How to Become a Chief Financial Officer

The CFO role requires both academic qualifications and professional experience. If you are aspiring to become a CFO one day, know that the CFO is one of the primary decision-makers of any company. Their policies impact the entire company and have a significant influence on its future. 

Serving as the senior executive, they are responsible for overseeing the company’s financial strategy, planning process, and financial reporting. And due to the demanding nature of the role, companies often prefer to hire people with deep knowledge and strong skills and diverse experience, in addition to more expertise in dealing with issues of finance and accounting.

In this blog, we will provide you with a step-by-step process guide on how to become a CFO, along with other important information like salary, qualifications, advantages, and challenges faced by a CFO.

Table of Contents:

• What is a Chief Financial Officer (CFO)?
• What Does a CFO Do? Key Roles and Responsibilities
• Step-wise Process of How to Become a CFO
• CFO Salary in India Based on Experience
• Advantages of Becoming A CFO
• Major Challenges Faced by the CFO

What is a Chief Financial Officer (CFO)?

A chief financial officer (CFO) is considered the second most important executive in a company after the CEO. They oversee all the financial operations of a company. From financial planning and projections to financial risk management and investments, a CFO is involved in virtually every aspect.  They perform all these tasks to ensure that the company remains financially stable and in line with the company’s mission and vision. The CFO is also influential in the company’s decisions based on the financial reports and market knowledge.

The CFO contributes significantly towards the potential investments, structuring of capital, money management, and planning the long-term business strategy of the company. Also, they directly coordinate with the chief executive officer (CEO) to discuss how to improve the company’s financial health through better forecasting, reporting, or capital allocation. In larger corporations and MNCs, a CFO typically manages financial teams, while in startups or smaller businesses, they have a more comprehensive financial role, including cash flow management, investor relations, and regulatory compliance. 

Apart from CFOs, companies also have Chief Operating Officers (COOs) and Chief Strategy Officers (CSOs); these all consistently compete against each other for top positions. Moreover, a CFO can transition to a chairperson, president, or even the CEO role.

What Does a CFO Do? Key Roles and Responsibilities

From monitoring cash flow to analysing the company’s financial health, the CFO performs several duties. Here are some of the crucial CFO responsibilities:

1. Financial Reporting and Compliance

A CFO has to go through and verify each and every financial report and the data of the company to ensure that it is reliable and complies with all mandatory regulations. Further, using these financial reports, the CFO provides strategic insights and financial advice to the top management of the company.

2. Financial Planning and Analysis

This can be done through planning, budgeting, forecasting, and analyzing the financial information to assess and support the company’s financial health.

3. Treasury and Cash Management

A key task of a CFO is to control the cash flow of the company to achieve sufficient liquidity to fulfill its obligations and to optimize its short-term investments. A CFO also monitors the financial health of the company through effective treasury management.

4. Strategic Planning

For business growth and profitability, the CFO connects with other top executives on organisation-wide projects and strategic planning.

5. Risk Management

From identifying and assessing to mitigating financial risks, a CFO must strategise effectively to mitigate risks to the company’s operations, capital, and overall financial performance. Risk management is one of the most important functions performed by the CFO to protect the assets of the company.  

These are some of the important CFO roles and responsibilities. Now let’s get into the step-by-step process of how to become a CFO.

Step-wise Process of How to Become a CFO

Becoming a CFO is not an easy task. You need to be well-qualified, experienced, and skilled, which takes around 10-15 years to become eligible for a chief financial officer (CFO) role. Let’s get into the details of relevant qualifications and skills required to become a CFO. 

Check out the following steps on how to become a CFO:

Step 1: Relevant Educational CFO Qualifications 

Obtaining a Bachelor’s degree in accounting, finance, commerce, or any other related discipline is the first and most crucial step. Next, you can get a master’s degree, which will improve your expertise in finance management and business strategy.

Numerous options are available for a Master’s degree, but an M.Sc. in finance or accounting, or a Master of Business Administration (MBA) degree can help you to implement theories practically.

Step 2: Professional Experience Required 

To get a good knowledge of how a business operates and build expertise in the industry, it is advised to start working while completing your undergraduate studies. You can join an internship in finance and accounting to gain experience with financial processes and get hands-on experience with key tasks that you may be responsible for in the future. 

