You may think your company is too small to have a chief financial officer (CFO).
Or maybe you’re considering hiring one once you’ve reached a certain size or level of profitability. But you might find value in having CFO knowledge even for a few hours a month. First the “why”:
The right CFO can help formulate and validate strategies for growth and viability. More than a controller, a CFO provides a financially oriented voice to the owner, CEO, or executive director. They understand “business drivers,” risks, and how to create value. The CFO, by definition, works hand in hand with the CEO to carefully navigate the opportunities and risks of taking a business to the next level.
Now for the “how.” A CFO can help a management team:
Be more strategic — A CFO can evaluate opportunities and build strategies around markets, geographies, products and services, pricing, and competition.
Sharpen accuracy — CFOs provide timely and accurate financials and metrics and educated interpretations of those numbers to guide actions.
Manage risk — Every organization needs a right-sized risk prevention infrastructure to protect against fraud, errors, and business risks. An experienced CFO helps identify and mitigate exposure by establishing and enforcing appropriate financial and operational controls.
Manage growth, profitability, cash flow, and expenses — While everyone in an organization has some responsibility in these areas, CFOs are the conductor on the train, working hand in hand with all levels of management and staff to help track these metrics and make sure performance is in line with company goals and strategy.
Negotiate with suppliers and customers — A CFO can help a company achieve the most advantageous rates, terms and conditions, credit lines, and payment options on the revenue and expense sides of the ledger. This can help ensure that cash flow is available to keep operations running smoothly at all times.
Establish relationships with funding sources and lending institutions — When capital is required, a strong CFO will identify and put in place the right types of capital from multiple investors or lending institutions. This vital role can provide a business with the lines of credit or working capital needed for expansion.
Manage organizational changes – Mergers, acquisitions, and IPOs are all major ownership changes that a company may want to consider as part of its growth strategy. A CFO with the right background can provide the appropriate quantitative analysis and strategic direction to lead a business smoothly through the process.
For those companies beginning a search for a CFO, look for a candidate with the right industry experience, communication skills, leadership style, and cultural fit. Most importantly, find a candidate who understands and fully embraces the “future state” envisioned and knows how to take a company there.
By Jay Burstein