Chief Financial Officer (CFO) and Vice President of Finance (VP of Finance) are two high-level finance roles. These professionals oversee different aspects of a company’s finances and work to ensure maximum profitability.
Small and medium businesses that are growing quickly or have complex finances may need one or both of these professionals to help with day-to-day operations and strategic planning. Understanding the differences will help you choose the right finance expert to steer your team to success.
Chief Financial Officer Definition
A CFO is an executive-level professional who is responsible for the overall financial strategy of a company. Apart from full-time CFOs, there are also fractional CFOs—who work with companies on a contract basis—and interim CFOs who work with companies during transition periods.
VP of Finance Definition
A VP of Finance is a senior management-level finance professional who oversees the day-to-day operations of the company’s Finance team and ensures accurate and timely financial reporting. VPs of Finance can also be fractional or interim.
Key Differences Between a CFO vs VP of Finance
CFOs and VPs of Finance have different but complementary roles. Larger companies will typically need both. Small and medium-sized companies may work with one or both of these professionals on a fractional basis.
Position in the Organization
CFOs are part of the executive team together with the Chief Executive Officer (CEO) and Chief Operating Officer (COO). The VP of Finance reports to the CFO.
The VP of Finance oversees the entire Finance team. This may include bookkeepers, accountants, auditors, treasurers, payroll managers, procurement managers, and financial controllers.
Responsibilities
The CFO is where the buck stops when it comes to the company’s financial health. The CFO is responsible for:
- Financial planning
- Cash flow management
- Budgeting and forecasting
- Financial analysis
- Risk management
- Investor relationships
The CFO analyzes the company’s financial data and provides strategic direction to improve profitability.
The VP of Finance, in contrast, is responsible for day-to-day financial management. They:
- Manage the company’s bookkeepers and accountants
- Oversee payroll functions
- Liaise with external auditors
- Manage regulatory compliance
- Look for opportunities for cost savings
- Make sure the use of company resources is serving business objectives
- Produce financial reports to present to the CFO
Salary
CFOs and VPs of Finance have a wide salary range that is affected by factors like the size of the company, their level of experience, and the benefits provided on top of their salary.
- CFOs in the United States earn a base pay of $135-$249K per year and additional pay (usually in the form of cash bonuses and equity awards) of $101-$188K per year. These figures come from Glassdoor.com, sourced June 2024.
- VPs of Finance in the United States earn a base pay of $120K – $200K per year and additional pay of $60K – $111K per year. These figures also come from Glassdoor.com, sourced in June 2024.
The high cost of both of these professionals is one of the reasons that smaller companies prefer to hire them on a fractional or temporary rather than full-time basis.
Which Do You Need?
Small and medium-sized businesses typically seek help from a high-level finance professional such as a CFO or VP of Finance for raising capital in the initial stages, in periods of fast growth, in transition periods, or if they are struggling to improve profitability. Your specific needs will determine which of these professionals would be most helpful for your business.
Chief Financial Officer
Most small and medium-sized businesses will benefit most from hiring a fractional CFO. A fractional CFO can help with:
- Raising capital
- Preparing budgets and financial forecasts
- Presenting financial forecasts to prospective investors
- Analyzing your financial reports and suggesting improvements
- Helping your business improve its cash management or cash flow
- Guiding your business through a transition or specific project
One of the benefits of a fractional CFO is that you receive the expertise and years of experience of an in-house CFO without the financial burden of a full-time salary. You can also define the scope of the CFO’s goals very specifically to see measurable results in a short time.
VP of Finance
Hiring a VP of Finance is helpful for small and medium-sized businesses in the following situations:
- Your finance team could benefit from a day-to-day manager to work more effectively.
- Your business is struggling with security issues like fraud and you need to develop better external and internal controls.
- You want to identify ways to reduce your costs and improve profitability without sacrificing quality.
- You suspect that the current use of your company’s resources is not helping you meet your business objectives.
- Your company will be audited by an external provider.
- Your company needs support to achieve full regulatory compliance.
- You need to produce financial reports that are different or more complex than what your current team members typically prepare.
Remember that you can hire a VP of Finance—like a CFO—on a full-time, fractional, or interim basis depending on your business’s budget and needs.
High-Level Finance Professionals Boost Profitability
Small and medium-sized businesses usually get along fine with a small finance team that handles their day-to-day operations. However, having expert help from a senior-level finance professional like a CFO or VP of Finance can be invaluable in times of crisis, transition, or rapid growth.
A CFO is generally best if your business needs help with strategic planning or raising capital. A VP of Finance may be best if your challenges are primarily operational. Talking with both of these kinds of experts will help you determine which one can help your business reach its goals.
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