The CFO And The Board Of Directors: How To Nurture A Productive Relationship

By Linda RoperApril 28, 2023

The relationship between the board of directors and the chief finance officer (CFO) is crucial if any company is going to achieve its long-term goals.

While they both may have the same goal or objective in mind, the CFO’s approach to achieving this might look very different to that of the board of directors. And contrasting visions, along with different outlooks, can often lead to a less-than-harmonious relationship between the two parties involved.

Gaining a better understanding of each other’s roles, and improving overall communication within a business, can go a long way to helping the CFO and the board of directors build a positive working relationship. And one that will ultimately help the board make solid, data-driven decisions that bring about positive change.

Let’s explore how the CFO and the board of directors can build and maintain a productive relationship.

3 women and 2 men sitting around a table in board meetingTable of Contents

What Is The Role Of A Chief Financial Officer?

Before looking at the relationship between the board of directors and the CFO, it’s important to understand what a CFO is and how they contribute to a company’s prosperity.

The CFO is a senior executive who is responsible for managing the financial side of a business. Along with the chief executive officer (CEO) and the chief operating officer (COO), the CFO is one of the most important executives in a company.

Along with financial planning and managing cash flow in the company, the CFO will spend a lot of time analysing the company's financial strengths and flaws and advising on corrective courses of action should they be needed. The CFO will also ensure that the company’s month-end financial reports are correct and completed on time, as these will form the foundation of any decisions concerning financial matters made at the executive level.

An expert in tax and compliance in relation to financial regulations, the CFO can navigate the financial implications of a company’s activities, pulling together budgets and conducting financial forecasting. It’s easy to see why an accomplished and experienced CFO is such a valuable asset to a company.

Female CFO looking at reportsShould The CFO Be Part Of The Board Of Directors?

The jury is out as to whether the CFO should be part of the board of directors, and the answer really depends on the individual company and its board. There are pros and cons to both scenarios, which we’ll explore in more detail.

The main advantage of having the CFO on the board of directors is that they are the ones tasked with producing financial statements. These need to be shared with investors as well as the public, so it’s vital that they are correct. These statements are approved by the board, so they are accountable for any issues that may reveal themselves. Other directors may not spot errors in the accounts, but the CFO certainly will.

With the exemption of the CEO, the CFO probably has the clearest understanding of the company’s operations and strategies. If the CFO can contribute to the business strategy of the company and play a key role in decision-making, having them on the board is a good move.

On the other hand, it’s important to remember that the board is there to oversee the management of the company and ensure it’s managed in the best interests of its stakeholders. The CEO is often already a board member, so it could be argued that adding a CFO or another executive director to the board may endanger board independence.

Whether they sit on the board or not, the CFO should still be involved in board meetings when the company needs expert financial analysis to aid its decision-making.

What Does The Board Of Directors Expect From A CFO?

In today’s uncertain marketplace, where boards are under more scrutiny than ever, the input of the CFO is invaluable. The board is looking to the CFO to ensure that all financial information relating to the company is correct so the board, in turn, can make sound, well-informed decisions.

However, board members don’t have time to sift through huge amounts of data, so they depend on the CFO to deliver insights into the data and how they affect the company in a straightforward and confident way. They also want to be shown how the financial side of things relates to operations, which the CFO is in a good position to provide.

Excellent communication is at the heart of nurturing a strong relationship between the CFO and the board. Good communication skills are essential if the CFO is to build trust with the board of directors. Being respectfully assertive, especially when disagreeing with the board, is a must-have skill for a CFO.

CFO presenting report to Board of DirectorsHow To Present A Report To The Board Of Directors

The thought of presenting a report to the board of directors might be daunting, but our tips will offer guidance on how you can nail it every time.

  • Before preparing your report, think about what the board is interested in and what its main concerns are. This will shape what you include in your report and also what you leave out.

  • You may need to gather information and data from other areas of the company, so try to request this in good time. Ensure that any data you include in the report is accurate. Real-time expense reporting is a great tool to help you achieve this Find out about the benefits of real-time reporting here.

  • Ensure your report covers all the relevant information in the most effective way. Financial information can be complicated to explain in words, so make use of visuals, such as charts and tables, to make figures easier to digest.

  • Part of the role of a CFO is to educate the board of directors about best practices where financial matters are concerned so they, in turn, can make well-informed decisions. Be ready to answer any questions the board may have about your report. Be mindful that board members don’t have a great deal of time, so try to be as concise as you can.

To sum it up, the relationship between a CFO and the Board of Directors plays a vital role in any business and the above advice should help you make it a productive one.