Chief Financial Officers and finance directors both analyze the financial climate of an enterprise. They assess its revenue and losses, identify potential errors and take the steps needed to improve its performance. However, the division of tasks and responsibilities differs between the two roles. Knowing the difference between the two roles could propel your business to the top and help you make better decisions.
The CFO is responsible for the strategic direction of the finance function and sits on the company's senior management team. The FD occupies the rank below senior management, and is the company's chief accountant.
What Does a CFO Do?
A Chief Financial Officer or CFO oversees a company's financial operations. He works together with the CEO and sits on the senior management team. The CFO job description varies from one organization to the next. In general, it involves the following tasks:
- Develops financial and tax strategies.
- Monitors and directs the implementation of business plans.
- Researches economic trends and identifies revenue opportunities.
- Forecasts staff and capital requirements.
- Establishes functional objectives.
- Implements recruitment, training, communication and disciplinary programs.
- Analyzes variables and identifies areas of improvement.
- Decides on investment strategies.
Those who fulfill the CFO role are also required to manage a team of financial controllers, set up the company's finance IT system and manage vendor relationships. Depending on the type of organization, they may also need to supervise all finance personnel and monitor banking activities. Their primary goal is to drive the company's strategic financial planning and support its efforts to grow and secure new business.
CFOs usually have a master's degree in accounting or business administration. Some are certified management or public accountants and have experience in partnering with executive teams. Those who work for small companies may also fulfill the responsibilities of a financial controller.
On average, a CFO salary is approximately $366,960 per year in the U.S. However, this figure varies from state-to-state and from one organization to the next.
What Is the Role of a Finance Director?
Finance directors have similar responsibilities to CFOs, but they are not part of the top executive team. Their role is to oversee and direct the company's financial operations and report to the CFO. They strive to create a solid foundation upon which an organization can grow. Business professionals who fulfill this role focus on the financial aspects of a business. They are responsible for:
- Analyzing and planning the budgets for each department.
- Ensuring all of the company's financial activities comply with the law.
- Monitoring cash flow and financial transactions.
- Setting up and leading finance teams.
- Presenting annual reports to investors.
- Assessing the company's spending and implementing strategies to cut costs.
- Forecasting financial trends based on data analysis.
- Implementing internal audit programs.
Finance directors need to have a good understanding of business practices and data privacy standards. They may be qualified members of an accountancy body and must possess strong IT and leadership skills. Most organizations choose to hire finance directors with a master's degree or CPA qualifications. The average salary for this role is $174,069 per year in the United States.
Large enterprises and multinational corporations typically employ CFOs. Finance directors work for small and medium-sized companies. If you have a small business, your company's finance director will oversee all monetary operations and report directly to you. Large organizations, on the other hand, designate different people for each role.