Chief Financial Officer (CFO)
A chief financial officer (CFO) is the highest-ranking executive responsible for leading and managing the fiscal health of a business. Anyone who assumes this role automatically joins the "C-Suite": a term used to describe a team of senior company executives, including the chief executive officer (CEO), chief operating officer (COO), chief information officer (CIO), etc
Above all else, the CFO is truly the key to unlocking effective financial management within larger businesses. Responsibilities include determining the stability and growth of future cash flows, managing and mitigating risks, spearheading investor relations, ensuring compliance with tax and regulatory authorities, etc. Accounting managers, financial analysts, senior/staff accountants, and controllers all report to the CFO.
A CFO's role constantly evolves, and besides acting as a strategic partner to the CEO, they help actively shape an organization's strategic goals as the big-picture thinkers of tomorrow—rather than the detailed-oriented number crunchers of yesterday. While yesterday's CFOs might tell you, "We lack the money/budget to expand" and print financial statements, their modern counterparts must lose that "number-crunching" mentality and strategize to plan/acquire the funding necessary to facilitate growth. Creativity is indeed the name of the game here!
As most startups and small businesses may not need (or be able to afford) a "full-time" CFO, many business owners assume this role under these conditions. However, cash-strapped owners with an eye on the future can (and should) consider bringing on a "fractional controller/CFO" amidst a rapidly maturing business that demands critical forward intelligence. With this in mind, let's look at primary CFO responsibilities:
What does a CFO do?
The CFO oversees the accounting and finance departments within an organization.
The controller, treasury, accounting, and finance departments report to the CFO.
The CFO is not involved in daily accounting activities; instead, he uses information from the accounting and finance departments for strategic planning.
The CFO performs risk-management tasks, analyzing company assets, liabilities, and investments.
The CFO reviews investment strategies by evaluating cash and liquidity risks.
The CFO evaluates the capital structure and plans fundraising activities.
The CFO establishes and tracks key performance indicators (KPIs).
The CFO ensures future stability and growth of future cash flows.
The CFO manages a team of regional controllers (in a larger corporation) and other accounting/finance personnel.
The CFO prepares reliable forecasting reports, establishes performance KPIs, and oversees IT.
When or why will I need a CFO?
Most small businesses do not require a full-time CFO, as the business owner or controller can successfully fulfill the responsibilities of this position. If all daily accounting and finance functions are executed flawlessly, a CFO is a "nice to have" rather than a "must-have."
There is no specific litmus test or a level of annual business revenue or expense that will help you determine if you need a CFO or not; however, review the following reasons why you should consider a CFO:
Business owners or leaders require more confidence in one or more areas of accounting and finance and need to receive accurate and appropriate financial data in time to make decisions about future growth.
Daily accounting and finance functions are efficient, but future planning is nonexistent.
Owners need guidance to interpret financial information, determine what works/does not work, and plan corrective actions.
The volume and complexity of your business are growing, or you are planning to expand your business (requiring a financial strategy to support that growth and plan future cash flows).
What is the difference between a Controller and a CFO
While a controller is a tactical position responsible for compliance and reporting past events, a CFO is a forward-thinking strategic leader who uses "past" information to plan, forecast, analyze risks/opportunities, and achieve tomorrow's goals.
A controller is responsible for managing and accurately recording/reporting all transactional activities and overseeing the accounting department's daily tax/GAAP compliance. A CFO, meanwhile, is less involved in day-to-day accounting department operations and uses daily financial data for economic strategy and forecasting, securing financing for future growth and expansion, etc.
Hire a controller if:
You require accurate daily accounting activity in compliance with GAAP & tax laws.
Your accountants/bookkeepers need help keeping up with accounting data and understanding the full breadth of accounting responsibilities.
You must continuously or periodically supervise accounting staff, including assistant controllers, accounting managers, senior and staff accountants, accounting clerks, and bookkeepers.
You need to fix the period-close process and on-time reports delivered.
You need a budget, cash flow forecast, timely financial statements, and metrics to measure periodic performance.
You need better internal controls to prevent fraud, errors, and security breaches.
Hire a CFO if:
You need to supervise your accounting and finance departments.
You need a high level of sophistication for financial reporting and interpretation.
You need help with a financial strategy, such as pricing decisions, long-term projections, new acquisitions or sales, and strategy formulation/refinement.
You need someone to compile your operational data into an attractive, easy-to-understand financial report for board members, banks, lenders, and investors.
Feel free to take advantage of our (free!) consultation to review our Fractional Controller/CFO and other client accounting services and learn how we can help you grow your business—together!
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