What Does a CFO Do? Pt. 3, Financial Reporting

In our continuing series detailing the duties of  a CFO, today we discuss the CFO’s role as it relates to financial reporting.  (If you missed Part 2 on Cash Management, click here.)

Monthly, quarterly and annual financial statements are a critical part of any business, for obvious reasons.  Business owners, CEO’s, and managers need this data to be accurate and timely in order to understand their company’s financial performance.  The CFO is responsible for ensuring that these reports are produced as such.

The typical reports that a company should be issuing on a monthly basis include:

  • Income Statement (also known as P&L)
  • Balance Sheet
  • Cash Flow Statement

In some businesses, the CFO or Controller may be responsible for compiling these statements.  In other companies, the CFO oversees accounting personnel to insure timely and accurate monthly financial statements.  This can include reviewing the general ledger to double check for accuracy and closing entries, and preparing necessary journal entries.  Prior to final close-out, the CFO should be reviewing the preliminary financials for any unexpected variances.  These variances should be explored to make sure the numbers are indeed accurate.

But the CFO is not simply responsible for handing over some spreadsheets.  The CFO must make sure the financial reporting includes information that is useful to management.  The data should include such items as variance against budget, percentage and dollar changes against historical averages, changes against prior period numbers, etc.  For some businesses, it may also be valuable for the financials to be organized by department or business function.

Aside from monthly reporting, the CFO should be responsible for implementing and updating dashboards to monitor key performance indicators or metrics.  What are the few, key numbers that drive your business?  You should be monitoring them on a regular basis via a financial dashboard.

Financial reporting and tax reporting are not the same thing, and the CFO should be actively pursuing and working with your CPA firm on reporting strategies to minimize your tax burden.  However, this must be balanced with maintaining a strong balance sheet.  Truly an art, this balance will guarantee that you are paying a minimum amount of taxes while still projecting a strong financial picture for potential creditors, banks, investors, clients, etc.

What if your managers don’t understand the financial data of your business?  If this is the case, your CFO should provide training and guidance for these managers.  Your managers need to be better equipped to understand the financial side of the company.  If they are not, your CFO needs to either teach them or arrange for third-party training to get them up to speed.

And finally, the CFO should be conducting monthly review meetings with business owners, CEO’s and managers.  These meeting should include a review of the monthly financials to identify trends and discuss areas for improvement.  This is a key part of bringing you and/or your team to the table, to understand the importance of your company’s financial picture and what changes might need to be implemented.

About Gateway CFO Solutions, LLC:

Based in St. Louis, Gateway CFO Solutions helps small businesses grow profits and revenues, and bring peace of mind to their company’s financial picture through part-time CFO services.  Many small business owners are without a trusted advisor for the financial side of their business, and they have seemingly few resources to turn to for expert guidance.  We provide that guidance and act as a trusted, strategic advisor for our clients.  We provide both broad, global planning and “roll up the sleeves” technical services.

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