July 24, 2020

“CFO” is a buzzword that we see getting used a lot in the entrepreneurship space. It seems like everyone wants a CFO! In this post we’ll dig into what exactly a CFO is and when you should use one.

What is a CFO?

We often see the term CFO used interchangeably with the term “controller” but these roles are not the same! The controller is responsible solely for the accounting function of the business, and in most large companies, the controller reports to the CFO. The CFO, or Chief Financial Officer, is a person who is responsible for the entire finance function of a business. This does include accounting, but also includes tax, treasury, and financial planning. The CFO is responsible for the financial strategy of your organization, and is primarily focused on the future. Controllers are primarily focused on recording what has already happened.

You have the option of hiring a CFO full-time, but be aware that a good full-time CFO is going to cost well into the six figures. The CFO should not be your first full-time finance hire! Before you hire a CFO, you should hire a bookkeeper or admin role to take care of your day-to-day transactions (accounts payable, payroll, billing, and bank transactions), and you will probably need a controller to make sure your accounting is done correctly, at least on a part-time basis. The same person is not going to be able to fill the role of bookkeeper and CFO – a traditional bookkeeper likely doesn’t have the skill set needed to be an effective CFO, and a good CFO is going to cost too much money to spend all their time on the nitty-gritty transactions. Don’t hire a “CFO” and then have them spend their time processing your AP!

Most companies, even those with $20 million and up in revenue, can get by with a part-time CFO because there just isn’t a need for that higher level skill set for 30+ hours per week. There are exceptions to this if your company is very complex or is in a highly-regulated industry, but in our experience your budget can be better used on a part-time CFO.

Most companies, even those with $20 million and up in revenue, can get by with a part-time CFO because there just isn’t a need for that higher level skill set for 30+ hours per week.

You may also see the part-time CFO role referred to as a virtual CFO, outsourced CFO, fractional CFO, or remote CFO. Ultimately, they’re all the same thing.

What can a CFO do for your business?

Here are some examples of what a CFO can help your business with:

Cash flow management: Creating a strategy and monitoring to make sure that you don’t run out of money, maximizing your profit and cash flow.

Financial analysis: Interpret your financial data to help make decisions.

Forecasting, financial planning: Prepare for the future, create a plan to achieve your business goals.

Manage the finance department: Make sure the day-to-day accounting, treasury, and other finance functions run smoothly, streamline processes to make you more efficient.

Financial strategy: Look at the bigger picture, help make hiring decisions, advise on expanding product lines/locations, advise on capital expenditures.

Mergers, acquisitions, divestitures: Work with bank/investors, develop a strategy for acquisitions and divestitures. Create an exit plan and/or succession plan.

Tax planning and strategy: Create a proactive tax plan to minimize your liability. Incorporate tax planning into business strategy and decision-making.

Who should use a CFO?

If your business is growing beyond the point where you feel comfortable making strategy decisions alone, or if you could use help with any of the above areas, you may benefit from a dedicated, virtual CFO.

If you need help with your day-to-day accounting, then a CFO is not quite right for you. In this case, we would recommend using a bookkeeper or controller to get your books cleaned up and closed on time every month.

The biggest thing you can do to make sure you’re maximizing the benefit of your CFO and making the best use of their time is to make sure that your books are in order and you can hand over recent, clean financials. This will enable your CFO to have a clear picture of where your business currently stands and be able to help you make the best decisions for your business.

Ready to hire a virtual CFO? Let’s talk – we’d love to help you achieve your vision.

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