As businesses grow, accounting becomes more of a priority. At first the spouse could do everything on the laptop from the kitchen table. But then the volume of work becomes too much and some reports are obviously wrong. Not a good idea to make decisions based on dubious information. Many entrepreneurs then bring on a bookkeeper or outsource the work to a bookkeeping and accounting firm like us. As growth continues there is a need for more accounting types to handle payroll, invoicing, AP, and more complex issues. The need for a CFO may seem like a solution in search of a problem.
What do CFOs do anyway? And why pay so much? Essentially, CFOs help organizations get the accounting structure in order, set long-range growth objectives, and navigate from here to there. Most small businesses are limited by cash and other constraints, but a good CFO may be able to overcome this. They take ownership of the company’s accounting and financial reporting system and work with management to produce customized reports and track key metrics of the business along with profitability over time. At the right moment, the CFO may recommend proceeding ahead with planned strategic decisions and initiatives.
CFO’s as corporate controllers
Most CEO’s have limited interest in accounting but need to know that the numbers used for decisions are relevant and correct. So CFOs lead these functions, watch over and manage the structure of the company’s finances, work with management to develop key performance metrics, and serve as the firm’s representative to stakeholders such as investors and bankers. They also construct financial forecasts and models on a regular basis (allowing comparisons over time), and deal with the myriad of taxes that, for most firms these days, are the biggest expense of all. CFO’s often serve as corporate controllers in smaller firms, but just as importantly they are key in planning the company’s long term company vision and the route to achieve this.
Start with an interim (part-time) CFO
Many firms often start with an interim (part-time) CFO – someone who parachutes in perhaps once a week to make sure that accounting is under control, produce key reports, lead associated meetings, and hear the latest news. This leadership and focus on the metrics can be insightful and make a big difference in a company’s success. Here are the main reasons to engage a CFO:
Revenue and Growth – To hit revenue goals – perhaps part of bank or investor covenants. The right CFO can make sure revs are counted in the right way, and help achieve the the numbers.
Business Complexity – As your firm enters into more agreements with vendors, customers and financing sources, engages in new business lines with different accounting procedures, opens more locations, and operates in new taxing jurisdictions, someone needs to keep on top of all of this, represent and respond on behalf of your company, assure compliance and report on an exception basis to top management. That would be the CFO,.
Personnel – When your headcount exceeds 50 employees, compliance with yet another wave of HR, legal and compliance laws and regulations becomes necessary from a battalion of federal, state and local governments. Again, a CFO can stay on top of this – until a full-time HR pro is needed (but that’s a different story).
Mergers and Acquisitions – Success can lead to unexpected outcomes. So be prepared for an M&A deal, such as when a potential buyer emerges, or perhaps you may want to scoop in and buy a competitor or a major vendor. A CFO is the key player in these initiatives.
Chief Financial Officers offer a special perspective that can help management focus on the most relevant information needed to maximize profitability and make the way forward. CFO’s don’t come cheap but their value usually far exceeds their cost.
We offer this and related services, from bookkeeping and general accounting to part-time CFO.
Contact us for more information on this.