The term “CFO” is an acronym for “Chief Financial Officer,” which is a title given to the person who is in charge of a business’ money and financial matters. Managing cash inflow and outflow is very important to companies of all sizes, and the chief finance officer is the person who oversees and approves these transactions. In some cases, he or she may actually do things like reports and manage payroll; in others, the job is mostly supervisory. CFOs typically bear responsibility for financial matters to a corporation’s board of directors, which makes oversight and solid direction an important part of the job.

Primary Responsibilities

The main goal of any CFO is to ensure that a corporation is both profitable and savvy with the money it has. Understanding tax obligations, monitoring necessary expenses, and looking for new forms of investment are all part of the job. This often involves a lot of careful bookkeeping and records scrutiny. Intersection and Overlap with Accounting Staff Depending on the company, a CFO may or may not have a direct role in spending allocations. In many companies, these tasks are handled on a day-to-day basis by accounting or other financial staff who prepare exhaustive reports and summaries for the CFO’s review. The executive must review and either approve or reject the resulting documents.

Potential for Liability

In most large corporations, it is all but impossible for one person to coordinate and collect every piece of financial information. It is essential that this information be accurate, however, which is where the CFO’s expertise comes in. In most places, when something goes wrong - when financial publications are incorrect, for instance, or when there are allegations of fraud or embezzlement - the chief financial officer is the first to be held responsible. As such, most officers are very involved in management and oversight, both as a means of saving the company embarrassment and as a way of protect themselves from individual liability.

Training Required

Becoming a chief financial officer usually requires a great deal of experience with corporate workings, as well as training in finance and money matters. A college degree is almost always required, and most of the highest-paid executives also have business degrees or other advanced certifications in finance and management. Many are certified accountants.

Role in a Small Business

A CFO in a small company is likely to do quite a bit of the hands-on financial work that might otherwise be allocated to lower-level accountants, often as a way to save money. When businesses are young, they often try to minimizing their staff by using the expertise of every team member to its fullest. In some cases, the chief financial officer may, in fact, be the only financial expert on board at all.

Government Work

Many local and national governments employ a chief financial officer to oversee money issues, primarily as related to taxation. This person is usually the liaison between local residents and elected or appointed officials when it comes to accounting and other spending issues. He or she may set fiscal policy, but typically is only responsible for managing government money according to pre-set mandates and rules.

Place in a Major Corporation

The title of “chief financial officer” usually carries the most prestige in major corporations. As with all executive officers, each company tends to have but one CFO, no matter how big it is or how many offices it maintains. The finance officers of large, international conglomerates are often very busy, but are typically well paid, making the positions coveted.

Role on a Corporate Board

In addition to overseeing financial operations and bookkeeping, one of the chief financial officer’s main responsibilities in a major corporation is board leadership and participation. Most companies are governed by what is known as a “board of directors.” The Chief Executive Officer and the Chief Operating Officer are key players, but the CFO also has a seat - and a vote. In this capacity, the finance officer has a role in shaping the company’s future. He or she may also be called upon to speak to the public or the media about certain financial decisions or changes happening at the company.

Managing Cash Flow

Our job is to control the cash flows position throughout the company, understand the sources and uses of cash, and maintain the integrity of funds, securities and other valuable documents. Our responsibility includes the authority to establish accounting policies and procedures for credit and collections, purchasing, payment of bills, and other financial obligations.

Managing company Liabilities

After cash flow, we need to understand all of the company’s liabilities. A company has many legal contracts, statutory & tax obligations, hidden liabilities in the form of contingencies, leases, or insurance summaries, and expectations from loan covenants and/or the board of directors.

Evaluating company Performance

We will develop the company business model for generating customer value and translate the operational metrics into measures for performance. Regular comparison of financial statement ratio analysis to communicate both the company’s expected and actual financial performance.

Department co-ordination and supervision

Our job is to make effective coordination with the critical department in the organization such as purchase, production, marketing, sales, recovery through procedures, and methods for automating document control.

Budgeting and Expense Control

We are responsible for overseeing the budget process, collecting the inputs, and comparing the company’s actual performance with estimates (the budget). It is an ugly process that falls within the CFO area of control.

Financial Relationships

We need to establish and maintain lines of communication with investment bankers, financial analysts, and shareholders in conjunction with the Promoters. We will administer banking arrangements and loan agreements and maintain adequate sources of capital for the company’s current borrowings from commercial banks and other lending institutions.

Finance or Raising Capital

We will establish and execute programs for the provision of capital required by the company, including negotiating the procurement of debt and equity capital and maintaining the required financial arrangements. We will coordinate with the promoters, key persons for the long range plan of the company, assess the financial requirements implicit in these plans, and develop alternative ways in which financial requirements can be satisfied.

Financial Obligations

We need to approve all agreements concerning financial obligations, such as contracts for raw materials, IT assets, and services, and other actions requiring a commitment of financial resources.

Record Control

We will responsible for the financial aspects of all company transactions including real estate bids, contracts, and leases. We need to look into insurance coverage, as required, ensures the maintenance of appropriate financial records, prepares required financial reports, insures audits are completed in time and statutory book closing occur. Our primary responsibility for ensuring company compliance with financial regulations.

Shareholder Relations.

