supports the company’s accounting and financial functions using job descriptions, policies, and procedures, and methods for automating document control.
5. Working upon financial relationships
Establishing and maintaining lines of communication with investment bankers, financial analysts, and shareholders in conjunction with the Chairman of the company is another key role of a CFO
. This includes administering banking arrangements and loan agreements and maintaining adequate sources of capital for the company’s current borrowings from commercial banks and other lending institutions.
6. Raising capital
Finance is undoubtedly one of the key functional areas of a CFO, but that’s not it. There always are some more pressing operational issues, which a CFO is expected to take care of. “A CFO is expected to establish and execute programs for the provision of capital required by the company. This includes negotiating the procurement of debt and equity capital and maintaining the required financial arrangements,” Gennady Barsky points out. He further explains, “Coordinating the long-range plans of the company, assessing the financial requirements implicit in these plans, and developing alternative ways in which financial requirements can be satisfied are some of the other roles of a CFO.”
7. Managing financial obligations
All agreements regarding financial obligations, such as contracts for IT assets, raw materials, services, and other actions requiring a commitment of financial resources need prior approval of the CFO. Hence, the CFO is expected to pay special attention towards these financial obligations.
8. Record Control
Keeping tabs upon the records related to finances, insurance coverage, audits and statutory book closure is another chief responsibility of a CFO. This includes ensuring company compliance with financial regulations and standards.
9. Maintaining shareholder relations
Shareholders play a vital role in a company’s core setup. The responsibility of analyzing the company shareholder relations policies, procedures, and information programs, including the annual and interim reports to shareholders and the Board of Directors, as well as recommends to the President new or revised policies, procedures, or programs when needed, resides with the CFO.
10. Budget and expense control
It is important for a company to gain profit, but it is even more important to ensure that those profits are spent wisely. “Another primary responsibility of a CFO is to oversee the budget process, collect the inputs, and compare the company’s actual performance with the budget estimates,” quips Gennady Barsky.
The position of a CFO is a powerful one. However, with great power comes great responsibility. According to Mr. Barsky, understanding one’s responsibilities and working in accordance with them is the true key to success.