What Do CFOs Do?
They are the highest-ranking officer in charge of the financial operations of a company.
(Chief Financial Officer) is in an irreplaceable position in developing corporate governance structure to a new stage. A structure without a chief financial officer is not a sound governance structure in the modern sense.
The word is an acronym that stands for Chief Financial Officer. They are the highest-ranking officer in charge of the financial operations of a company. Their responsibilities include:
- Financial planning
- Money management
Under the ever-changing market environment, in the process of increasingly fierce competition and the transformation of enterprises to modernization and globalization, entrepreneurs are thinking more deeply:
- How can maximizing enterprise resources, information, financial management, and control methods sustain ?
- Growth and organizational capabilities can be continuously optimized, and can meet the needs so can be unbeatable.
All of this determines that the transformation of the financial management system is imminent in the current environment. Yet, none of the resources, information, and control methods are related to financial management, which has become the core of business management.
The construction and transformation of the financial management system are crucial to establishing a business model suitable for enterprise development. However, when entrepreneurs seek help from financial directors, they also put forward higher requirements on the ability of financial directors.
As a Chief Financial Officer, are you thinking the same way as an entrepreneur?
Chief Financial Officers build financial management systems that adapt to an enterprise's business model, closely integrate the company's, and profoundly integrate the business operation model of the enterprise.
What is CFO?
In an interview with domestic news agencies, the Executive Kodak Corporation of the United States talked about the responsibilities of the chief financial officer of American companies.Financial Officer of
In his view, a US company's chief financial officer oversees a company's financial and accounting affairs.
An essential responsibility of the chief financial officer is to communicate the company's operating conditions and financial settlement reports to investors so that they can understand the actual operation of the company.
The CFOs are responsible for finance, accounting, investments, investor relations, and legal matters. The company's financial department, accounting departments, and information service department are all managed by them.
In addition to being responsible for the company's public relations with investors, the chief financial officer must ensure that the company has enough cash in the process of development, as well as enough office and production, and operation space.
The company can borrow money from banks or raise money in the stock market. The company's own investment affairs and complex legal affairs are also managed by them.
How to become a CFO?
There are three main tasks of the Chief Financial Officers:
- It is to carry out strategic operations through financial means. If the work is excellent, the value added to the company will be more than the value created by business operations.
- It is to "sell" the company like a sale and sell the company to investors. The people who decide the fate of listed companies are fund managers and large institutional investors. Therefore, investor relations are a significant issue for them.
- Implement the company's strategy at the lowest cost through .
From this, it can be judged that the criteria for an excellent chief financial officer include:
- Independent judgment.
- Strong business awareness.
- Thorough understanding of the business.
- Smooth operation in the capital market.
- Strategic vision.
Some of the qualifications are described below.
- Physical Fitness. This is a qualified chief financial officer who should have a healthy body. It is a prerequisite for being able to perform their job functions earnestly and to play their role.
- Morality. Good ideological and moral quality is the inherent guarantee for CFO to perform chief financial officer duties. Loyalty to the company, loyalty is the personality foundation of the officer.
- The chief financial officer should have good psychological qualities; that is, a qualified financial should have a healthy body. This is a prerequisite for being able to perform their job functions earnestly and to play their role.
The chief financial officers should be courageous to take responsibility, withstand pressures, and adequately handle various crises. In addition, the chief financial officer must maintain a normal state of mind.
- First, one must know . It gives the CFO a correct way of thinking, grasps national policies, and analyzes the economic environment so that they can better learn the impact of the financial situation on business operations.
- Second, they must be proficient in professional knowledge. This is the foundation required to carry out their work and a thorough understanding of national policies and regulations.
- Third, they must also be proficient in the marginal knowledge of finance, trade, law and management, sociology, psychology, and information technology.
The Chief Financial Officer should be a person who has accumulated rich work experience in other enterprises, continuous innovative management experience, and innovative operation methods.
Ability to analyze and judge
An essentialis to control risks and balance risks and benefits. Therefore, the chief financial officer must have a keen ability to analyze and judge risks and control the risks of the enterprise within a specific range.
Externally, the chief financial officer should be able to analyze and judge the development trend of the entire macro-nationaland the market environment and make decisive financial suggestions for the enterprise based on financial risks.
Internally, the chief financial officer should have a professional judgmentand the capacity to find out existing problems and propose solutions to the various financial activities of the enterprise.
The chief financial officer should not only report directly to the general manager but also to the foreign headquarters so that they can control the subordinate companies. This requires him to have a high degree of integrity and communication skills.
The chief financial officer plays the role of a communicator: The production department, the general manager, and the multi-party ideas of the company headquarters participate in the communication and coordination.
Communication and coordination ability
CFO has to deal with everyone in the enterprise and communicate with stakeholders such as shareholders and creditors outside the enterprise. Therefore, the chief financial officer must have good interpersonal communication and coordination skills.
