CFO VS CEO: What’s the Difference?

The CEO and CFO are all part of the C-level executive position. They perform crucial leadership roles in organizations, influencing company goals and actions with unique responsibilities that contribute to a successful company.

Understanding the difference between these business roles can enhance your comprehension of company structure and help in setting your career objectives. This article provides a detailed explanation of the roles of CFO and CEO while highlighting their differences.  

First, let us know what the C-level executive is all about.

What is a C-level Executive?

The C-level, also known as the C-suite, refers to high-ranking executive titles in an organization, with the letter C representing “chief”. It includes the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), chief marketing officer (CMO), and others.

C-level officers are influential leaders in organizations setting company strategy, making high-stakes decisions, and ensuring daily operations align with strategic goals. They are often the highest-paid individuals within a company.

They also possess strong leadership, communication, and team-building skills, overseeing functions and hiring staff to align daily management with established plans and policies.

C-level executive positions are typically the pinnacle of a career achieved through extensive education, training, and professional development.

Now, let’s continue with the primary focus of this article, the CEO vs. CFO.

Read Also: C-Suite Titles: List of Different C-Level Executives & Their Functions

What is a CEO?

The Chief Executive Officer, also known as the CEO is the highest-ranking executive in a company. He is responsible for overseeing the entire organization. He reports directly to the board of directors and implements board decisions and can often serve as a member or chairperson of the board.

Also, it is the duty of the CEO to oversee the company’s strategy, mission, and organization, while aiming to maximize revenue, market share, and share prices.

Furthermore, the CEO supervises, directs, and controls all the departments in the organization in order to make sure the company maintains its budget, and market position while making sure the business goals are met.

What is a CFO?

The Chief Financial Officer (CFO) is the top accounting officer in a company responsible for overseeing the company’s financial operations, budgeting, and financial reports. The CFO reports directly to the CEO and may also serve on the board of directors.

The primary duty of the CFO is to oversee and enhance the company’s financial health by monitoring revenue and expenses while analyzing data. The CFO also works as a liaison with financial institutions.

The CFO gives financial recommendations to the CEO and board of directors and executes financial decisions to enhance the company’s financial stability.

Let’s examine the duties and roles of the CEO and CFO in an organization.

Roles and Responsibilities of the CEO  

The CEO is the top executive in an organization, he is responsible for leading and making significant decisions for the organization. Other duties of a CEO are:

#1. Develop strategic objectives and direction

The CEO is responsible for creating strategic plans and policies. He set clear and achievable company goals and objectives and also assisted the employees and the BoD in understanding business growth expectations, including long-term and short-term goals.

#2. Implement proposed business plans

The CEO oversees the business’s strategic plans. He develops quality strategies to achieve the set goals, maximize profits, increase shareholder value, and improve market position while communicating the approach or strategies to members of the organization.

#3. Budgeting and forecasting

A CEO’s financial responsibilities cannot be transferred to the CFO. It is the job of the CEO to set out the yearly financial budget based on net income, cash flow, and desired valuation.

Then the CFO assists the CEO in calculating potential expenses, revenue, and profit for the upcoming year and also manages cash flows and performs fiscal and financial analysis throughout the year.

#4. Public relations

The CEO is a prominent public figure and, as such, must effectively communicate information and ideas to the public. This will be useful in marketing the company and will also influence the company’s reputation through its public values and actions.

#5. Communication with the Board

Regular board meetings should be used to keep the board informed about important business decisions, just as expectations should be communicated to employees. The board and CEO must maintain open and transparent communication to ensure effective decision-making.

#6. Tracking company performance:

The CEO’s role involves understanding a company’s performance as it relates to competitors, using revenue growth, profit margins, and sales to shape KPIs and adjust targets. It is important for the CEO to monitor market trends and industry developments, which is important for setting and achieving long-term goals.

#7. Establishing working culture:

The CEOs play an important role in creating a healthy working culture. He leads by example by exhibiting expected attitudes, and also aligning with company values, visions, and goals. This positive environment drives consistent, high performance across the company.

Let us examine the roles of the CFO in an organization.

CFO Roles and Responsibilities 

The CFO is responsible for overseeing a company’s financial decisions.  Other responsibilities of a CFO are:

#1. Liquidity

Liquidity is an organization’s capacity to pay off short-term liabilities with readily available funds, often expressed as a ratio of owed assets against owned assets. The CFOs are responsible for ensuring timely and full customer payments. He controls expenses and maintains sufficient cash to meet financial obligations.

