What Is a Chief Financial Officer (CFO)? Role & Responsibilities

Chief Financial Officer

Investopedia / Zoe Hansen

What Is a Chief Financial Officer (CFO)?

The term chief financial officer (CFO) refers to a senior executive responsible for managing the financial actions of a company. The CFO's duties include tracking cash flow and financial planning as well as analyzing the company's financial strengths and weaknesses and proposing corrective actions. The role of a CFO is similar to a treasurer or controller because they are responsible for managing the finance and accounting divisions and for ensuring that the company’s financial reports are accurate and completed in a timely manner.

Key Takeaways

  • A chief financial officer is a top-level executive.
  • The CFO is a financial controller who handles everything relating to cash flow, financial planning, and taxation issues.
  • A CFO is often the highest financial position and the third-highest position in a company, playing a vital role in the company's strategic initiatives.
  • Financial reports completed under a CFO must adhere to financial standards.
  • People interested in becoming a CFO must have an academic and professional background in finances, economics, and/or analysis.
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Understanding Corporate Structure

How Chief Financial Officers (CFOs) Work

The chief financial officer is a member of the C-suite, a term used to describe the most important executives in a company. Alongside the CFO, these roles include the chief executive officer (CEO), the chief operating officer (COO), and the chief information officer (CIO).

Becoming a CFO requires a certain degree of experience in the industry. The majority of people who end up in this position have advanced degrees and certifications, such as a graduate degree in finance or economics, and the Chartered Financial Analyst (CFA) designation. It also helps to have a background in accounting, investment banking, or analysis.

The CFO reports to the CEO but remains one of the key personnel in any company. In the financial industry, it is a high-ranking position, and in other industries, it is usually the third-highest position in a company.

People in this role have significant input in the company's investments, capital structure, and how the company manages its income and expenses. This corporate officer may assist the CEO with forecasting, cost-benefit analysis, and obtaining funding for various initiatives.

The CFO also works with other senior managers and is a vital participant in a company's overall success, especially when it comes to the long run. For instance, when the marketing department wants to launch a new campaign, the CFO may help to ensure the campaign is feasible or give input on the funds available for the campaign.

A CFO can become a CEO, COO, or they can assume the role of company president.

Special Considerations

The CFO must report accurate information because many decisions are based on the data they provide. The CFO is responsible for managing the financial activities of a company and adhering to generally accepted accounting principles (GAAP) adopted by the Securities and Exchange Commission (SEC) and other regulatory entities.

CFOs must also adhere to regulations such as the Sarbanes-Oxley Act that include provisions such as fraud prevention and disclosing financial information.

Local, state, and federal governments hire CFOs to oversee taxation issues. Typically, the CFO is the liaison between local residents and elected officials on accounting and other spending matters. The CFO sets financial policy and is responsible for managing government funds.

The Benefits of Being a CFO

The CFO role has emerged from focusing on compliance and quality control to business planning and process changes, and they are a strategic partner to the CEO. The CFO plays a vital role in influencing company strategy.

The United States is an international financial hub and global economic growth increases employment growth in the U.S. financial industry. Companies continue to increase profits leading to a demand for CFOs. The Bureau of Labor Statistics (BLS) predicts the job outlook for financial managers to grow 15% between 2019 and 2029. The average annual salary for a financial manager was $134,180 in 2020.

Is a CFO an Accountant?

Generally, no, a CFO is not the same as an accountant. Accountants handle bookkeeping tasks and tax filings. Meanwhile, a CFO focuses on the company's financial future, creating forecasts.

What Is the Average Salary of a CFO?

The average salary of a CFO, according to PayScale, is roughly $140,000.

What Is the Highest CFO Salary?

The highest-paid CFO for fiscal year 2020 was Comcast's Michael J. Cavanagh, whose salary was $2.39 million.

How Do You Become a CFO?

Generally speaking, the CFO position is reserved for very experienced professionals with established track records in their field. CFOs are generally equipped with advanced educational designations, such as a Master of Finance or Chartered Financial Analyst (CFA) designation. Many CFOs have professional backgrounds in fields such as accounting, investment banking, or financial analysis. For financial professionals, the CFO is among the most prestigious and highly-paid positions available in a firm.

Are a CEO and a CFO the Same Thing?

No, a CEO and a CFO are not the same thing. However, CFOs are required to work closely with the other senior executives of a company, such as the CEO. These executives are sometimes referred to as the C-Suite of the company, representing the company’s highest level of decision-making. Although the CFO is typically subordinate to the CEO in the corporate hierarchy, CFOs will generally be the foremost decision-maker on all matters within the Finance department of their firm.

The Bottom Line

The CFO is the top ranking executive related to managing a company's finances. This includes managing all aspects of financial and cash flow planning, as well as analyzing its financial position. A CFO is comparable to a treasurer or controller. However, unlike a controller or accountant, a CFO is responsible for financial planning, while the other two are in charge of bookkeeping and the company's financial statements.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Bureau of Labor Statistics. "Financial Managers - How to Become a Financial Manager."

  2. Govinfo.gov. "Sarbanes-Oxley Act of 2002," Pages 1, 4-44, 47-48 and 50-51.

  3. U.S. Bureau of Labor Statistics. "Financial Managers - Summary."

  4. PayScale. "Average Chief Financial Officer (CFO) Salary."

  5. The Philadelphia Business Journal. "Highest-paid public companies CFOs."

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