1 (801) 804-5800 info@preferredcfo.com
Facebooktwitterpinterestlinkedinmail

Whether your business is a startup or an established enterprise, you need a strong, agile financial team with a highly competent leader. Some companies think they can get by without a Chief Financial Officer (CFO) until they start preparing to go public. Other companies wait too long to hire a CFO simply because they don’t want to spend the money. This can be a mistake. A good CFO can be a huge asset at almost every stage of business development. This article is intended to help you determine when and how to bring on a CFO that can best help you with your business needs and goals.

What Can a CFO Do for Your Business?

As a key player in a company’s decision-making process, a CFO may be considered a steward over company assets and finances. A CFO adds value to the business by looking forward with a long-term strategic view and balancing it with the short-term needs of the company and its stakeholders. A CFO helps optimize company profitability by finding ways to increase efficiency, make the best use of resources, and identify viable opportunities.

The COVID-19 pandemic has made the CFO’s role more important than ever. In a June 2021 interview with Forbes Magazine, Trintech CFO Omar Chouchair said,

“Over the last fifteen months, the role of the CFO has become significantly more complex. In fact, according to Deloitte’s recent North American “CFO Signals” survey of CFOs in Q1 2021, more than half of respondent CFOs (54%) reported ‘having higher demands from their executive/leadership teams since the beginning of the pandemic.’ Now, as we move towards a post-pandemic reality, CFOs are a key voice in determining their firms’ topline strategies. CFOs are involved in efforts across the business, from enhancing processes that support talent acquisition and retention to ensuring business resiliency and preparing for the future.”

Typical responsibilities of a CFO may include the following:

  • Financial forecasting
  • Building financial models
  • Raising capital
  • Managing the financial team
  • Preparing financial statements
  • Optimizing product lines and sales strategies
  • Managing cash flow
  • Preparing exit strategies

What Makes a Good CFO?

When looking for a CFO, you should seek an experienced, visionary financial executive who fully understands finance and funding, and is both a leader and a collaborator. You need someone who can work well with people and stay calm under pressure. Here are some other qualifications you may wish to consider include the following.

Breadth of Experience

A qualified chief financial officer will, of course, be proficient in the basics of accounting and finance. The CFO should also be experienced in other areas such as strategy, raising capital, risk management, forecasting, investment, and cash flow optimization. A CFO with a diverse background can be very valuable as a source of creative ideas and strategies. The right CFO will be able to quickly gain an understanding of the unique environment in which your business operates and the kinds of employees, clients, vendors, and stakeholders you work with.

Industry Knowledge

Although the basic principles of accounting and finance are largely the same everywhere, each industry has its own standards and particularities. Your CFO should be familiar with your industry and its financial challenges. A CFO who has experience with other businesses in your industry or similar industries will be able to recognize issues and opportunities as they arise and prepare accurate financial forecasts.

Tech Smarts

The modern CFO must be tech savvy and know how to use technology to optimize effectiveness. This includes helping the company to select and use the best financial systems for their needs and to offer effective reporting and tracking tools. The CFO needs to be able to evaluate new technologies not only for cost versus benefit, but also for potential risks such as data privacy and vulnerability to hacking.

Leadership Ability

A CFO needs to be a people person as well as a numbers person. As a leader of the financial team and an influencer of the executive team, the CFO must be able to build solid working relationships and motivate individuals without undue pressure. The CFO also needs to be a good cultural fit for the organization.

Communication Skills

A CFO must be able to express ideas clearly and concisely and back them with data. Both oral and written communication skills are important. Teamwork is particularly important both in the executive suite and in the financial department. The CFO should be able to work well with personnel at every level.

A CFO must also be able to explain the business articulately to investors, bankers, and other stakeholders. This is especially important when the company is seeking financing or preparing an exit strategy.

Problem-Solving Ability

Every business experiences difficulties and emergencies from time to time. When financial issues arise, you need a CFO with a cool head who has overcome crises in the past and can recommend creative strategies for conquering current challenges.

The CFO needs to be able to maintain internal controls regardless of circumstances and ensure that financials are double-checked to prevent errors and fraud.

Risk Management Ability

Management of both internal and external risks is a key component of the CFO’s job. Internal risks may include such factors as bad data, inadequate controls, and unreliable technology. External risks might include supply chain issues, competition, and other factors unique to the industry. The CFO needs to recognize and evaluate risks and provide contingency plans to deal with them. This process involves financial forecasting, budgeting, negotiations, and more.

Connections

An experienced CFO who has worked successfully with multiple companies will be able to provide connections to financial institutions, suppliers, investors, and others. This can be a great benefit, especially when a company is in the early stages of business.

When Is It Time to Hire a CFO?

Finding a good CFO can be a daunting process, but you will probably find it well worth the effort. Don’t assume that just because your company is a startup or hasn’t reached a specific revenue goal that it is too early to consider bringing on a CFO. Smaller companies will benefit from outsourced or fractional CFO options that will offer a high level of financial expertise without the full-time, in-house cost.

If your company needs to raise capital, wants to expand, lacks financial oversight, or needs help with financial reports and forecasts, it may be time to hire a CFO. If your financial team is overloaded with work or struggling to keep accurate records, it may be time to hire a CFO. If you want to move into new territory such as international markets or more sophisticated accounting software, it may be time to hire a CFO.

Where Can One Look to Find a CFO?

Networking is often a good place to start. Trusted acquaintances who have a knowledge of your industry may be able to recommend competent prospects who have the right experience and are open to new opportunities.