#2. Return on investment (ROI)

A CFO’s strategic focus is on ensuring a strong return on investment (ROI). He measures the likelihood and precise amount of return on investment as a percentage of cost. The CFO uses context to assess if a project will yield a robust ROI, as ROI is a basic KPI that doesn’t consider all variables.

#3. Forecasting

The value of the CFOs lies in their ability to accurately predict future outcomes, based on past performance, internal and external factors, and departmental-level forecasts, creating profit projections for the CEO and shareholders.

The CFOs use government data, analyst firms, business media, trade memberships, board members, and lenders to monitor the external environment.

Business decisions are influenced by internal factors like sales trends, labor costs, and raw material prices, as well as external data inputs like capital opportunity cost, market demand, competitors, and technological advancements.

#4. Reporting

Financial reports, including balance sheets, profit and loss (P&L), and cash flow statements, provide a clear understanding of a business’s financial state, with the CFO confirming their accuracy and completeness in accordance with accounting principles (GAAP).

In summary, the CFO manages the company’s financial strategy, growth plans, investment identification, mergers, and acquisitions. They assist the CEO in financial planning and manage accounting procedures.

Now that we have understood the duties of the CEO and the CFO, let’s now examine the differences between them.

Differences Between the CEO and the CFO

The article explores the differences between the CEO and CFO in various aspects of a company’s operations, including:

#1. CEO vs. CFO in Administration

The CEO manages the entire company administration, while the CFO oversees the financial department and its employees.

#2. CEO vs. CFO in finance

The CEO sets the company’s financial goals, while the CFO manages financial planning, execution, and analysis, working together with accounting and operation teams.

#3. CEO vs. CFO in partnerships

The CEO manages business partnerships to achieve company goals, while the CFO collaborates with private investors and financial institutions to enhance the company’s financial performance.

#4. CEO vs. CFO in Public Relations (PR)

The CEO represents the organization in public, delivering conferences, speeches, and press releases, while the CFO manages the financial impacts of PR strategies.

#5. CEO vs. CFO in decision making

The CEO is responsible for directing the company’s overall strategy. The CFO, on the other hand, is responsible for influencing the company’s financial performance.

#6. CEO vs. CEO in salaries

The CEO typically earns significantly more than the CFO. The average annual salary in the US is between $420,000 and $1,200,000.

CFO salaries range from $29,000 to $295,000. They also vary based on company size, location, industry, education, experience, and certification, and may also be influenced by a candidate’s qualifications.

Let’s consider the steps to becoming a CEO or a CFO.

How to Become a CEO

A CEO is the top-ranking executive in a company, responsible for making corporate-level decisions, directing operations, and interacting with shareholders.

The path to becoming a CEO varies depending on the industry and business, but following these steps can guide you in the right direction.

#1. Pursue an education

A post-secondary degree in engineering or business is the first step towards becoming a CEO. A master’s degree, such as an MBA, can potentially advance beyond entry-level positions.

CEOs often enroll in MBA programs to enhance their skills, adapt to changing policies, and improve their decision-making abilities and potential for strong candidates.

#2. Seek challenging experiences

To become a CEO, you must gain real-life experiences. Seek technical challenges, and utilize every opportunity to learn and push yourself closer to your goals.

Improved business environments can enhance managerial skills, broaden knowledge, and offer educational opportunities.

Seek opportunities for CEO roles, while demonstrating team management and leadership abilities, aligning with professional goals.

#3. Get certified

Certifications validate career skills, inform others of capabilities, and enhance hard skill sets, allowing individuals to become experts in a specific field.

A certificate program can significantly boost your career by fostering the confidence of others to rely on your expertise and experience.

#4. Gain relevant experience 

To become a CEO, one must first gain experience in an entry-level or mid-level position, enhancing their soft skills and technical knowledge.

Familiarizing oneself with a company’s operations and receiving job training is crucial for advancing to a C-suite position, as top-level executives typically have years of experience.

#5. Start a company

Starting a company can lead to becoming the CEO of an existing organization, providing personal fulfillment and valuable skills, as an entrepreneur determines the company’s culture, direction, and mission.

This alternative path showcases technical and leadership skills, potentially leading to advancement within a company and a promotion to CEO if dedicated and demonstrated to board members.

How to Become a CFO

A CFO is a top-level executive with strong finance and accounting skills, working alongside the CEO to improve a company’s financial health. To begin this career, it is essential to understand the necessary steps to prepare, including understanding the education and experience requirements.

