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How to become a Chief Financial Officer?

Financial Director answers how to become a CFO, CFO qualifications, managerial and general skills required, relevance of CFA and Jobs that lead to CFO

An accounting or finance professional aspiring to be a chief financial officer (CFO), must reflect a little to be certain they understand what it takes to become a CFO. CFO is generally the most sought-after job title to possess in anyone’s finance career.

CFO is an executive-level professional financial professional who is in charge of the financial planning, record keeping and monetary health of an organisation, as well as managing the financial risk.

A CFO occupies a seat near the elite of an organisation. In most cases it is just the chief executive officer (CEO) above them. For many CFOs the subsequent milestone is CEO – with the two-working hand-in-hand.

An organisation’s CFO has a large say in the business strategy and steers revenue flow developments and funding decisions. The principal expectation from them is to be first-rate in financial analysis and budgeting skills. They must have profound knowledge of tax codes, cutting costs, and building equity/revenue. Finances and money are arguably the greatest priority of any organisation.

CFO is a coveted position in any organisation. So, lets investigate further to know how to become a CFO?

How to become a CFO?

Here are seven steps to acquire just what you need to carry you on the CFO career path:

  • Gain broad financial experience: To be the CFO, aspirants need a firm grasp of the fundamentals of budgeting, analysis, compliance, risk management and other accounting principles.

The job of a CFO is to ensure that the CEO and board’s decisions are financially sound, both with regard to resources available and regulatory compliance. Having thorough financial experience is necessary to make these judgments. Sometimes, especially at smaller organisations, the same person serves as chief executive officer and chief financial officer, making this financial expertise even more crucial.

  • Expand your business and operational experience: Attainment of an in-depth knowledge of the business is critical on the CFO career path. A CFO frequently meets with the board and collaborates with managers. For this reason, the aspirants need a broader understanding of the business and operational sides of an organisation.

The insight and support of an experienced mentor can be effective at this stage, as can cross training and job shadowing. Taking a leadership position at a non-profit or industry association can also offer valuable training for future CFOs by providing exposure to a broad range of business processes and challenges.

  • Widen your customer service experience: The aspirants must ensure to built and nurture relationships with people at all levels of the organisation, both within and outside your department. Improving communication and presentation skills is pertinent. Aspirants need to position themselves as team builders.

Not only as CFO they will be accountable to the board regarding the financial status of a company, but they will also interact with investors. They will serve as a bridge between what they want to see from the organisation and the board. These corporate communications will be periodic, as investors are key stakeholders of the business.

  • Consider controller and treasury positions – jobs that leads to CFO: Like certifications, certain job titles have been held previously by today’s CFOs. Some have held positions of increasing responsibility within an accounting department, such as internal audit manager, director of finance or controller. Getting broad corporate experience in a treasury function, for example, can increase experience with funding and strategy execution, both of which are essential for CFO duties.

How to become a CFO? – Managerial and general skills

The position of CFO demands firm self-discipline, along with the following managerial and general skills:

  • Leadership Skills: The CFO leads the finance team in the organisation. So, leadership skills become essential. Apart from leading the finance team, the fact that CFO also has the seat in the C-suite makes leadership skills even more desirable.
  • Influencing Skills: CFOs obviously are part of the strategic leadership team of an organisation, so influencing the remainder of the C-suite becomes a critical attribute.
  • 3600 view for a perspective of the business: CFOs must have a helicopter view of what’s happening in other departments, in the market, within competitors’ businesses. Only then they can build a winning growth strategy.
  • Data mining and analysis: CFOs need to evidently and correctly catch differences in margin drivers over a period of time. They must know how their latest price increase, sales strategy, or product launch would impact the organisation’s bottom line.
  • Passion for technology: CFOs must adapt to the latest technology for automating and speeding-up processes, facilitate team-wide collaboration and enhanced productivity, and avoid unproductive and cost-centric practices.
  • Out of box thinking: By thinking out of the box, CFOs can be ahead of the curve and take the best ideas forward, pertaining to both – finance team and the whole organisation.

How to become a CFO? Five Don’ts

  1. Don’t be the bean-counting curmudgeon who only cuts costs: Be a member of the senior-management team who looks at the big picture and takes a long-term view of investments, says Paul Dorf, PhD, managing director of Compensation Resources, a compensation and human resources consulting firm. “Work with operations, sales and marketing, and human resources to identify their concerns and issues, and then assist them to find solutions that enhance the company’s ability to get the job done,” he says.
  2. Don’t jump right in: Thanks to Sarbanes-Oxley Act, being the CFO of a public or private company is unlike most other roles in corporate America. “Jumping straight in without taking some time to get your feet wet is one way to get in over your head,” says Shane Hill, accounting and finance practice manager for executive recruiter Hudson Highland Group in Raleigh, North Carolina.
  3. Don’t try to do it all yourself: “Trying to take on all of the CFO’s responsibilities is a sure way to fail quickly,” warns Hill. Instead, strategically build a strong team that can support you and help you get the job done.
  4. Don’t tolerate idiots: CFOs are the generalists of the accounting world. They know a little bit about a lot of things and supplement that knowledge with access to the people who know the details. If that detailed knowledge is wrong, the CFO’s recommendations and decisions will skew. “Above all, surround yourself with really smart people,” says John Morrow, vice president of the American Institute of Certified Public Accountants.
  5. Don’t betray your integrity or ethics: The line between bending and breaking the rules is thin. Cross it in today’s business climate, and you could end up with a new job making license plates.

