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Finance Director vs CFO – what’s the difference (if any) and why should your business care?

If your business is growing and you’re thinking about hiring a new finance person or adding to your current accounting department, you may be wondering if you need a CFO or a Director of Finance.

What role your team requires will be based on your current business, its annual revenue, and its future goals.

Let’s break down CFO vs. Finance Director, what each role’s responsibilities are, and when your business is ready for a CFO vs Finance Director.

What is a finance director?

Finance Directors (also known as directors of finance or directors of financial planning) are part of senior management, and they manage the financial aspects of an organization. Part of their role is to ensure that the finances of the company are sound.

The role of a finance director is to help their employer become more effective and efficient – which ultimately helps the company grow and succeed.

The finance director works closely with and reports to the CFO.

What does a finance director do?

A finance director is responsible for making sure that the finances of a company are accurate and in line with company goals, policies, expectations, etc. This may include monitoring expenditures and budgets for each department and determining the financial needs of an organization.

Specific duties of a finance director generally include the following:

  • Directing financial planning and strategy
  • Analyzing and reporting on financial performance
  • Overseeing audit and tax functions
  • Developing and implementing accounting policies
  • Preparing forecasts and comprehensive budgets
  • Monitoring cash flow and financial transactions
  • Training accounting staff
  • Reviewing departmental budgets
  • Assessing, managing, and minimizing risk
  • Analyzing complex financial data
  • Managing internal controls

What is a CFO?

CFO is part of the executive team of an organization, and they are focused on the future. A CFO will use the financials created by the Finance Director and assess what’s working (and not working) and what needs to change. Afterward, the CFO will define where and how changes should be executed for maximum impact.

A CFO’s input holds significant weight when it comes to investment decisions, how a company’s capital is utilized, and how the company’s income and expenditures are managed.

What does a CFO do?

A CFO is the CEO’s partner and right hand when it comes to strategic decisions, board of directors’ meetings, and bank/investor discussions. The CFO is a very strategic role, and therefore, this person focuses on the long term.

Some of the most common responsibilities of a CFO typically include:

  • Long-Term Planning: CFOs collaborate with other executives in developing financial planning, procuring capital investments, succession planning, M&A, divestitures, or joint ventures. A CFO can look at the data produced by the Finance Director to see their current progress, then predict and make future decisions.
  • Long-Term Goal Achievement: Finance Directors and Financial Controllers give the necessary blocks upon which a CFO builds a solid financial structure to keep the company secure and on its way to success. CFOs work on long-term goals such as minimizing project costs, increasing shareholder value, negotiating acquisitions, securing new loans or investment capital, and plotting a company’s financial position years in advance, identifying and mitigating risks well before they happen.
  • Agent of Change: A CFO develops and executes comprehensive financial growth initiatives. They reach into their years of experience to find the right tactics to address present financial challenges and skirt around future threats. Since they usually have expansive practical knowledge under their belt, they have a birds-eye view of both opportunities and possible challenges and the actions the organization must take to address these.

What are the differences between a CFO and a finance director?

The main difference between a CFO and a director of finance is the breadth and depth of experience, as well as their horizon of influence.

Finance directors are typically less experienced than CFOs and are focused on short-term goals. Meanwhile, CFOs usually have decades of experience that spans across a broad range of industries and financial management experience. Given this, CFOs are focused on the long-term, strategic goals of the organization.

CFO vs Finance Director: The major differences –

  • Experience Level: CFOs typically have 20+ years of diverse financial management expertise while Finance Directors may have 5-10 years of less diverse experience
  • Level in Organization: CFOs are executive level while Finance Directors are senior management (usually one level below the CFO)
  • Focus: Finance Directors focus on the day-to-day and manage accounts of the organization, as well as short-term goals. On the other hand, CFOs focus on the long-term, strategic goals of the business.
  • Responsibility: Finance Directors analyze department budgets, often manage the accounting function, ensure actions are legally compliant, monitor cash flow, and provide the financials for CFO review. CFOs collaborate with other executive team members, supervise the financial strategy of the business, and develop plans for revenue and profit growth.

The CFO is responsible for the strategic direction of the finance function and sits on the company’s senior management team. The FD occupies the rank below senior management and is the company’s chief accountant.

CFO vs Director of Finance: Which one do you need?

Any company above $5 million in revenue likely needs at least a fractional CFO to oversee financial strategy and assist the CEO with strategic financial matters (such as revenue and profitability growth, capital raises, and 3-5 year long-term planning).

A Director of Finance is usually sufficient for companies below $5 million or is needed in addition to a fractional CFO (if the company is above $5 million.

Once a company hits revenues of $250 million or above, it can typically afford to bring on a full-time CFO, as well as a Director of Finance.

  • Below $5 million: Finance Director
  • Above $5 million but below $250 million: CFO
  • $250 million or more: CFO + Finance Director

Interested in learning more about CFOs and their role?

At New Life CFO, we help companies of all shapes and sizes with fractional CFO services. If you’d like to learn more about how a CFO can help grow your company, send us a message or check out our additional resources below. We’d love to talk.