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What Does CFO Stand For and What Do They Do?

Jan 2, 2024

CFO stands for “chief financial officer.” The CFO is the top financial position held by an individual in a company or organization. 

What is a CFO?

A chief financial officer (CFO) plays an essential role in ensuring a business's financial health and ongoing functionality. From developing financial strategies and managing cash flow to mitigating risk and financial forecasting, they help a company work toward sustained economic success and growth.   

CFOs are top-level executives. They share the C-suite with the chief executive officer (CEO), chief operating officer (COO), and chief information officer (CIO). CFOs collaborate with investors, lenders, and key stakeholders to evaluate the company’s financial performance and drive profitability.   

What Does a CFO Do? 

The CFO exercises a high level of authority within a company. CFOs oversee fundraising strategies, evaluate investment opportunities, and determine how to balance debt and equity. They collaborate with treasury groups that manage the company’s cash balance and working capital, including accounts payable, accounts receivable, and inventory. Much of their time is spent preparing financial reports for executives, investors, shareholders, employees, lenders, and government regulatory bodies. These reports guide decisions about capital investments, acquisitions, resource allocation, debt management, budgeting, and other strategic options.  

The CFO also works with the company’s financial planning and analysis (FP&A) team to scrutinize historical data and market trends and compare the company’s financial performance against key performance indicators (KPIs). CFOs provide guidance and leadership to large-scale teams, communicate with the board and other stakeholders, negotiate with suppliers and vendors, and promote a company’s overall mission, values, and culture.   

How Do You Become a CFO?

To become a CFO, you’ll need a broad range of skills, from accounting and business strategy to communication and relationship building. Companies look to their CFOs for leadership, support, and guidance regarding highly consequential business decisions. If your career aspirations include becoming a CFO someday, you’ll need a solid finance and accounting background. Many CFOs have corporate experience in controller and treasury roles. Others begin their careers as public accountants. Most climb the corporate ladder by gaining professional experience in various positions within a company’s financial structure. You’ll need fantastic communication and decision-making abilities and demonstrated leadership, management, and problem-solving skills to succeed in a CFO job. Education requirements for professionals in this role typically include bachelor’s and master’s degrees with specializations in business management or accounting. If you want to gain the advanced knowledge needed to succeed as a CFO, consider pursuing a Master of Business Administration degree.  

Benefits of Being A CFO

There are many benefits to becoming the CFO of a business or organization, including earning a high salary and using your talents and skills to help others succeed. CFOs are highly respected and typically earn impressive salaries. They exercise a great deal of authority and power in a company. Some of the most significant benefits of becoming a CFO include the following: 

Higher Salary     

CFOs take on an elevated level of responsibility within an organization or company, so their salaries are much higher than that of the average businessperson. While a CFO’s salary can vary based on industry, experience, and location, typical base salaries range from $84,000 to $239,000 a year.   

More Prestige   

The CFO plays a crucial leadership role in a company, and the profession carries significant prestige. CFOs have substantial influence, and their day-to-day decisions have a massive impact on a company’s trajectory. Colleagues, fellow executives, and stakeholders often hold CFOs in high regard for their financial expertise and authority. As the CFO uses their knowledge and experience to lead a company toward economic growth and success, others may emulate the CFO’s work ethic in their own careers.  

Greater Responsibility   

The CFO holds the highest leadership position within a company's finance division. CFO responsibilities include coordinating the finance department's activities and working closely with leaders from other departments to achieve the company's financial objectives. Lower-level financial managers may oversee financial reporting, develop cash flow statements, project profits, and provide advice on financial decisions, but the CFO bears the ultimate responsibility for the company's financial health. While CFOs often report to the CEO and board of directors, they have much greater autonomy than lower-ranking finance professionals within the company.

Cons of Being a CFO

As with any career, greater responsibility can mean greater challenges. CFOs must keep up with the fast-paced, ever-changing field of finance. This requires them to remain current on financial regulations, tax laws, accounting standards, and compliance regulations. Their decisions carry immense influence, and a single mistake or oversight could lead to millions of dollars in losses. Some of the disadvantages associated with being a CFO include the following:

More Stress  

CFOs typically have larger workloads than other financial professionals. They’re held directly responsible for the company’s financial stability, which creates a high-pressure work environment–especially during challenging economic times. The need to produce results, manage rigorous business expectations, and mitigate risks can be demanding. However, many CFOs find that the stress of the job is offset by the financial success and positive reputation their organization can achieve under their leadership.  

More Accountability   

Increased accountability is another challenge a CFO may encounter during their career. If anything goes wrong financially or funds are mismanaged, the CFO must address these issues with the company’s internal stakeholders. The CFO may also serve as an organization’s public face and can be tasked with providing statements or giving speeches to the media. 

CFO vs. CEO: What’s the Difference?

Within the hierarchy of an organization, it’s easy to confuse the roles of a chief executive officer (CEO) and a CFO. While each takes on different responsibilities within a company, the CEO and CFO work as strategic partners and have a shared vision for the company’s continued success. A CEO oversees the entire company's operations and holds the highest rank in an organization. They report only to the board of directors. The CFO, on the other hand, assumes the highest rank within the financial division of an organization, and CFO responsibilities focus on the financial management of the business.   

Want to Become a CFO?

Becoming a CFO is an ambitious goal, but with the proper education and experience, it is attainable. At WGU, our ACBSP-accredited bachelor’s and master’s degree programs provide the flexibility needed to learn on your terms and at a pace that works for you. We offer online bachelor’s degree programs in business management, accounting, and finance that can set the stage for a thriving career. If you want to advance your business knowledge and skill set further, we offer master’s degree programs in management and leadership, accounting, business administration, and more. Take the first step toward achieving your dreams by applying to WGU today! 

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