The CFO is essentially the holder of all the financial data and records that your business holds. In their hands are the answers to anything you might need to know, but you need to ask the right questions first.
Continue reading for 4 CFO questions to ask.
What is a CFO?
4 CFO questions to ask
What is a CFO?
Before we can ask a CFO questions, we need to fully understand their role. CFO stands for Chief Financial Officer. They are the senior executive that’s responsible for managing all of the financial aspects of a company, including data collection and reporting.
The duties of a CFO include:
Leadership: A CFO will be required to provide advice and guidance to both senior and junior colleagues, as well as to help lead the company into growth whilst staying on a strong financial footing. CFOs need to be concise, clear and accurate in their communication and have excellent leadership credentials to help steer the business.
Operational: A CFO should have a strong understanding of the company’s business model. They should also be knowledgeable about the industry segment as a whole and their perspective and knowledge should be able to inform strategic decision making that improves the business operationally. Management decision making will often rely on a CFO being able to understand and interpret complex financial data and communicate these through predictive modelling and scenario creation. The CFO will also support operations within the business by identifying cost controls and maximising profits through profit analysis and competitor benchmarking. CFOs will make sure that their business stays ahead of its industry peers by overseeing and monitoring all financial aspects of business operations.
Strategy: Supporting the business in its development and utilisation of strategy is an important aspect of any CFO. They’ll need to ensure that strategies and programmes are affordable and do not put financial viability at an unacceptable risk. This’ll include analysing macro financial trends, along with building and maintaining financial models.
Controls: Within the business, it’ll be down to the CFO to ensure that regulatory compliance is maintained. This’ll include assessing and mitigating risks to ensure that the company is acting within the legal requirements demanded of it. Part of these responsibilities will require rigorous processes for reporting.
CFOs are an important member of leadership for any business. Responsible to the CEO but a key member of personnel in their own right. A CFO will have significant input in all areas of a business’ finances, including its capital structure, investments and the day to day management of expenses and income.
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4 CFO questions to ask
1. What do you see as the biggest challenge in the current year’s financial statements?
The key business metrics that are most important to your business will impact the productivity, revenue, and profitability of your business. The CFO in your business should know them inside and out. They should have critical insight into how your business is operating and the challenges to its performance. As they have day to day oversight of all financial functions, they should be able to highlight issues and weaknesses (even if they're potential) in the financial statements.
2. What would you do differently?
The CFO is the person that’s trusted with collecting and understanding all of the sensitive data within your business. This includes financial data, profitability, growth metrics, commercial data, and more. Empowering them to communicate how they might move the business forward can be a powerful tool to unlock diverse thinking and gain consensus for growth planning.
3. How accurate is our current forecast, compared to actuals?
CFOs should maintain forecasts and models to help track company performance. How accurate your forecasting is can determine the success (or otherwise) of growth strategies and capital expenditure. Holding a CFO accountable not only ensures that models and forecasting are a priority but also means the CEO is kept up to date and aware of forecasting performance, including challenges to forecasting that might be unrelated to the business.
4. Which are the most and least profitable products and services we offer?
By identifying the strengths and weaknesses of the products and services being produced, the CFO can communicate the strengths and weaknesses of the business. If certain things are more profitable than others, you can investigate why and then look to either make improvements or maximise the more profitable options. The CFO should have the data available to rigorously determine why any differences occur across a product range allowing a CEO to create an improvement plan.
At the end of the day, a CFO is one of the most important individuals within your company. They not only have the technical expertise to collect and manipulate data, but they have the commercial experience needed to provide insights and judgements on your business. Founders can get the most out of CFOs by asking them the right questions.
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