Once you have completed your education, start looking for entry-level roles in your preferred industry. Examples of some roles are staff accountant, tax preparer, financial analyst, and accounting assistant. 

Step 3: Key Skills Needed 

In many areas of finance, a CFO’s expertise is required. Major decisions are taken by the financial officer in meetings with the CEO, president, or stakeholders, so they must make sure that all decisions ensure financial stability. 

Aspiring candidates must master technical skills such as financial modelling, forecasting, data mining, and data visualization. Strong communication, strategic thinking, teamwork, decision making, and leadership are some skills that one must possess to get a CFO job. 

Step 4: Obtain a Professional Certification

Many aspiring CFOs pursue professional certification to show expertise in specific areas and improve their leadership skills. Certifications like Certified Public Accountant (CPA), Certified Treasury Professional (CTP), or the Chartered Financial Analyst (CFA) can validate their practical knowledge and experience in accounting and finance. These professional certifications reflect your commitment to career growth and signal advanced expertise to employers and recruiters.

Step 5: Build a Professional Network 

Attend seminars, webinars, and corporate events to connect with industry leaders and other professionals. This can help you achieve new professional development, employment opportunities, and mentorship to enhance your career. 

CFO Salary in India Based on Experience

A CFO’s salary varies based on qualification, experience, city, and industry, ranging from ₹12 lakh to ₹3 crore annually. Entry-level CFOs are individuals who have newly been appointed to the role, not early-career. Let’s take a look at the CFO salary from the entry-level to the senior level in India. 

In addition, professionals working in MNCs or large corporations can potentially expect an average salary of between ₹4 – ₹6 crore per year. In several cases, the total compensation package can also go up to ₹12 – ₹16 crore per year, inclusive of bonuses, ESOPs, and stock options, depending on the company’s structure and size. 

Advantages of Becoming A CFO

The Chief Financial Officer role is not only prestigious, but also creates opportunities for leadership, global impact, and strategic decision-making, along with financial changes. The position offers a range of advantages, including the ability to influence the future of the company and become one of its best-paid executives.

Below are the key benefits that make the CFO role valuable.

1. High Salary Package: After the CEO, a CFO usually receives a high salary with stock options and bonuses, as they are one of the top executives in the company. 

2. Strategic Influence: CFOs directly influence the success of the company in terms of developing the financial strategy and direction of the company.

3. Leadership Opportunities: The CFO position offers the chance to lead and supervise finance departments and organise meetings with other executives.

4. Business Operations Exposure: CFOs gain exposure to strategic planning, business operations, and marketing.

5. Networking: This job assists a professional in forming networks with board members, investors, and other industry executives. It may be beneficial for both personal and professional development.

6. Advancement in Career: A position as a CFO can lead to being a step higher in the structure of corporations, e.g., as a chairperson, president, or even CEO.

Major Challenges Faced by the CFO

A CFO in the current complex business world experiences several problems, such as high pressure with the responsibility of providing financial stability.

Below are the key challenges that a CFO faces:

1. Financial Performance: The CFO is in charge of the financial performance of the company, which can be stressful due to fluctuations in the market, inflation, and economic uncertainty.

2. High Pressure: An individual serving as a CFO is also under a lot of pressure to handle the financial performance of the business organization and ensure that the organization adheres to the regulations.

3. Complex Decision-Making: CFOs are expected to solve complex financial problems that involve complex issues in finance, accounting, and regulatory matters.

4. Working Hours: In order to execute all the functions and duties, the CFO must work long hours, particularly during audit, budgeting periods, and financial reporting.

5. Changes in Technology and Regulation: Rapid change in technology and regulation continues to take place, which a CFO must learn and adapt to.

6. Stakeholder Management: It can be difficult at times to be on the same page with stakeholder management, which may lead to disagreements.

While being a CFO can be prestigious and impactful, it also comes with major responsibilities and challenges that demand strong leadership and financial expertise.

Conclusion

In the current world, the job of a CFO consists of far more than simply planning the finances of a business; the individual must also possess the financial understanding and strong leadership skills to succeed. The role is both rewarding and challenging. Knowing what you want in the first place and being dedicated to the right CFO course will put you in a much better position to become a successful CFO in the long term. You must remember that it takes time and commitment to become a CFO.

How to Become a Chief Financial Officer (CFO) – FAQs