| What Does a CFO Actually Do?

Posted in Finance, Small Business at 9:00 AM by Loftis Consulting

For many small to mid-size privately held businesses and non-profits, there may be some confusion on what a CFO, Chief Financial Officer, actually does and how a CFO could help grow their business.  This article will help define what a CFO can and should be doing for your business to make it more profitable and stable in the short-term and long-term.

What Is a CFO?

The CFO is responsible for establishing and maintaining a strong financial foundation and strategic direction for the business in all economic climates.  Also, the CFO oversees the accounting function but does not actually do the accounting work.  Listed below are some of the things that a CFO does.

  • Establish and Maintain Effective Internal Controls – This is important for your business because proper internal controls can prevent fraud and theft and help maintain positive cash flow.  Internal controls should be implemented for the following areas:
    • Cash management
    • Overhead expenses
    • Customer credit policies including collections of outstanding accounts receivables
    • Vendor relationships to get the best pricing
  • Help Maintain or Establish Multiple Financing Options – This will include building a relationship with right business bank for your business, developing funding sources for short-term and long-term needs and negotiating best terms for your business. This is important because this will help you always to be able to make payroll even in the months that revenue is down.
  • Develop Expense and Capital Budgets – The CFO should develop a one-year and 5-year operating and capital budget plans.  These plans will be used to identify funding needs either through internal sources (increased revenue) or external sources (loans or outside investors) to help grow the business.  The budgets also will have to take into account the strategic aspirations of the company and have processes in place to monitor and ensure performance levels.  Budgets will allow you to not only know when your business is off target but will also help you be able to quickly adapt to put the business back on the right track.
  • Strategic Projects – This includes a strategic plan. A strategic plan outlines the companies future goals and what steps it will take to get there. For example, if I want to grow my business by 100% in two years my strategic plan may include an acquisition of another company as well as a list of the target companies I would like to purchase to make my two year goal.  Other strategic responsibilities a CFO role includes major alternative funding alternatives such as divestitures and IPOs.  Strategic projects will help you envision the future of your company and start planning for that future today.
  • Adviser to the Owner – The CFO is a senior level resource for the owner or manager of the business.  The CFO can take into account both the financial and strategic impact of business decisions.  This advisory role will allow you to brainstorm with someone who understands your business but also has the general business knowledge and finance and strategy expertise to bring to your business.

For businesses that are growing or are not as successful as they once were, a CFO can help create links between operations and finance in order to right the ship or grow the business profitably for the long-term.  For businesses that cannot afford a full-time CFO, a part-time CFO is a great option.  A part-time CFO can be used on a project or interim basis.   Loftis Consulting, a Chicago based firm, provides part-time CFO services to small and mid-size businesses including non-profits.

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