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CFO stands for Chief Financial Officer, and usually refers to a person in a corporation who directs the corporation’s finances. Related terms include treasurer, finance director or financial director. In corporations large and small, a CFO is needed to handle both the inflow and outflow of cash, and to create reports about spending, balance the books, and possibly direct payroll. In a small organization, for example a small charity, a CFO would likely make financial reports for each corporate meeting, be responsible for paying employees, and file the company’s taxes each year.

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The CFO would also be responsible for keeping and maintaining company records on how money is received and how it is spent. For publicly held corporations, these records need to be on hand and made available to the public and/or shareholders when requested. A CFO in a small business might not even have a degree but would require ability to balance checkbooks and keep good records. Some CFOs do have degrees in business management or accounting, which make them attractive employees to both large and small businesses. Keeping records of finances, making recommendations about how to increase earnings, and filing quarterly or yearly taxes are all important aspects of the well-run business. Yet in some cases, the CFO title is largely honorary, with most of the actual accounting work done by a professional accountant or a finance department.

In large corporations, the primary duties of the CFO may be to oversee and manage a large accounting department, while coming up with ways to maximize profit to the company.  A CFO might, for example, evaluate the way in which employees work to determine the way to most efficiently get work done for the least amount of money.  Again, these responsibilities could be shared with other corporate heads or with general managers or lower level supervisors.
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The CFO in a large corporation would ultimately be responsible for payroll and income stated on tax returns, so even if other people do this work, the CFO has to check its accuracy. In a very large business, several financial officers may exist to check and recheck accuracy of any financial statements. The Chief Financial Officer on a board typically has ability to vote on matters of interest to the company. Usually the CFO is an officer of a company’s board and takes part in all board meetings. The CFO may also need to attend meetings for shareholders to explain the financial affairs of the company and financial projections for the future.

In terms of company politics, the CFO usually has equal status to the Chief Executive Officer (CEO).  Often, in the US, it is illegal for a CFO to concurrently work as a CEO, even in small corporations.  However, small companies with a single worker or limited partnerships do not necessarily need either a CEO or CFO, since they technically don’t have a board.  In these cases, the sole proprietor of a business or joint partners might share the responsibility of creating financial reports and filing required tax reports, in addition to running the business.
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CFO

Corporate Audit

Corporate Accounting Tax

Management Reporting & Business Analysis

Investor Relations

Treasurer

CFO

Corporate Audit

Corporate Accounting Tax

Management Reporting & Business Analysis

Investor Relations

Treasurer

Shared Services

Strategic Planning

Strategic Business Unit, CFO’s

Information Technology

Procurement SCM

Mergers Acquisitions Divestitures

Appointment and Approval Requirement:
 The appointment, removal and remuneration terms

and conditions of employment of the chief financial officer of a listed company shell be determined by the Chief Executive Officer with the approval of the Board of Directors.

Qualification Requirement:
 The qualification requirement is defined under the

code of corporate governance that is the person appointed as the Chief Financial Officer must be

 Member of recognized body of professional accountants  A graduate from a recognized university or equivalent, having at least 5 years experience in handling financial and corporate affairs of a listed company.

Attending Board Meetings:

 The Chief Financial Officer of a listed company is

Responsibilities towards Board of Directors:

required to attend the meeting of the board of directors.

 The Chief Financial Officer is required to furnish

necessary and classified information to the board of directors along with his analysis and suggestions as the Chief Financial Officer attends the board meetings, any issue with financial implications is being discussed, the person likely to be most in command of these implication is on the spot and immediately available for questions.  In order to strengthen and formalize corporate decision-making process, significant issues are required to be placed for the information, consideration and decision of the boards of directors by the CFO. These are:

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Annual business planes, cash flow projection, forecasts and long term planes Budgets include capital, manpower and overhead budgets along with variance analyses. Quarterly operating results of the company as a whole and in terms of its operating divisions or business segments. Details of joint ventures or collaboration agreements or agreements with distributors, agents, etc. Default in payment of principal and/or interest, including penalties on late payments and other dues, to a creditor, bank or financial institution, or default in payment of public deposit. Failure to recover material amounts of loans, advances, and deposits made by the company, including trade debts and inter-corporate finances. Significant public or product liability claims likely to be made against the company, including any adverse judgment or

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Responsibilities towards Shareholders:
 The Chief Financial Officer is required to provide all

the necessary data to be presented in the “Director’s Report”. For this purpose Chief Financial Officer must ensure the following.
 The financial statement, prepared by the management of company, present fairly its states of affairs, the results of its operation, cash flows and changes in equities.  Proper books of accounts of the company have been maintained  Appropriate accounting policies have been consistently applied in preparation in financial statements and accounting estimates are based on reasonable and prudent judgment.  International accounting standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed.

 The system of internal control is sound in design and has been effectively implemented and monitored.  There are no significant doubts upon the companies’ ability to continue as going concern.  There has been no material departure from the best practice of corporate governance as detailed in the listing regulations.

Internal And External Reporting:
 Chief Financial Officer now has extensive responsibilities

for internal and external reporting. All the information required for decision-making by the Board of Directors and Chief Executive is processed and furnished by the Chief Financial Officer. Apart from this, external reporting requirement is fulfilled by Chief Financial Officer, the accounts and financial statements are signed by the Chief Financial Officer before they are sent to concerned authorities.

The role of CFO has changed significantly in recent years. A more competitive market landscape, a keener focus on corporate governance, and issues such as risk management all play a part in the evolving role of the CFO. This executive guide identifies the key challenges today’s CFOs face, and outlines a proactive approach to financial operations Challenge # 1: Compliance Issues
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 A series of corporate scandals in recent years

has put pressure on the CFO to report accurate and reliable corporate disclosures.

Challenge # 2: Economic Forecasting
 There is increasing pressure for CFOs to provide

more accurate forecasts, not just of financial performance but also of the fundamental business drivers to reduce costs while increasing productivity.

Challenge # 3: Managing Risks and Liabilities
 CFOs are under constant pressure to evaluate

the level of risk and return on any investment. During times of recession, declining sales compel CFOs to reduce costs to protect the bottom line. However, in today’s competitive market, CFOs must do so without harming growth potential, or putting the organization at risk.

Challenge # 4: Challenge the Status Quo
 The CFO must be an agent of change – to help

understand evolving market trends, to question the current business model and help move the organization forward.

Challenge # 5: Communication
 CFOs today must look beyond the balance

sheet to truly understand a company’s risks and opportunities. He or she must ensure that the created value is properly communicated to the management team as well as the financial community.

Corporate

Crossfunctional
International New Co.’s New Areas

Manager Entry

Audit Tax

Acct.

Cost Acct.

Planning, Reporting, Investor Relations

Business Analysis, Treasury

Strategic Planning


				
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posted:10/28/2009
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