Attention Accountants! Understand the Strategic Role of the CFO

Whether you work for an in-house accounting department or for an outsourced accounting provider, you are answerable to your company or client on all finance-related matters. 

The Chief Financial Officer or CFO will, depending on the size of the company, be the head of the finance department for most businesses. The CFO generally operates at the more strategic level with a primary objective – to optimize the financial performance of the business. 

To provide the highest level of accounting service that aligns with the company’s business model, an accountant must understand, firstly, what the CFO’s role is and, secondly, what value the accountant(s) can add for the CFO on a daily basis. 

Below, we explain the key role and requirements of a CFO and outline the various structuring options available for an accounting or finance department. 

The Position of CFO

The Chief Financial Officer, or CFO, is usually one of the most senior executives in a company. The CFO is responsible for the entire finance function of the business.

The CFO operates at a more strategic decision-making level while the accountants/bookkeepers generate the key financial data and information that enables the CFO to advise the board or the company on key commercial and financial matters.

The CFO requires deep expertise and knowledge when it comes to corporate finance matters as well as an in-depth understanding of the overall operations of the company. The finance department of a business plays an important advisory and oversight role in supporting almost all other divisions in a company such as manufacturing, selling, marketing and Human Resources. 

The Role of CFO

So what are the fundamental duties and tasks of a CFO? Below are just 5 key activities that a CFO will undertake on behalf of their business.

• Strategy development and implementation. A CFO focuses on the company’s financial goals and aligning them with the company’s commercial objectives (i.e. growth, expansion, diversification, new product line, etc). The CFO must monitor and ensure that the company has the financial resources to support these strategic objectives. In short, the CFO must ensure that management decisions are based on the most up-to-date and accurate financial data of a business.

• Financial modelling and planning. The CFO must oversee the establishment and implementation of financial models and financial plans to cover both the short-term and long-term objectives of the company. While the finance team under the CFO might generate the models and plans, the CFO must ensure that they make sense and that they are accurate or adjusted on an ongoing basis. The CFO will also provide the financial grounds for capital investment decisions, working capital financing as well as advising the company on the optimal debt to equity structure. Simply put, optimization of the financial structure of the business.

• Internal controls and financial reporting process. At the outset, the CFO will advise on the establishment of robust policies and procedures for all finance-related activities within the business. It is then the role of the accounting and finance team to ensure that these processes and controls are strictly followed on a day to day basis. Key processes may relate to credit and collections, purchasing, financial obligations, invoicing, cash flow management, financial reporting and KPIs and of course, compliance with accounting and tax legislation, regulations and policies. 

• Cash flow for business operations. The CFO needs to ensure that there is enough cash coming into the business to be able to support business operations on an ongoing basis. The CFO will be responsible for ensuring that cash inflows are maximized and cash outflows are mitigated, to the extent possible, to ensure that the business has cash to operate, pay its staff and pay its suppliers. 

• Financial relationships. A company’s relationships can be a key driver of success in business. Due to the position, responsibility and knowledge of the CFO, the CFO can be a crucial liaison between the company and its shareholders, creditors, investors, suppliers, banks and any other parties that have an interest in the company’s finances. For example, the CFO will often present the finances of the company at shareholder meetings and respond to queries. Further, the CFO’s relationship with its banking partner or investor might help the company obtain short-term funding during a period of financial uncertainty. Larger companies sometimes have a designated Corporate Affairs officer to perform this role.

How Accountants support the CFO

In startups and SMEs, a CFO may assume the dual-role of finance executive and accountant. In larger scale organizations, the finance function cannot be a one-woman or one-man team. There will be a standard organizational structure in place where the accountant, the accounting department (which may include support from an outsourced accountant) reports to the CFO. 

The company accountant or accounting department performs tasks and completes deliverables on a daily basis which ensures that the CFO can perform his/her role and duties (see key CFO tasks above). The daily tasks of the accountant or accounting department (which may also include support from an outsourced accountant) include: 

• Generation of Financial Statements. The accountant prepares the financial statements to collate information about the financial position, financial performance and cash position of the company. The accountant will process relevant data and present the results to the CFO. This information will then assist with the formulation of policies, plans and controls within across business operations. The information forms the basis for financial statement analysis, including cash flow analysis, trend analysis, profit variance analysis and computations for liquidity and profitability ratios.

