Who is a Chief Financial Officer (CFO)?
Section 2(19) of the Companies Act, 2013 defines the Chief Financial Officer (CFO) of a company as “Chief Financial Officer means a person appointed as the Chief Financial Officer of a company.”
They are ranked as the highest officers of the company about the finances of the company. The Chief Financial Officer (CFO) of the company makes all the decisions related to the finances of the company; i.e., planning to spend the cash, planning on the financial risk management, record keeping of the company, and also reporting the funds of the company to appropriate authorities. In some companies, CFO is also known as CFOOs, which stands for Chief Financial and Operational Officers.
In most cases, the CFO of a company holds a degree in business administration; i.e., MBA in finance, or a certified Chartered Accountant (CA) or Company Secretary (CS), or both. They are a very important person for the company as the whole finance of the company is in their hands. They also keep a constant check on all the financial reports of the company, as it is their responsibility that the company provides correct information to the government. They are also responsible for analyzing any financial risks for the company and also for making plans that take out of the company from such financial risks.
Features of Chief Financial Officer (CFO)
- Financial Expertise: The CFO possesses a deep understanding of financial principles, accounting practices, and risk management strategies. They can analyze financial data, interpret trends, and create forecasts to guide financial decision-making.
- Financial Stewardship: The CFO is responsible for overseeing all aspects of the company’s finances, including budgeting, cash flow management, fundraising, and financial reporting. They ensure the company operates within its budget and maintains financial health.
- Strategic Partner: The CFO works closely with the CEO and other executives to develop and implement the company’s overall strategy. They provide financial insights and analysis to support strategic decisions such as mergers and acquisitions, product development, and market expansion.
- Risk Management: The CFO plays a critical role in identifying, assessing, and mitigating financial risks. This involves analyzing market conditions, potential liabilities, and economic factors that could impact the company’s financial stability. They develop strategies to minimize risks and protect the company’s financial well-being.
Difference between Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are two Key Managerial Personnel in a company. In our country, every person is free to form any type of company, and a large number of companies are incorporated as per the rules of the Companies Act, 2013. After the independence of our country, the government introduced the Companies Act, 1956 to uniformly manage all the functions of the company. After some time, this act was replaced with the Companies Act, 2013 and the new act has added various new provisions related to the functioning of the company. This act expanded the scope of functioning of Key Managerial Personnel (KMP) in a company and also added various other posts under the Key Managerial Personnel (KMP) in a company.
KMPs are responsible for ensuring the smooth functioning of the company. There are various persons under this and all have different responsibilities. Each member of the group “Key Managerial Personnel” holds a separate responsibility and manages a branch of the company. Chapter XIII of the Companies Act, 2013 governs the appointment, functions, and other responsibilities of these people. These people are the heads of the branch, and they are responsible for making any decision regarding the branch they are handling.
Section 2 (51) of the Companies Act, 2013 defines Key Managerial Personnel (KMP). It states that the KMP of a company means:
- Chief Executive Officer or the Managing Director or the Manager;
- Company Secretary;
- Whole-Time Director;
- Chief Financial Officer;
- Such other officers, not more than one level below the directors who are in whole-time employment, are designated as Key Managerial Personnel(KMP) by the Board; and
- Such other officer as may be prescribed.
Table of Content
- Who is a Chief Executive Officer (CEO)?
- Who is a Chief Financial Officer (CFO)?
- Difference between Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
- Conclusion
- Frequently Asked Questions (FAQs)