- Ability to coordinate relations with government departments: They require the ability to properly handle relationships with financial and taxation departments to understand the governmental policy.
- Ability to coordinate relationships with owners: The goal of the chief financial officer is to maximize the shareholders' wealth. Still, the enterprise belongs to the shareholders, and the owner's investment plan restricts the financial management activities of the enterprise.
- Ability to coordinate with creditors: When an enterprise invests, the source of capital often requires external financing. Therefore, whether it can obtain debt capital is related to the development of the enterprise.
- Ability to coordinate relationships with internal departments: Effectively communicate and communicate with others, reduce differences between each other, and gain support from others and other departments.
- Organizational skills: Organizational ability is one of the essential talents of the chief financial officer. As the highest head of the financial department of the enterprise, to obtain ideal social and economic benefits, the ability to manage and control the managed effectively.
- Reform and innovation ability: The chief financial officer is the leading promoter of enterprise change. The Chief Financial Officer must be able to discover new situations and new problems, explore new ways, summarize new experiences, and propose new ideas and new solutions.
- Team building ability: As the senior manager of the enterprise, the chief financial officers should be able to cultivate its employees' collective sense of honor. In addition, they should have a team spirit, leading them to accomplish the work required by the business.
- Implement internal control capabilities: The chief financial officer should establish the standard internal system of the enterprise and control the most sensitive vital links and positions such as fundraising, utilization, investment, and withdrawal.
Leadership is the accomplishment of a goal through the direction of human assistants. The man who successfully marshals his human collaborators to achieve particular ends is a leader. A great leader is one who can do so day after day, and year after year, in a wide variety of circumstances.
S/he may not possess or display power; force or the threat of harm may never enter into his or her dealings. S/he may not be popular; his or her followers may never do what he or she wishes out of love or admiration for him/her.
S/he may not ever be a colorful person; may never use memorable devices to dramatize the purposes of the group or to focus attention on leadership.
As for the important matter of setting goals, a leader may actually be a person of little influence, or even of little skill; as a leader, he or she may merely carry out the plans of others.
Ability to participate in decision-making
Decision-making ability comes from profound knowledge and successful practice. It is formed by the organic combination of comprehensive skills such as character, artistic quality, social and natural science knowledge, and direct and indirect experience.
This is mainly manifested in three aspects:
- The ability to investigate, analyze and predict the future.
- The ability to find problems and set goals.
- The ability to judge.
The chief financial officer will often participate in various decision-making activities of the enterprise.
The decision-making ability of the chief financial officer has dual meanings. On the one hand, it reflects specific financial management work. On the other hand, it is a requirement to help the general manager and the board of directors to conduct business management.
- Expression ability
The ability to express is an essential ability of the chief financial officer and fundamental skill. In particular, when the chief financial officer refutes the general manager's decision, they need to have solid, expressive abilities to lobby board members in their favor.
At certain international CFO summits, those who are fluent are mostly CFOs of foreign companies, and those who are native are more reticent. Language and written expression abilities are indispensable qualities of a financial director.
- Develop employees' abilities
As a department head of an enterprise, the chief financial officer must turn everyone's wisdom and talent into collective knowledge and talent to drive the smooth development of the entire financial work.
At the same time, it is necessary to decentralize power properly, let subordinates be in charge of work to free themselves from tedious and fragmented specific affairs, and concentrate on thinking and doing. Emphasize overall strategic decision-making.
- Learning ability
Enterprises are faced with a rapidly changing world, and new things are emerging one after another. Therefore, the financial director needs to have the ability to learn and accept new things.
With the international flow of capital and the development trend of world economic integration, the functional status of the chief financial officer and the practical connection between corporate development strategy and finance has been paid more and more attention.
Management, social relations, and another multidisciplinary knowledge background, good professional ethics, and strong organizational and coordination ability are gradually becoming the basic requirements for an excellent financial director in today's society.
Responsibilities and Authority of the CFO
To ensure the realization of the chief financial officer's work objectives, companies must not blindly expand their powers; at the same time, companies carefully prevent the CFO from excessive responsibilities. The primary responsibilities should include:
- Review essential and reports of the group company, and jointly take responsibility for the quality of the financial statements and reports with the general manager of the group company.
- Participate in the examination and approval of the financial management regulations and other economic management systems of the group company, supervise and inspect the financial operations, capital receipts, and expenditures of the group subsidiaries.
- Jointly examine and approve decisions with the company's general manager on matters including business operation, financing, investment, , construction expenditure, remittance of overseas funds, and more.
In the United States, for large companies with a value of more than 10 billion US dollars, the's salary composition ratio is roughly:
Basic annual salary accounts for 17%, bonuses account for 11%, benefit plans account for 7%, and long-term incentive plans based on stock options account for 65%.
In 1999, the average stock return of the 50 highest-paid CEOs in the United States accounted for 94.92% of total compensation. In 2000, 87% of the CEO salary of many large internet companies was replaced by equity.