What are the Characteristics of a Good CFO and How You Should Choose One

What is a CFO?

A Chief Financial Officer (CFO) is the chief administrator of all the financial activities that are undertaken by a company. He can be considered as a head of all financial departments of a company, ergo the company’s head of accounting or any other financial sector would work directly under him and would be directly answerable to him. Since a company’s main purpose is to earn money in the long run and be a participant in commerce, it is quite understandable that a CFO is both vital and important for a company to run.

A CFO’s core responsibilities

A CFO’s core responsibilities include can be broken down into three main aspects: Controlling finances with respect to old data and past transactions, overseeing all current financial activities taken by the company and answering to a higher up (usually a COO or maybe a CEO), and preparing a financial strategy for upcoming fiscal years to decide where the company would spend its budget.

The first involves the CFO analyzing past financial data, along with data that keeps being provided to him in real time and use this data to be able to report his findings to higher-ups and shareholders, while also keeping an eye on everyone involved in the process of collecting and compiling this data for him. The second responsibility entails the CFO to be directly in charge of the treasury and use the current state of financial affairs to try and figure out how much financial risk can be taken over the next couple of years without completely disrupting the current capital structure. The last responsibility involves a CFO using all available data plus market trends to create a financial strategy that details what the company’s future expenditure would be like and how it would be divided among the departments.

Why it’s important to have a good CFO

The biggest reason why CFOs are so important for a company to have is due to their indispensability in financial strategizing. A CFO can be considered as a right-hand man to a CEO who provides him with both the data and several detailed plans to follow, all of which makes the final decision made by a CEO far more beneficial for a company, since it’s been checked out by a person who’s looked into the company’s finances in depth. The financial strategies provided by a CFO are also very useful if and when a company decides to go public since their strategies heavily factor in a company’s current financial standing and market trends, meaning they’d be able to predict what steps would be profitable and what steps won’t. That’s why most companies that do look to make a public offering rely heavily on their CFO to do a good job and get their company the maximum possible profit.

Another reason why a CFO is indispensable to a company is due to his responsibility as a steward. It is his job to protect a company from government action by ensuring each financial practice done by the company fall strictly under the umbrella of legal commerce. He also works to protect the vital assets of the company and makes sure that all financial books contain only authentic information. He is also then responsible for sharing all of this data with investors, boards, and stockholders to ensure that risk and value issues are effectively communicated to them. Without a CFO spearheading all of these actions, the company is sure to fall into disarray.

The characteristics of a good CFO

The characteristics of a good CFO and a good leader are quite synonymous; After all, a good CFO has to be able to lead the rest of the company in a financial direction he feels is right and will bring about maximum profits. His thinking and mindset should always be open-minded and ready to accept both criticisms for his ideas and adapt to new changes both in the market and in his strategy as devised by his higher-ups. A CFO cannot be someone whose vision is too narrow to look beyond profit for a few years only and is afraid of taking risks and thus lose sight of the bigger picture. He must be honest in his dealings and very knowledgeable both about what goes on in his company and the market overall. Finally, a CFO needs to be someone who’s curious about new market trends and is willing to try new ideas and ventures for the sake of the company’s growth.

Choosing a CFO that’s right for you and your company

There are three aspects a company needs to look out for before a hiring a person as their CFO. First and foremost, a company needs to ensure the person they hire possesses all the qualities of a good CFO as mentioned above. They should also be great communicators and should have a great understanding of the business and industry your company works in. The second thing you need to look for when hiring a CFO is his past work and level of experience since only a person who has worked for quite a while in the finance department and has sufficient knowledge and seniority would be a good fit for the difficult position of a CFO. The final thing that you need to check before hiring a candidate is his profile. A candidate deemed fit for a CFO position at a company must also have a profile that aligns with all his responsibilities and whether or not a person of his caliber would be able to take on the size of the task that’d fall on him if he were to take on the role at your company.

How to help your CFO grow

One of the biggest problems faced by newly-hired CFOs is their confidence in their decisions. They may be confident in their numbers and calculations but may get flustered if confronted with questions from all sides. This may make them undermine themselves, so it is important for the rest of the members of the C-suite to help them and cultivate trusting relationships with their CFOs. Internal politics and relationship struggles can also hinder their performance, so it is advised to make sure these don’t end up bothering them.

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