Posting on job boards and on the company website will probably bring you a fair number of candidates, but be prepared to sift through a lot of resumes and sit through a lot of disappointing interviews.

A paid recruiter or employment agency can help you find a more qualified pool of candidates, but this option can be very costly in the long run.

Another option is to hire a part-time or “fractional” CFO.

Why Should You Consider a Fractional CFO?

Not every company has the need or the resources to hire a full-time CFO. An excellent alternative is to hire a fractional CFO. A fractional CFO provides a high level of strategy and financial expertise without the associated costs of salary, benefits and bonuses that would be expected by a full-time employee.

A fractional CFO is typically hired on a contract or retainer basis. Many fractional CFOs can handle challenges on a per-project basis or can oversee financial strategy with your internal team or their own team of controllers and bookkeepers. A fractional CFO can help the business develop forward-facing financial visibility, create financial forecasts, manage growth, prepare for upcoming events, and achieve company goals. A fractional CFO can be given as much or as little responsibility as you wish, depending on the needs of your company.

How do you hire a fractional CFO? For the best results, we recommend the use of a fractional CFO company. In doing so you can reduce the headaches and risks of the hiring process, get a more seasoned CFO, end ensure continuity of service in the event that the assigned CFO is unable to perform the required tasks. A fractional CFO company will usually support its CFOs with a team of competent controllers and bookkeepers to ensure good service.

Final Thoughts

Whether your company is new, well-established, preparing for an IPO, or pursuing an exit strategy, having an experienced Chief Financial Offer can be a big financial advantage. If your company is not in a financial position to hire a full-time CFO, you may wish to consider fractional CFO services such as those offered by Preferred CFO. A good CFO can not only keep your finances in order, but also can provide the insights and strategies that will help your business grow, overcome obstacles, and prosper.

About the Author

David Guyaux

David Guyaux brings over 25 years of experience as CFO, VP of Finance, and Controller roles within both public and private enterprises. He has organized finances for companies to turn around operations and meet compliance and governmental requirements, as well as to prepare for mergers and acquisitions.

You may also be interested in...

What to Expect During Due Diligence

What to Expect During Due Diligence

Due diligence is the evaluation process used to inform decisions about business opportunities, such as a merger, acquisition, privatization, investment, or other financial transaction. During due diligence, the interested party will request documents, explanations,...

9 Business Finance Lessons We Learned from 2020

9 Business Finance Lessons We Learned from 2020

If there’s one thing we learned in 2020, it’s that change can happen—and it can come quickly, fiercely, and unexpectedly. In 2020, businesses were met with challenges they could never have predicted, and many had to shut their doors for good. Still others were...

What is an Outsourced Controller?

What is an Outsourced Controller?

An outsourced controller is a financial expert who helps keep your books up-to-date. They also provide financial reporting and information in a timely manner. Controllers can be in-house or outsourced. If the controller is outsourced, this typically means they are an...

What is the Difference Between a Controller and Comptroller?

What is the Difference Between a Controller and Comptroller?

The terms “controller” and “comptroller,” as well as the positions they define, may seem strikingly similar. Indeed, the word “comptroller” is believed to stem from a 15th Century misspelling of “controller.” However, despite the similarity in titles and functions,...

6 Signs You May Need a Financial System Upgrade

6 Signs You May Need a Financial System Upgrade

How often do you reevaluate your financial management system? For most organizations, the answer is not very often. After all, the ultimate point of a financial system is to put it in place, then rely on it and the people who contribute to it to help things run...

How to Choose an ERP System for Your Business

How to Choose an ERP System for Your Business

As companies grow and their operations become more complex, they tend to outgrow their existing software. Expanding business units or segments tend to become more independent over time. This makes interdepartmental communications and resource allocation more difficult...

Variable Costs, Fixed Costs, Total Costs: How Do They Differ?

Variable Costs, Fixed Costs, Total Costs: How Do They Differ?

Nearly every business has both fixed and variable costs. To ensure that your business remains fiscally solvent and profitable, it is important to understand the different types of costs and how to manage them. In general, variable costs relate to the number of items...

What is GAAP and Why is it Important?

What is GAAP and Why is it Important?

What is GAAP and Why is it Important? Financial reporting is an important part of business that communicates the financial performance and results of a company. It records and presents information about the company’s financial position, revenues, expenses, and related...

Debt vs. Equity Financing: Which to Choose?

Debt vs. Equity Financing: Which to Choose?

Every business needs financing to fund growth. The old adage is true: it takes money to make money. There are two basic types of business financing: debt and equity. Each has its advantages and its drawbacks, and over time most businesses will need both. Finding the...

Strategies for Improving Vendor Contracts

Strategies for Improving Vendor Contracts

For businesses that are inventory-supported, such as retail, resale, or manufacturing businesses, strategic vendor contracts can greatly enhance your profitability and cash flow. For some companies, vendor contracts are a set-it-and-forget-it portion of the business....

Basics of Business Banking

Basics of Business Banking

Every business needs banking services so they can receive funds, pay bills, and finance large purchases. It may be tempting to just use your personal bank for your business needs. However, a business has much greater need to understand and carefully select its banking...

How to Determine Cost of Goods Sold (COGS)

How to Determine Cost of Goods Sold (COGS)

What is Cost of Goods Sold (COGS)? Cost of Goods Sold is also known as COGS or Cost of Sales. It is a critical financial metric that indicates the direct cost of creating or acquiring the goods a company sells during a given time period. This figure helps companies...

Facebooktwitterpinterestlinkedinmail