#.1 Complete relevant education:

Employers often require candidates with a bachelor’s degree in finance-related fields, such as finance or accounting, but economics or other business fields may also be beneficial.

Take online short courses in business risk management, compliance management, import/export management, and strategic business management to enhance your skills and gain experience. These options provide a comprehensive understanding of analysis, budgeting, compliance, and risk management.

#2. Acquire industry experience

Gain experience in accounting or finance through internships, observing processes, and practicing future tasks, which can help build industry expertise after graduation. After completing your education, seek entry-level positions with professional growth opportunities or strong skill sets, such as:

#3. Pursue leadership opportunities

CFOs often possess exceptional leadership skills, which can be developed through entry-level roles and subsequent managerial and other leadership positions. This can enable you to enhance your people management and team leadership skills required for CFO roles.

You can also consider positions within an accounting or treasury department, such as Controller, Director of Finance, Internal Audit Manager, or Finance Manager.

#4. Consider advanced education

Consider pursuing advanced higher education, such as a Master of Business Administration or a master’s degree in finance or accounting, to gain professional leadership experience. An advanced degree enhances business administration and finance management skills, enabling the practical application of theories through case studies and projects.

#5. Earn professional certifications

CFOs often earn specialty credentials like Certified Public Accountants (CPA) to enhance their expertise and appeal to employers, enhancing their practical knowledge in accounting and finance.

They can also gain benefits from certifications like Certified Treasury Professional (CTP) and Chartered Financial Analyst (CFA), which teach treasury management and financial analysis. Both certifications showcase your commitment to professional development and high-level qualifications to potential employers.

#6. Network in your industry

Building a professional network through industry events or professional organizations can provide opportunities for professional development, career prospects, and mentorship, ultimately enhancing your career.

#7. Create a comprehensive resume

To become a CFO, highlight recent relevant experiences, education level, quantifiable results, top qualifications, and references in your resume. Employers often require 8–10 years of experience in finance or accounting and may prefer departmental leadership experience.

In addition, include a skills section highlighting your top qualifications and a references section to encourage employers to inquire about your impact and success within your network.

Bottom Line

The CEO vs CFO are key figures in a company, with the CEO planning and executing corporate strategy and the CFO managing the company’s finances. The CEO sets financial goals, while the CFO manages strategy, data analysis, and decision-making, representing the organization and providing advice on financial matters.

Furthermore, the CEOs drive organizational success through increased revenue, market share, and brand awareness, while the CFO ensures the organization has the necessary financial resources to achieve its goals, thereby setting the path for growth and achieving company goals within a stipulated period.

Who is higher than a CEO?

The CEO is directly accountable to the Board of Directors, who govern the company’s management structure and are directly accountable to shareholders. Aside from the day-to-day running of the business, the duties of the BOD include selecting and appointing a CEO, reviewing their performance, and approving major policies and decisions, with the possibility of firing.

Is the CFO higher than the CEO?

The CEO is considered superior to the CFO. The CEO reports directly to the board on strategy matters, while the CFO reports to the CEO on the company’s financial health. The CFO holds the highest financial position in a company and often assists the CEO on the financial aspects of the company, working alongside them.

Who is second in command after the CEO? 

The COO is the second in command to the CEO. The CEO is responsible for an organization’s long-term success, while the COO typically handles day-to-day operations. Note a COO’s success is largely dependent on their relationship with the CEO.

Can a CFO become a CEO? 

CFOs are increasingly transitioning from traditional finance and accounting roles to strategic and operational roles, potentially leading to their eventual rise to CEO roles.

What is the difference between the CEO, CFO, and COO?

The CEO is responsible for managing a company’s business operations and providing reports to the board of directors, while the CFO, or Chief Financial Officer, is responsible for managing a company’s financial operations and reports to the CEO, and the Chief Operations Officer (COO) manages a company’s daily administrative and operational functions, reporting to the CEO.

Can a CFO and COO be the same person?

The dual CFO-COO role can be created due to the similar skill sets required in both positions. By combining these roles, a second-in-command can be established to manage daily operations and assist in business scaling.

Is a CEO the owner of a company?

The CEO can technically be the owner of a company but generally is not. The title of CEO typically signifies the individual who holds full management responsibility for the company.

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The post CFO VS CEO: What’s the Difference? appeared first on Business Yield.

Originally posted 2023-10-04 09:30:41.