CFO vs CPA: What’s the difference?
Whilst the two share some similarities, they aren’t the same. You see, being a proficient Certified Public Accountant (CPA) doesn't automatically mean you're destined for the role of a Chief Financial Officer (CFO). And guess what? That's perfectly fine!
There's no rulebook saying you must be a CPA to excel as a CFO. Likewise, CPAs don't have to chase the corporate finance dream if it's not their cup of tea.
In this blog post, we clear up the confusion between CFOs and CPAs and explore whether you need a CPA to become a successful CFO (spoiler - you don't!).
- What is a CFO?
- What is a CPA?
- Differences between CFOs and CPAs
- Do you need a CPA to be a CFO?
- How to become a CFO without a CPA
What is a CFO?
A CFO is a top-level executive responsible for shaping the financial strategy and ensuring the business stays on the right track (financially speaking). They juggle a range of responsibilities including financial planning, risk management, and financial reporting. Using their insights and financial expertise, they play a huge part in supporting the company’s growth by making data-driven decisions.
CFOs are highly collaborative and must be team players since they’ll join forces with fellow C-Suite members to set strategic goals and allocate resources. And they're not shy about sharing their company's financial performance with stakeholders, making sure everyone is kept in the loop.
What is a CPA?
A Certified Public Accountant (CPA) is a professional designation awarded when you pass the Uniform CPA Examination. CPAs know the ins and outs of accounting, auditing, taxation, and financial reporting. These important skills make them incredibly useful in sectors such as public accounting firms and government agencies.
When it comes to accurate financial records, preparing and filing tax returns, conducting audits, and dishing out financial advice, CPAs have got you covered. An often overlooked part of the role is the fact that CPAs are held to incredibly high ethical standards. They must adhere to a strict code of professional conduct, ensuring trust and credibility in their work.
Sabrinthia Donnelly
What’s the difference between a CFO vs CPA?
While both roles are vital, CPAs and CFOs have distinct responsibilities and areas of expertise. So, let's dive into the three main differences to get a better understanding of how these finance gurus differ:
1. Tax strategy vs financial strategy
When it comes to tax strategy, CPAs are the first in line to take charge. With their in-depth knowledge of tax laws and regulations, they help businesses remain compliant. They also identify tax deductions, credits, and other opportunities to reduce a company's tax liability. For instance, a CPA might recommend a specific depreciation method for a business asset to maximize tax benefits over time.
On the other hand, CFOs are all about shaping and implementing the broader financial strategy of a business. They take a holistic approach, focusing on the company's overall financial health and growth. This includes activities like financial planning, budgeting, and forecasting, as well as managing risk and ensuring the business remains profitable. A CFO might, for example, recommend a merger or acquisition to achieve long-term growth goals.
2. Expertise in tax strategy vs long-term organizational strategy
While both CPAs and CFOs have financial expertise, their focus areas differ. CPAs are experts in tax strategy, which means they're well-versed in tax laws and can help businesses navigate complex tax situations. They focus on the books and provide guidance on tax compliance and tax planning. Some CPAs even represent clients before tax authorities during audits or disputes.
CFOs, however, concentrate on the long-term strategy of the organization. They analyze financial data, identify trends, and make strategic recommendations to support the company's growth and sustainability. For example, a CFO might identify a new market opportunity and suggest reallocating resources to capitalize on it, helping to increase profitability.
3. Fundraising and capital structure
One key area where CFOs excel is fundraising and managing the capital structure of a company. They're responsible for securing the necessary funds to fuel the company’s growth, which might involve debt financing, equity financing, or a combination of both.
CFOs can help businesses:
- Decide on the right mix of debt and equity
- Negotiate terms with lenders and investors
- Manage the overall capital structure to minimize risk and optimize returns
Sabrinthia Donnelly
Do you need a CPA to be a CFO?
The short answer is no, you don't need to be a CPA to become a successful CFO. While having a CPA designation can be beneficial in some cases, it’s not a prerequisite for the role of a Chief Financial Officer.
A strong background in finance, combined with strategic thinking and leadership skills, is typically more important for a CFO than a specific accounting certification.
