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SHOULD PAYROLL OVERSIGHT BE PART OF THE CFO'S RESPONSIBILITIES?

In many companies, the CFO has an overarching responsibility for managing financial health, while the day-to-day payroll operations fall under the HR or payroll director. For some businesses, this structure works. However, I’ve found that for service-based companies, where 70-80% of the budget is dedicated to payroll, this approach may not be the best fit.


Imagine a scenario where 20-30% of the company's budget is handled by the CFO, while the bulk of the company’s expenses—payroll—are overseen by someone without a financial background. To me, this is a missed opportunity to leverage financial expertise in one of the most significant areas of the business.


Why Payroll Deserves CFO Attention

Here are three key areas where payroll oversight by the CFO can improve business outcomes:


  1. Internal Control

    • Payroll errors can result in significant financial and compliance risks. A CFO's expertise in financial oversight can enhance internal controls around payroll processing. By having direct oversight, the CFO ensures that payroll is aligned with the company’s financial objectives and adheres to compliance regulations.


  2. Payroll Software

    • Many businesses rely on payroll software that automates processes. However, these systems can have limitations or require complex configurations to manage different pay structures, taxes, and benefits. A CFO can ensure that the payroll software integrates well with the company’s broader financial systems, providing accurate reporting and insights.


  3. Financial Understanding of HR/Payroll Managers

    • HR directors or payroll managers often lack a deep financial understanding. While they may excel at managing employee relations, they may not have the skills to analyze payroll data as part of the larger financial picture. A CFO’s involvement bridges this gap, ensuring payroll not only serves its function but is optimized for cost control and efficiency.


My Take

For businesses, especially in the service industry, payroll is too large of an expense to leave entirely in the hands of non-financial personnel. CFOs should take a more active role, ensuring that payroll is seen not just as an administrative task but as a critical component of financial strategy.




 
 
 

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