Difference Between CEO and CFO

Edited by Diffzy | Updated on: April 28, 2022

       

Difference Between CEO and CFO Difference Between CEO and CFO

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Introduction

Organizations are the backbone of a country's economy. The development of organizations symbolizes that the economy of the country is increasing. This organization can be of various types. For example, private industries, non-profit organizations, governmental bodies, and many more. The main purpose is to ensure the growth of the company.

Companies use different strategies to ensure growth. These strategies are set by a few chief strategy makers of the company. A CEO and a CFO are one of those. They play a vital role in strategizing the path of the development of the company. However, the strategies used by them are completely different from each other. Also, the position of the CEO is higher than the CFO.

CEO vs. CFO

The CEO or chief executive officer of the company is one of the highest positions in the company and plays a vital role in making strategies for the development of the company. The responsibilities of the chief executive officer include making strategies, interacting with the employees, management of the different departments, heading the day-to-day work, acting as a link between the board of directors and employees, managing and executing new strategies and suggestions, and many more. The CEO of the company reports to the board of directors who is the supervisory board. The chief executive officer need not be the owner of the company.

The CFO or chief finance officer is the head of the financial department of the company. It manages the financial reporting, transactions, finance record-keeping, financial strategy, management, and many more. He is in one of the second-highest positions after the CEO of the company. The CFO directly advises the CEO of the company and coordinates with the board of directors.

Earlier, the position of the CFO was considered as important as today. Being the traditional method of transactions, earlier, the finance officer used to spend most of their time checking out the finance calculation. But with the introduction of modern technology, the method of working in the financial department has also changed. Now, it can easily be maintained with the help of new technology. The CFO is getting more and more time now. They have started to pay more attention to strategy making and other productive works.

When the CEO needs advice, he looks to the CFO. He expects the most from CFO to get help in the work. After globalization, the need for macroeconomics information in the company has increased drastically. All these services are fulfilled by the CFO. The demand for a skilled and experienced CFO with adequate accountancy knowledge has increased profoundly making it a deciding career option.

Difference between CEO and CFO in tabular form

Table: CEO vs. CFO
Parameter of comparison
CEO
CFO
Full form
Chief executive officer
Chief finance officer
Area of working
Head of all departments
Head of the finance department
Reports to the
The board of directors
Chief executive officer
Focus on
Business risks and gains
Financial risks and gains
Ranking
Highest rank in the company
Below the CEO
Accountable for
Overall organizational performance
Financial planning and reporting

Responsibilities include Interacting with employees, meeting with the board of directors, strategizing plans for the growth of the company, etc. Evaluating financial condition, reporting transactions, financial reporting, record keeping, making financial strategies

What is a CEO?

The CEO is a defined post in various companies, organizations, or working bodies. The CEO or Chief Executive Officer is also known as the chief administrative officer, central executive officer, or chief executive. The name of the position may be different, but the sole purpose of a chief executive is always the same in different companies. However, depending on the type of the organization, the scope of a CEO might be opened-ended or limited.

Working

A CEO has a different working area depending on the area of the business. Particularly, the work of a CEO is decided by the board of directors. A CEO has to report to the board of directors. It is the main strategists, decision-makers, policymakers, leaders, managers, and executives of the company. The main responsibilities of a CEO include strategizing new policies for the company, making a decision, representing the company in front of people, and taking responsibility for the work done in various departments. A CEO is typically responsible for all departments of the company. all divisions in the company come to report to the CEO of the company. He carries this information to the board of directors. then, the board of directors advises the CEO on different aspects.

The CEO needs not to be the owner of the company. He is in the charge of the management of the company and is responsible to increase the overall value of the company. A CEO is employed in a company, organization, governmental entity, non-profit bodies, etc. He checks on the market value, share price, revenue, income, profit, and loss of the company and makes strategies to maximize the profits.

Dual board system

Some companies follow a dual board system in which the companies have two sets of boards. The first is the executive board and the second is the supervisory board. the main work of the executive board is to manage the day-to-day activities of the company, while the purpose of the supervisory board is to control the company.

The presidency of these boards is always occupied by two different people. The president of the executive board is known as the CEO who manages the activities of the company, talks to the employees, makes strategies to gain control over the market, and suggest progressive changes. The CEO is the mastermind of the company. The supervisory board of the company is handled by the chairman. He might probably be the owner of the company who supervises the activities in the company.

This division of power helps to prevent the concentration of the power in one position. It prevents conflict in the company. the management of the company is in the hand of the executive board, while the governance of the company is handled by the supervisory board. The responsibility, as well as the power of the executive officer, varies from organization to organization. In some companies, the central executive officer is the most important position. while in other companies most power is enjoyed by the board of directors.

