The roles and responsibilities of Chief Financial Officers (CFOs) vary from company to company based on many factors, not the least of which is a company’s ownership structure. While public company CFOs have a clear set of responsibilities, the role of a private company CFO may be more varied and complex.
Below are five strengths of the most effective private company CFOs.
- They generate timely, reliable financial reports. Great CFOs earn the trust of owners and other executives by providing them with timely and reliable financial information that they need to make informed decisions. They also often serve as the primary contact for investors and lenders and, as a result, they must earn the trust of these parties in order to ensure that the company has access to financing on reasonable terms.
- They play an active role in strategic planning. One of the most important roles of a private company CFO is to help the company achieve its financial goals. To do this, the CFO must create and implement financial strategies that align with long-term objectives. This often involves analyzing the company’s financial data and industry data, as well as identifying critical metrics and monitoring trends in those metrics. Most importantly, great CFOs keep a close eye on leading indicators of performance, promptly alert other stakeholders to negative variances, and work closely with them to correct course.
- They actively identify and address risks. Every business faces a variety of internal and external risks. CFOs are uniquely positioned to identify and evaluate the potential impact of those risks as well as work with internal and external stakeholders to develop and implement mitigation plans. This may include developing and implementing internal controls, obtaining new or expanded insurance coverage, or negotiating contracts that mitigate financial exposure.
- They develop short and long-term plans for financing. CFOs play a crucial role in financing and capital planning by developing and implementing the most cost-effective financing strategies. This can include evaluating potential debt, hybrid or equity financing as well as the proper mix of both short and long-term financing. The best CFOs spend years cultivating relationships with financing sources to build the trust necessary to minimize the amount of time necessary to secure financing when the need arises (see #1 above).
- They manage cash. Great CFOs don’t only know how to manage cash, they are also adept at developing both near and long-term forecasts under a variety of possible scenarios to stress test the company’s plans. Additionally, they routinely revisit those forecasts based on changes in the company’s operations or environment and develop contingency plans to address a variety of reasonably foreseeable outcomes.
Because of their unique skillsets, CFOs play a critical role in a company’s success, and the number of responsibilities can sometimes seem endless. But by focusing on these five responsibilities, a private company CFO can move from serving as a scorekeeper to being a trusted partner of owners and other executives.
If you have any questions or would like to continue the discussion, please contact Chris Meshginpoosh, Managing Director, at Email.
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