We will analyzes company shareholder relations policies, procedures, and information programs, including the annual and interim reports to shareholders and the Board of Directors, as well as recommends to the promoters new or revised policies, procedures, or programs when needed.

Applying for a business loan

When applying for a business loan, it's essential to prepare a detailed business plan and fully inform the lender about your proposed venture. This information helps the lender to provide you with the right type of finance and advice.

Decisions to make

Deciding that your business needs a loan is only the first step. There are a number of things to consider before you approach a lender; how much do you need to borrow; what type of loan will you need; how long will you need it for; can the business afford to repay the loan, interest and any one-off or ongoing fees that come with the loan; what security can you offer the lender and how this affects the interest rate offered. Find and compare loan options for your business Online repayment calculators are a good tool in researching options but make sure you take the following into account

Access to funds you borrow

If you need to access the funds on a semi regular basis (i.e. to help with cash flow to keep the business operating while waiting for your customers to pay for goods etc.), 'at call' loans such as an overdraft or line of credit are designed for this purpose. However, if you need the funds to buy a new business or equipment etc. to expand your existing business you will need the funds 'upfront'. This is also known as a ‘fully drawn advance’ and provides you with the entire loan amount all at once.

Loan terms

Loans provided upfront will need a portion of the loan plus interest paid back at regular intervals. The repayment amount will depend on the term or length of the loan. To determine the loan term suitable for your business you will need to calculate how much you can afford to service the loan. Be aware that the longer the loan term the more total interest you will pay. Loans that are at call have no fixed terms.

Ongoing funding

This is the average amount of an overdraft or line of credit that is used at any one time. E.g. You may wish to have an overdraft limit of $20,000 to provide money for the occasional big expense, but usually you won't use more than $5000 of that credit limit on average. So in this case $5,000 is the level of ongoing funding you need.

When applying for an overdraft limit, things to watch out for are

Higher the overdraft amount higher the fees

Clauses where the lender can demand repayment of the whole loan at any time.

Fixed or variable interest rate

The choice of rate will affect the stability of repayments, overall cost of the loan and the loan features available. With a fixed rate loan the lender bears the risk of interest rate moves, while with a variable rate you will bear this risk. Ultimately, the choice of variable or fixed rates will depend upon how much free cash flow your business generates after you have paid all your expenses, including loan repayments. If your business has a low profit level, a variable rate loan repayment may rise beyond your ability to pay.

Loan security

Loans can be secured or unsecured by various types of assets, including residential, commercial, rural property or business assets. Alternatively, some loans are unsecured by any asset. Generally the less you provide for security the higher the interest rate will be. Be aware the lender has the legal right to seize any property or asset you offer as security if you can't repay a loan on time.

Fees

There can be fees which can make a loan less attractive than it first seems. These include one-off fees such as establishment/application fees, exit/discharge fees and early termination fees or regular fees such as service fees or line/credit advance fees. The Business Loan includes the cost of set-up and ongoing fees in the average monthly repayment to give you a better idea of the true cost of the loan.

Seek advice

The information provided here will provide you with a range of possible finance options. It is important to seek advice from your accountant or business advisers before approaching a lender for a loan.

Plan the business, plan the finance

Lenders will ask for a lot of in-depth information about the financial history of the business. It's also important for you to create a convincing and detailed business plan which should include a profit and loss budget and cash flow forecast. The information you use to build your business plan may also be needed by the lender to assess your project. This includes both the past and future plans for your business, the people working in it and the market itself. The outcome of your application is strongly influenced by how well your proposal is researched and how well it is presented.

Banks and other lenders will look at your businesses risk profile when considering your loan application. Understanding what lenders look for and what they consider risky will help you present your business in a favorable manner.

As a general rule, lenders look for

The level and nature of your security (what you're offering to give them if you can't repay the loan)

Your ability to make regular loan repayments (cash flow risk)

Your ability to ultimately repay the debt (business risk), including any other debts you might already have.

You need to be able to assess the level of cash flow or business risk in your specific circumstances. A projection of the cash requirements of the business is most important to a lender, as it is the actual cash left after expenses that will repay the loan, not income. It also shows you are an effective manager.

A lender's perception of risk

The following factors can influence your lender's perception of risk. If a number of these areas apply to you and your business you may need to consider another source of finance.

Start up businesses

A new business start-up represents one of the highest risk areas for a financier. It incorporates financial risk, business risk and management risk.

Lack of security

Without security you will have limited chance of getting a loan. You could consider funding part of the business through leasing or hire purchase, using the equipment as security or debtor finance, using your invoices outstanding as security.

Lack of business history

If you have not run a business before then the financier will see you as a potential ‘management risk’.

Industry sector

Risk assessment may take into account issues such as levels of competition in the industry, barriers to entry, profitability profile/number of business failures and current economic conditions.

Seasonal nature of your business

If your business has a strong seasonal nature, such as swimsuits, agriculture or travel a financier will be concerned about how you would deal with the cash

flow pressures in the off season.

Lack of planning, market knowledge and finance skills If the financier considers you lack some of the basic all-round management skills to operate a successful business, it will increase the perception of risk.

Poor credit history

Most financiers will run a routine credit check as part of the normal finance approval process.