The USA system is based on the dual board system. The power is not concentrated in one position. Instead, it is divided between different bodies. The USA employs executive officers in companies as well as in local governments. The executive board is the CEO of the company and the board of directors is called the supervisory board in the USA.

When the maximum power of the organization is enjoyed by the CEO, it is assisted by a whole group of people. They are divided into departments and sub-departments. They all have to report to the executive officer. The senior-most post after the CEO in the company is of a senior executive or corporate executive. If the CEO is the president of the company, then the post of the senior executive is known as Vice president.

A company may have more than one vice-president for different branches. For example, the VP of the HR department, the VP of finance, planning, management department, etc. All these VPs reports to the CEO of the company. And, the CEO transfers this data to the board of directors.

What is a CFO?

The CFO or chief finance officer is the manager of the finance department of the company. He manages the finances of the company, checking out the in and out, record keeping, financial reporting, etc. His new role has emerged in the analysis of data as well.

A chief financial officer is also known as the CFOO or chief financial officer and operating of the company. The responsibility of the CFOs is increasing every day. He is also sometimes considered the chief strategist of the company after the chief executive officer. The CFO reports to the CEO or board of directors of the company. Looking at the importance of the position, CFO gets the position to seat on the board.

Responsibilities

The responsibilities of a chief finance officer cover a wide area. It is no more limited to the finance department of the company. The chief executive officer of the company is expecting a CFO to be active more as compared to other departments. Being always active in the open market, a CFO has more idea about the strategies of the market. that's why they are trusted to give valuable suggestions.

Looking at the importance of this position, more and more vacancies are being created for this post. To become a CFO, a person can do an MBA, Master of science, CFA, or a degree in accountancy. The companies offer the alluring position to the aspirants from the accountancy department because they play one of the most important roles in increasing the value of the company.

In recent times, some companies launched a new post, the chief strategy officer. The work of this post is about 50 percent related to the finance department. Thus, it is certain that this post will be filled by the accounting department.

In some companies, this position is merged with the position of a CFO. Earlier, the position of the CFO was based on the traditional style of working. They were spending most of their time managing the finances, finance reporting, transactions, etc. However, the rise of digital technology has significantly eased the work of the CFOs. Now, they can pay more attention to the planning and making strategies of the company.

Organizations are understanding the importance of a CFO officer. Their position and suggestion are getting more important than earlier. He is now considered the main strategy planner after the CEO. Focusing on detail orientation, collaborative, decisive, planner, manager, a finance officer is focusing more on what things are getting rather than how things are done. The position of the officer is increasing day-to-day. This is the only position that directly advises the executive officer and the board of directors of the company. He plays a fundamental role in team building, development of policies and strategy making, tax management, etc.

Globalization has led to an uneven fluctuation in the financial market. thus, the importance of a CFO is increasing more and more. It checks on the fluctuation of the market, draw a pattern, and makes use of this pattern to strategize plans for increasing the value of the company. The CFO relies the most on business information, financial reports, etc to get strategize their plans.

Today, the world is relying more on the macroeconomics environment. Meet the company's strategic needs in the field of macroeconomics can only be fulfilled by a financial expert. And, this work of a financial expert is done by the finance officer. A CFO is the little brother of the CEO who does the work of a CEO in financial matters. Also, he owns the maximum probability to get the position of the next CEO.

Differences Between CEO and CFO in Points

  • The full-of-form CEO is a chief executive officer. However, the full form CFO is the chief financial officer.
  • The CEO reports to the board of directors, while the CFO reports to the CEO.
  • A CEO is the head of all departments, while the CFO is the head of only the finance department.
  • The area of focus of the CEO is business risks and gains, while the area of focus of the CFO is financial risks and gains.
  • The CEO looks after the overall business development, while CFO is responsible only for financial planning and reporting.

Conclusion

Both the CEO and the CFO are two important branches of the company. The CFO works under the CEO which is the highest position in the company. The CEO is responsible to handle the overall organization. It reports directly to the board of directors. Though the CEO is not the owner of the company it is the decision-making branch that decides the rise and downfall of the company.

The CFO is the head of the finance department who maintains all financial transactions in the company. It looks at the market and suggests the best possible investment at that time. It also plays a key role in the development of the company.

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"Difference Between CEO and CFO." Diffzy.com, 2022. Thu. 29 Sep. 2022. <https://www.diffzy.com/article/difference-between-ceo-and-cfo-209>.



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