How Work of CFOs and Accountants Are Connected
Accounting is the business function of collecting financial records to create reports and make interpretations about the company’s financial health. On the other hand, the finance function, headed by the Chief Finance Officer (CFO), is the management of the company’s assets.
Both are very different. But why are their outputs important for the other? This article takes a closer look at these two functions and reveals how the work of CFOs and accountants are connected.
Work of CFOs and Accountants Explained
CFOs and accountants provide relevant information to the companies’ stakeholders. Their difference lies in the type of data they use and analyze, and for what purpose they use it for.
Accountants’ primary purpose is to provide financial information to decision-makers. They gather raw data and process them into understandable information. They ensure that the information is relevant, accurate, and timely.
The CFOs, on the other hand, manage the financial decisions of the company. Their purpose is to optimize the company’s resources. They gather financial data to make plans and strategies that would best lead the company to growth and success.
The output of accountants pave way for the work of other functions. That includes the work of CFOs. Here is the relationship between CFOs and accountants.
CFOs Use the Information Provided by Accountants
The work of CFOs starts at the end of the accounting process. And that is when the financial reports are complete. Accountants provide CFOs with the needed information to make financial decisions.
For example, company executives decide to increase its capital by issuing more stocks. They will have to consult the CFO on this decision. To analyze whether the company will benefit from this action, the CFO will need financial records. He can get this information from the accountants.
In this particular case, the CFO will need information about its current capital. The accountant will provide for the information needs of the CFO. And then the CFO will calculate the benefits of increasing its capital through stock issuance. If the results of his analysis prove that it is not a good decision, then he will recommend this decision to the executives.
Use of Historical Data to Plan the Future
The historical data provided by accountants are crucial in making plans for the future. One of the many responsibilities of the CFO is analyzing whether prospect projects are financially advantageous or not. To do this, the CFO needs the historical data of the company and information about the industry.
Let’s say, for instance, that the company plans to expand to other locations. The CFO will have to look into the assets of the company. So with the help of the accountant, the CFO gets the insight if the assets of the company are sufficient to fund this expansion. If not, then the CFO will again analyze, with the use of historical information, if it is beneficial to borrow money from creditors.
Understanding of Accounting to Manage Decisions
CFOs need accounting knowledge to do their job right. But most of the time, company CFOs have accountancy degrees and are holders of the title Certified Public Accountant (CPA). This is because finance is also studied when taking accountancy. Furthermore, understanding of transactions and accounts are important in making financial decisions.
If CFOs are unsure of what the reports portray, they refer to accounts to clarify. Accountants handle highly detailed information, while the CFO only gets summarized information. Therefore, accountants provide clarity when needed. Particular cases sometimes don’t make sense because of complex transactions. CFOs work side by side with an accountant, in these cases, to gain clearer insights on specific business activities.
Reliable Accounting Services in the Philippines
We now understand how CFOs and accountants work together. And from this article, we see how important accountants work is. They provide the information needed to make decisions. Thus, companies have to make sure that their accounting function is working well.
3E Accounting can give that to you. We provide dependable accounting services. Hiring only competent and expert accountants in the Philippines, we ensure timely and standard-based financial records and reports. Are you in urgent need of accounting services? Contact 3E Accounting today!