If you asked any company's chief financial officer (CFO) what he or she does, you would probably be in for a three-hour conversation. But the core duties can be summarized in just a few paragraphs. A CFO's job can be broken down into three major components:
1. Controllership duties
These make up the backward-looking part of a CFO's job. Controllership duties hold the CFO responsible for presenting and reporting accurate and timely historical financial information of the company he or she works for. All stakeholders in the company including shareholders, analysts, creditors, employees and other members of management rely on the accuracy and timeliness of this information. It is imperative that the information reported by the CFO is accurate, because many decisions are based on it.
2. Treasury duties
The CFO is also responsible for the company's present financial condition, so he or she must decide how to invest the company's money, taking into consideration risk and liquidity. In addition, the CFO oversees the capital structure of the company, determining the best mix of debt, equity and internal financing. Addressing the issues surrounding capital structure is one of the most important duties of a CFO.
3. Economic strategy and forecasting
Not only is a CFO responsible for a company's past and present financial situation, he or she is also an integral part of a company's financial future. A CFO must be able to identify and report what areas of a company are most efficient and how the company can capitalize on this information. For example, the CFO of an auto manufacturer must be able to pinpoint which models are making the most money for the company and how this information can best be used to improve the company in the future. This aspect of a CFO's duties also includes economic forecasting and modeling - in other words, trying to predict (given multiple scenarios) the best way to ensure the company's success in the future.
A 2015 S&P Capital IQ study reported that CFOs of S&P 500 companies had an average annual pay of $3.8 million for the year, compared to the annual average pay for chief executive officers (CEO) of $13.6 million. The table below is a list of the top 20 CFOs, former or current, by annual compensation:
The CFO's job is a very complex one. We have only scratched the surface of the many things this corporate executive is responsible for. One thing is certain: The way a great CFO differs from a good CFO is in the way he or she is able to project the long-term financial picture of the company and by how the company thrives based on his or her multiple analyses.