A CFO isn’t supposed to be a “face of the organization” position. They don’t make the speeches, collect awards, or rack up sales. However, a good CFO is vital to the success of an organization, whether for those going through recent growth or those already well-established. Finding the right CFO can mean the difference between long-term business success and disappointment, even disaster.
Many companies hiring a CFO for the first time have some doubt about whether they even need one. They’ve managed their finances so far. What does a CFO even do?
- A CFO handles a company’s past, present and future finances, and is responsible for accurately tracking a company’s financial information.
- A CFO keeps an eye on how, and how much, money is being spent and helps give strategy and structure to a company’s financial decisions.
The negative light shed on CFOs from recent scandals should not deter growing companies from hiring one. Instead they should serve to illustrate why it’s important to find a good one. A CFO can be a vital addition to a company, not only to recognize and skillfully handle a company’s financial needs, but also to ensure long-term financial stability and growth.
1. It is time to a hire a CFO when growth, transaction, tax and strategic planning sophistication surpass the knowledge of internal employees or owners
a. CFOs know:
i. Financial Management
1. Create reporting structures
2. Budgeting
a. Helps companies forecast monthly, quarterly and yearly projections to provide decision makers with information
b. Strategically builds goals based on finances
3. Build departments within finance (AP, AR, etc)
4. Build processes for billing, collections, etc.
ii. How operations effect finances and vise versa
1. Understands business
2. Helps to streamline operations
3. Marries financial goals with operational goals
iii. Creative Financing for growth
1. Brings knowledge of how to structure, evaluate and purchase or sell
2. Understands the merger and acquisition process
3. Builds banking relationships to help finance deals
iv. Tax advantages
v. Transactional processing
1. Understands different ways to engage in transactions (i.e. eCommerce, retail, B2B, etc)
2. Create processes to all transactions to occur smoothly
3. Billing and collections
b. CFOs are concentrated on profitability and ultimately the bottom line
i. Create processes and build financial systems utilizing technology for efficiencies
ii. Pose operational improvements for the company to help company correlate financial goals with operational efficiencies
iii. Strategic planning for growth
c. CFOs bring the financial component into the business and allow a company to make contacts in areas it otherwise would be unable to do
i. Industry specific knowledge that can be shard or attained with other financial experts within the trade – allowing for best practices scenario
ii. Outside audit firms, legal, banking relationships
iii. Helps sell companies abilities to others in the market
2. How to identify the right person
a. Past history
i. If worked in a growth company understands how to grow a company
b. Strong Leader
i. Will give opinion based on financial facts not on what other senior managers want to hear.
ii. Not afraid to hire people that are stronger in a particular financial area that can give him advice
c. Strategic thinking
i. Invests in areas of business to help grow
ii. Divests in areas that hinder company
d. Industry specific knowledge
e. Gets along with senior management and can be viewed as a peer not an employee
3. Identifying Own Needs
a. Goals of the company
b. Growth or sustainability
c. Financial problems associated with goals and growth
d. Do you or team have capacity for solving all problems and strategically seeing what others will arise in the future