What is a Chief Financial Officer (CFO)?

What is a Chief Financial Officer (CFO)?

Definition

The term Chief Financial Officer is often referred to by its initialism, CFO. The CFO of a company is its senior-most financial officer. This person is responsible for managing the company’s finances and for interacting with external agencies regarding the company’s business results and performance. The CFO of a company reports to the Chief Executive Officer (CEO).

What does CFO mean?

The CFO handles the accounting and treasury functions of a company. In addition to this, the CFO is responsible for overseeing risk management, planning, and taxation issues.

Every finance-related activity falls within the CFO’s domain. This includes:

  • Ensuring that the company’s accounts are prepared in an accurate and timely manner.
  • Providing the CEO with inputs regarding the company’s operations and suggesting corrective actions.
  • Making certain that the company complies with regulatory issues.

Every decision that the board of directors and its CEO makes could have a financial implication. It is the CFO’s duty to keep the top management informed of the company’s financial position and to anticipate any issues that may arise. It is also the CFO’s duty to suggest measures to improve the company’s performance, especially with regard to its finances.

Example of CFO

CFO.com is a website targeted at finance professionals. In a recent article, they have listed some of America’s top CFOs and provided information about the role that they play in their respective companies. Here are some interesting details from the article:

John Stephens, Senior EVP & CFO, AT&T – the company is the middle of an $85 billion acquisition of Times Warner. John Stephens is playing a central role in the entire process.

Cathy Smith, EVP & CFO, Target – the brick and mortar retail industry is facing an enormous challenge from online retailers. Cathy Smith is tasked with ensuring that the company’s finances remain strong as it tries to fight competitors like Amazon.

David Wells, CFO, Netflix – the highly successful entertainment company has grown exponentially in recent years. As CFO, David Wells has to try to convert the growth in the number of users of Netflix into profitability for the company.

Summary

The CFO of a company plays a pivotal role in its success. Although the work that this person does is primarily related to finance, the CFO is a part of the top management team and is one of the individuals who is responsible for the firm’s overall profit and growth.