How to become a CFO? –  Background

According to a study, almost half of  Fortune 100 CFOs previously served as primary liaison between finance and assigned business units. These Divisional CFO positions are the most popular role from which CFOs are hired. Nearly half of big-company CFOs appointed in the past three years have strategy and corporate-development experience. This is evidencing the CFO role has become more strategic.

The role of a CFO is complex but offers great rewards. If acting as a strategic partner to the CEO, leading the finance functions of a corporation, and changing business processes to deliver improvements in performance sounds exciting to you, then being a CFO might be your perfect long-term career goal.

There are many CFOs who have initiated their career in finance at a Big Eight (Arthur Andersen, Arthur Young, Deloitte Haskins and Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, Touche Ross, Coopers & Lybrand) as it was known till 1989 or a Big Four (Deloitte, EY, KPMG and PwC), as it is known currently. They ultimately made it to the c-suite. However, CFOs come from smaller firms too and some have begun their journeys in private industry and made their way upward to the role.

Regardless of the career path, one essentially requires investing time.

CFO qualifications

In terms of academic qualification, the answer to how to become a CFO differs according to the organisation hiring. Mostly, a candidate must have a bachelor’s or master’s degree in a discipline such as finance, business administration or economics and some considerablenumber of years of experience working in a related position.

Even though CFOs come from various backgrounds, certain certifications and advanced degrees tend to make transitioning into the position easier. A CFO does not need to necessarily have an academic qualification of Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), or MBA. But out of these, having a CPA degree does benefit considerably.

CPA licenses are mostly suited for the role given their wide-reaching skills they represent, including forensic accounting and compliance knowledge.

How to become a CFO after CFA

A way to advance in knowledge and credentials is to become a certified public accountant (CPA). In fact, many organizations require their CFOs to be CPAs. CPAs are experts in tax and financial planning, as well as providing a variety of services, including information technology (IT), consulting, accounting, and assurance.

The importance of a CPA for financial officer positions has lots to do with regulations. According to executive search firm Spencer Stuart, the percentage of CFOs holding a CPA certification rose from 29 percent to 45 percent when Sarbanes-Oxley took effect in the US about a decade and a half ago.

Many businesses will require their CFOs to have this credential.

Outside of formal education, accounting and finance qualifications are also highly regarded, including Association of Chartered Certified Accountants, Chartered Financial Analyst, and Certified Public Accountant holders. In fact, skills in accountancy and finance are a near requisite for regional and FTSE companies – two thirds of FTSE 100 CFOs come from the Big Four auditors KPMG, Deloitte, EY and PwC.

Adrian O’Connor, Founding Partner of Global Accounting Network observed that: “With UK firms coming out of the back of a recession, it stands to reason that boards and shareholders are increasingly realising the value of strong financial expertise at the highest levels. CFOs have had a much greater say in the strategic direction of firms of late, with their input being widely recognised as integral to the company’s success. Considering this, the fact that accountants are disproportionately represented at the top of FTSE 100 firms is unsurprising.”

The qualities that launched many CFOs to the top are not always easy to define. Marianne Lake the current CFO and 18-year veteran at JPMorgan Chase Bank, is tipped to succeed Jamie Dimon as the new CEO of the bank. Like many other CFOs, she has solid quantitative skills. Ms Lake studied physics at the University of Reading before heading to PwC in London and Sydney to earn her CA. Her career at JPMorgan has been extraordinary, serving as the investment bank’s Global Controller, then CFO of the communities bank, and now, global CFO. Last year, she presided over the bank’s most profitable year. To add to her accolades and exceptionalism, she is a single mum of three, dual US and UK citizen, and female – all unusual in her peer group and industry.

Jobs that lead to CFO

The following job titles lead to CFO:

  1. Staff accountant
  2. Accountant
  3. Accounting manager
  4. Financial controller
  5. Senior accountant
  6. Operations Manager
  7. General Manager
  8. Business Manager
  9. Director of Operations
  10. Finance Director
  11. Director of Administration
  • Internal Hires: The Wall Street Journal reports that almost 70% of the CFOs in the Fortune 100 were internal hires. Loyalty and internal company experience are highly valued among CFOs.
  • Long Tenures: Seventy percent of internally promoted CFOs had at least 11 years of tenure with their organizations. 41% had more than 20 years of tenure. Finance professionals hoping to become a CFO should find an organization with which they can grow and avoid much job hoping.

Many CFOs work as controllers before moving on up. A controller focuses on producing financial statements and accounts receivable or accounts payable. Because of this accounting experience, they are often great candidates to become a CFO.

If a CFO doesn’t rise through the controller ranks, they tend to come up through the treasury department. Consider getting experience in the following treasury functions:

  1. Planning and operations: In these jobs, you engage in risk forecasting, pension planning, and strategic development in coordination with the Board of Directors.
  2. Funding and capital markets: Manage short-term and long-term investments and ensure the business has adequate liquidity. You might also ensure contracts do not unduly constrain your business.
  3. Corporate governance: Work with internal and external auditors and ensure accurate transactions and audit trail.
  4. Stakeholder relations: Perform risk analysis for the board and manage relationships with investors, banks, and credit rating agencies.
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