That being said, some CFOs do hold a CPA designation. According to the Journal of Accountancy, 44% of CFOs are CPAs. Plus, a CPA background can provide a solid foundation in accounting principles and tax laws, helping you navigate complex financial situations and make well-informed decisions as a CFO.
Another benefit of having a CPA is the impact it’ll have on the executive team. With a CPA on board, it can enhance a company's credibility in the eyes of stakeholders, such as investors and board members.
Ultimately, the qualifications and skills required for a CFO role will depend on the specific needs and expectations of the organization. While a CPA designation can be a valuable addition to a CFO's skill set, you can become a CFO without a CPA.
How to become a CFO without a CPA
Becoming a CFO without a CPA is definitely possible and here are some tips to help you do it:
1. Earn a relevant degree
Pursue a Bachelor's degree in finance, accounting, business administration, or a related field. This will provide you with a strong foundation in financial management and business operations.
2. Gain practical experience
Obtain hands-on experience in finance or accounting roles, which can help you develop a deep understanding of financial management practices, budgeting, and financial analysis.
3. Develop leadership skills
As a CFO, you'll need to lead and manage teams, so it's essential to develop strong leadership and communication skills. Seek opportunities to lead projects, mentor junior team members, or participate in leadership development programs.
4. Expand your network
Networking can be crucial for career advancement. Attend finance industry events, join professional organizations, and connect with other finance professionals to stay informed about new developments and job opportunities.
5. Pursue advanced education
Consider earning an advanced degree, such as an MBA or a Master's in Finance, which can help you gain a deeper understanding of financial management, strategy, and decision-making.
6. Stay current with industry trends
Keep up to date with the latest financial trends, regulations, and best practices by attending conferences, participating in webinars, and reading industry publications.
7. Focus on strategic thinking
Develop your strategic thinking skills by analyzing financial data, identifying trends, and making recommendations that support the long-term growth and sustainability of your organization.
8. Gain experience in various industries
Broadening your experience across different industries can help you develop a diverse skill set and a more comprehensive understanding of financial management in various contexts.
9. Seek mentorship
Identify experienced finance professionals, such as current CFOs or other finance executives, who can provide guidance, advice, and insights on how to successfully navigate a career path toward becoming a CFO.
10. Demonstrate results
Showcase your ability to drive financial success by highlighting your achievements in previous roles, such as cost savings, revenue growth, or improved financial performance.
Final thoughts
The debate of CFO vs CPA is an intriguing one, revealing the unique yet complementary roles these finance professionals play in the world of business. Although they each possess distinct areas of expertise and responsibilities, their combined efforts can drive a company's financial success.
It's important to remember that a CFO doesn't necessarily need to be a CPA, as their focus lies more in the strategic and long-term aspects of a company's financial management. By following the tips provided, aspiring CFOs without a CPA designation can still build a successful career, acquiring the necessary skills and experience to excel in the role.
FAQs: CFO vs CPA
What other certifications or designations might be useful for a CFO?
Besides a CPA, other certifications that can be beneficial for a CFO include the Chartered Financial Analyst (CFA), Certified Management Accountant (CMA), or Financial Risk Manager (FRM). These designations can demonstrate expertise in various aspects of financial management and may be helpful in advancing your career as a CFO.
Can a CFO also perform the tasks of a CPA?
A CFO with a strong background in accounting and tax may be able to perform some tasks typically handled by a CPA, such as financial reporting and tax planning. However, if the CFO is not a licensed CPA, they may not be able to represent the company before tax authorities or sign off on certain financial documents. It's essential to consider the specific needs and requirements of your organization to determine whether a CFO can fulfill the roles of a CPA or if separate individuals should handle these responsibilities.
How can a CPA become a CFO?
For a CPA looking to transition into a CFO role, they should focus on gaining experience in financial strategy, risk management, and leadership. This can include taking on roles with increasing levels of responsibility, participating in executive education programs, and developing strategic thinking and decision-making skills. Networking and building relationships with industry professionals can also help open doors to CFO opportunities.
