If you’re wondering how to become a CFO, you’re not alone. Many financial professionals have the same questions about landing their dream executive position. The good news? Today, we’re here with the ultimate guide to becoming a CFO.
It’s an exciting time to be working in finance. CFOs are re-inventing themselves, trying to master automation and spearhead business strategy. They are also juggling new responsibilities, which means that future finance talent will have to develop a unique skill set. Inquisitiveness and interpersonal skills will be as crucial as number-crunching and tax filing.
According to a Mckinsey report, CFOs spend 41% of their time on non-finance activities. Now, in 2022, that number might well be higher. If you want to finally join your dream company’s board of directors as CFO, it’s crucial to be aware of the changing landscape and set sail according to the new tides.
As an aspiring chief financial officer, your next career jump shouldn’t be a leap of faith. It must be a sure-footed step of conviction. In this blog, you’ll learn what the roles and responsibilities of a CFO are and how you can climb the next rung of the corporate ladder, so you can get the promotion you deserve.
Roles and Responsibilities: A Day in the Life of a CFO
CFOs work closely with other C-suite leaders and report to the Chief Executive Officer (CEO). The CFO holds in their hands the financial well-being of the entire company. Their days can be long and hard, full of everything from financial statements to strategic planning sessions.
As the company’s financial manager, a CFO’s responsibilities are constantly evolving depending on what the business needs.
That said, most CFOs share the same key responsibilities
- Balancing budgets and expenses
- Overseeing financial planning & analysis (FP&A)
- Heading tax & regulatory compliance
- Raising capital and pitching strategic M&A
- Minimizing financial risks and losses
- Managing investor relations
- Championing automation
1. Balancing Budgets and Expenses
As the head of finance, this is a primary responsibility for the CFO of a company. While they may not be closing the account books, it falls on them to think about big-picture expenses and how company’s budget should be allocated. A great CFO has the financial expertise and professional experience needed to both manage a balance sheet and execute a long-term vision.
“As you mature, budgets become a tool in trying to be accurate in the profitability and revenue growth you deliver because that’s critical to your success in public markets” – Mike Beach, CFO at Chargebee.
The scope of budgeting can be more than cutting costs and cash flow management, though. It can be about identifying company initiatives that align with the organization’s long-term goals, assessing their capacity for returns, and ensuring these are funded at a granular level.
2. Overseeing Financial Planning & Analysis (FP&A)
Financial planning & analysis is a branch of the finance department that analyzes a company’s financials and forecasts reports based on previous numbers. This data is often used to back the major decisions that company executives need to make.
The FP&A team performs qualitative and quantitative analyses of the company’s financials and measures the progress of the company’s goals. The CFO directly oversees the FP&A team and is instrumental in charting financial strategies for the company’s future.
3. Heading Tax and Compliance
In the digital economy, all companies are global. This brings a list of tax laws and compliance regulations that allow your organization to operate in all markets with the same ease.
Staying on top of tax and compliance isn’t just good governance; it’s also about future-proofing your business.
“You’ve got to look at compliance in terms of your company’s future and not just focus solely on the past. Do you want to expand globally, and will you be able to do that with everything as it is now or as it has been?” – Tony Ricciardella
When compliance management is proactive rather than reactive, you enable your company to grow faster instead of having compliance as the last annoyance to cross off a checklist.
Related Read: The Complete SaaS Compliance Checklist for 2022
4. Raising Capital and Pitching Strategic M&A
As a business matures, fundraising becomes a critical role of the CFO.
“The responsibility of the CFO is not just the fundraising itself – it’s also how they want to structure it. Do they want to raise equity or debt? Do they want to bootstrap? What kind of capital structure is best for the company going forward?” – Karime Mimoun, Head of Controlling at TIER Mobility. (Source)
The CFO’s approach to raising capital depends on the stage of growth the company is in. They need to ensure they have the funds to execute current business plans while proactively raising funds that could accelerate your plans.
Apart from fundraising, the CFO plays a significant role in advising the CEO on strategic acquisitions that will help the company scale across markets and product offerings. The CFO identifies profitable acquisitions that work well within a company’s ecosystem while adding to its value proposition.
5. Minimizing financial risks and losses
Identifying financial risks within the company’s processes is a critical job and has a significant impact on the company’s bottom line. The CFO has a cross-functional view of the entire organization and has the perfect vantage point to identify risks and loose ends. Risk management could optimize an error-prone process or automate compliance to avoid paying substantial slip-up fees.
Related Read: Automate Your Compliance Woes Away
6. Managing investor relations
The CFO combines their finance, communication, and marketing skills to set and manage the stakeholders’ expectations across the board. Maintaining strong and transparent relationships with its investors is crucial to its continued success. As a financial leader, the CFO plays a direct role in engaging with the investor community and building long-term credibility for the company’s brand.
