A CFO (Chief Financial Officer) is an extremely important member of the C-suite in any corporation or organization. The financial success of an organization is strongly correlated with this individual’s ability to manage financial operations in an efficient manner.
In this article, we will be discussing what a CFO is and what their job description might look like. Specifically, we will be addressing the following questions:
- What does a CFO do on a regular basis?
- What type of salary can a CFO expect to make?
- How can you become a CFO?
If you have other questions about this job role, please feel free to leave a comment at the end of this page.
What Does a CFO do?
A Chief Financial Officer is responsible for maintaining the financial well being of his or her organization in both flourishing and floundering economies. Without their leadership, many organizations would be unable to properly allocate resources to take on projects.
Keeping a company financially sound is extremely important, especially in a world where the economy is subject to wild fluctuations in investor confidence and spending. Many publicly traded companies are at the whim of the investors who trade their stocks. A large company can, in extreme cases, experience %25 decreases in value if a poor earnings report is released.
A CFO must be prepared to handle situations like this. Without an individual who can lead through financial hardship, a company is most certainly in danger of collapse.
The daily responsibilities of a Chief Financial Officer can vary widely depending on the type and size of the organization in which he or she works. Here are a few of the key responsibilities of a CFO that are relatively transferable between all organizations:
- Communicate organizational goals and objectives in relation to financial performance targets. In many cases, financial targets may be set to either increase revenue or decrease costs, or both. It will be up to the CFO to communicate specific goals to staff.
- Use data to guide business decisions to provide the best opportunity for success. Different types of data include benchmarking against competitors, salary and benefit models, tracking of prices of goods sold, monitoring market investment returns/dividends, and calculating expected ROI on organizational investments.
- Guide C-suite executives, such as the CEO, in the planning and fruition of major initiatives that are designed to meet the organizational mission and vision objectives.
- Manage the delicate balance of costs and benefits of human capital. A CFO must be acutely aware of the needs of his or her employees while also balancing the needs of the business.
- Guide marketing and product development strategies based on market trends and analysis. This includes supply management and projections, human capitas projections, cost estimates, and ROI estimates for new products and services.
- For publicly traded companies, deliver a statement of company performance to shareholders that indicates the health and overall financial stability of the company.
What is the Average CFO Salary?
A 2012 annual survey by Grant Thornton LLP indicated that CFOs earn approximately $286,500. The average salary increase between 2011 and 2012 was approximately 4%.
The salary of a CFO is nearly double that of the average salary of lower-level finance employees. As you can see in the chart below, an experienced individual working in the finance world will likely make less than half of a CFO salary.
In addition, the pay for individuals in finance will depend on the type of organization at which they work. For example, individuals working at a large tech company might expect to make more than those working for a non-profit hospital.
How to Become a CFO
Unfortunately, there isn’t any one route to becoming a CFO. Many individuals come from different career backgrounds that ultimately culminate in them taking over at the financial helm of a company.
Some of the most common qualifications of a CFO include:
- Demonstrated experience and success in a financial role at a previous organization
- MBA or other business/finance related Master degree
- Demonstrations of strong organizational and leadership skills
- Proven track record of improving financial outcomes
One thing you can be certain of is that you will likely need at least 10 years of experience in the financial field before any company will consider you for a CFO position. Even 10 years may not be enough to get you the job. It will heavily depend on the type and size of the organization that you are planning to work for.
The exception would be cases where you have either started a company yourself or were an early member of a team that created a company. In these scenarios, you are likely to see individuals in their thirties or even twenties taking on the role of Chief Financial Officer.