• Tax compliance requirements. With expertise, knowledge and experience in the field of taxation and regulatory frameworks, accountants are ideally placed to support the CFO in the process of tax planning. The accountant will prepare tax returns, review company tax compliance matters and other relevant legal requirements, in addition to providing audit support during audit season. 

• Budgets and Financial Plans. For financial planning and control, the accountant supports the budgeting process by formulating the master budget and its various components such as the sales budget, production budget, capital budget and others. Data and forecasts are then utilized by the CFO to estimate the need for funds for operating activities, investment, capital, schemes and projects.

• Cost and Differential Analysis. The accounting department can assist a CFO when making a key commercial decision on the benefit of a new product, service or offering by the company. The accountant may also work with the CFO to generate a profitability analysis, pricing strategy and other performance measures for a new product or service.

• Financial Management Reports. The accounting team provides data and analysis on various key indicators including cash, receivables, inventory, etc, to maintain a healthy working capital. Capital investment and financing decision factors are quantified by determining cost of capital, net returns, profitability index, project prioritizing and capital rationing. With such quantified information, the CFO can identify the current strengths and weaknesses and advise on any actions that might be required to increase cost and resource efficiencies. 

The Added-Value of an Outsourced Accountant

A company may adopt two approaches, or sometimes a combination of both, when considering how to structure the finance or accounting function of a business. 

The company may opt to build a team of internal accountants, otherwise known as an in-house team. This will generally revolve around a structure of junior level to senior level accountants and bookkeepers working within the company.

The company may also opt to go with an outsourced model, for example, the way in which CloudCfo offers outsourced accounting, bookkeeping and finance services in the Philippines.

Here are 4 key ways in which an outsourced accountant can add value for the CFO and finance function of a business in contrast to an internal accounting team:

1. Access to innovative technology solutions. Many outsourced accountants have invested in and have access to various kinds of online technology, platforms software and solutions. For example, this might include solutions for accounting, payroll, invoicing, process management and much more. This is an advantage to the CFO as the accountant’s knowledge on technological advances enables efficiency and optimization of processes. It also removes the need for the company itself to invest in technology.
2. Cost and resource efficiencies – By hiring an outsourced accounting provider, the business does not have to invest in recruitment, increase headcount or worry about rising payroll or labor related compliance requirements. An outsourced accountant is another service provider or vendor supplying a key service for the business.
3. Range of specialized skills. Outsourced accounting providers can have a wider knowledge and expertise in other disciplines, specializations and industries. A wider range of accounting, finance and tax compliance skill sets could be the advantage a company needs to scale within a specific market.
4. Objective performance of responsibilities. Without bias or conflict of interest, an outsourced accountant can perform their duties without concern for company politics, hierarchal structures or internal forces. An entirely independent view can sometimes result in a more objective view of a company’s strategies, processes or controls.

Virtual CFO

We have discussed the role of the company CFO above. However, due to advancements in technology over recent years, a new role is now being utilised regularly by companies – the Virtual Chief Financial Officer or VCFO. 

The Virtual CFO is an outsourced CFO, similar to that of an outsourced accountant, yet providing advice and support at a more strategic level. A Virtual Chief Financial Officer enables a business to engage the expertise, skill and professionalism of a Chief Financial Officer without having to invest in recruitment, training or equivalent FTE compensation. It’s also a more cost-efficient use of resources. A company does not have to directly employ a Chief Financial Officer yet can still benefit from receiving sound financial and strategic advice and key industry insights. 

Check out our article on the benefits of hiring an outsourced CFO over an in-house CFO. 

Outsourced Accountants and Bookkeepers in the Philippines 

Trouble finding a professional finance executive? Struggling to find the working capital for a full-time CFO? Lack of candidates with the expertise you need? 

CloudCfo offers clients a professional and trusted outsourced/virtual CFO advisory service. Our team of professionals offer the full range of outsourced accounting, bookkeeping and tax compliance advisory services here in the Philippines, particularly in Metro Manila. Check out how our VCFO service works by clicking HERE. 

Visit us at cloudcfo.ph or contact us at enquire@cloudcfo.ph for more information on how we can provide real strategic support for your business here in the Philippines.