7. Championing Automation
With technology disrupting industries every day, finance is no exception. CFOs need to leverage technology to accelerate growth and scale seamlessly in the competitive landscape of fast-growing businesses. It can also be a critical tool to reduce friction and lower costs. And that’s why CFOs are looking to future-proof their business. A robust tech stack is their best friend.
An Accenture report estimates that you can automate 60 to 80 percent of backward-looking accounting activity with minimal human intervention. You needn’t use automation just to reduce errors or remove bottlenecks. Accounts receivable automation, for example can also free up valuable time for your team, letting them focus on more strategic initiatives.
Related Read: The Strategic Toolkit for Modern CFOs
What are the Skills Needed to Become a CFO?
As the job description of the CFO role evolves, the skillset it demands evolves accordingly. Saying a company leadership position requires decision-making and leadership skills is a little on the nose. Not to mention the extensive financial management skills that the CFO role demands. While a CFO will lead the finance function and should possess the vision to build and scale a team, they are also so much more than just a leader.
“The simple truth is that the CFO is now a primary decision-maker, thought leader, and voice of reason,” according to the Grant Thornton report.
Here are some less obvious but more critical skills that modern CFOs need.
Communication Skills: Effective leaders don’t overlook the soft skills they need to communicate important information. What sets a good CFO apart is their ability to translate what the numbers mean into language appropriate for the audience they’re talking to, whether it’s employees or investors.
Tech-savviness: The role of technology in the growth journeys of businesses is no longer a questionable one. Fast-growing companies need a CFO who’s excited about the value addition that technology brings and actively seeks ways to optimize internal processes with automation.
Future-readiness: A forward-looking CFO is strategic in their thinking. Rather than putting out fires, they’re thinking about ways to future-proof the processes within the organization. As business partners, CFOs need to plan for growth – whether automating compliance or rethinking competencies for promotion within their team.
Risk assessment skills: As the strategic advisor to the CEO, CFOs will have to weigh in with their opinions on whether an initiative is financially prudent. Then, CFOs must weigh the potential risks against their value to the shareholders and the company. While scaling businesses stand to benefit mainly from CFOs who are aggressively passionate about growth, a CFO who puts their foot down at a critical time can be a valuable asset to any organization.
What is a Typical Career Path for a Chief Financial Officer?
There are several different paths one can take to reach the CFO position. The CFO job requires extensive financial knowledge, so naturally, an undergraduate degree or advanced degree in accounting or a finance-related field is mandatory.
Here are some other examples of degrees or certifications that an aspiring CFO might begin with:
- Master of Business Administration (MBA Program)
- Certified Public Accountant (CPA)
- Certified Management Consultant (CMA)
- Chartered Financial Analyst (CFA)
After gaining a finance degree or certification, some aspiring CFOs might begin their career as an auditor, financial analyst, or in an accounting department. Scoring a job at one of the ‘Big 4’ accounting firms (Deloitte, Ernst & Young, PricewaterhouseCoopers (PwC), and Klynveld Peat Marwick Goerdeler (KPMG)) is often seen as a great start to a career in finance.
Entry-level positions can allow you to get a close look at how a company operates and helps you test your number-crunching skills with real-world scenarios. As you climb the corporate ladder, you start viewing the company from a big picture perspective as you take on more responsibilities.
Since finance is an integral part of all businesses, finance professionals can work in any sector. And while the fundamentals of finance are the same everywhere, sticking to one industry will give you a competitive edge as you learn more industry-specific skills the longer you stay in one.
There is no one yellow brick road to CFO-dom. CFOs come from different industries and academic backgrounds. They can have a varying number of years of experience and they often possess a unique amalgamation of technical skills they’ve acquired on their way.
According to a Robert Half survey, on average, CFOs have nine years of experience in accounting and finance before becoming a CFO and have been employed by three different companies. That means the best CFOs have had the time to become strong leaders and get a firm grasp on essential accounting principles.
Whether you’re a straight shooter or you take the scenic route, whether you work with private companies or public ones, all the work experiences you gain along the way add veritable contributions to your finance career.
So What Makes a Great CFO?
The traditional CFO role is going through a historic transformation. The job description’s evolving, and CFOs are playing not just a more strategic but a more central role in their organization’s growth.
As finance continues to barrel persistently towards automation and digital transformation, CFOs who can envision and champion change become more favorable. And those who fail to look ahead are left behind.
“The ultimate question is what can CFOs do today to future-proof the finance function for tomorrow.”
– Krish Subramaniam, CEO, and Founder of Chargebee (source)
The role of finance within an organization has grown into something more significant than a back-office accounting team. Modern CFOs are now also Chief Growth Officers and Chief Automation Officers.
The future’s exciting. What kind of CFO are you going to be?
