As a long-time CFO to many clients since 2001, you do not need a CFO. Here’s what you do need at a minimum:
- a strong accountant
- a strong money person
- a strong financial person
When funds permit, the next key role is the financial analysis role which is underrated in small business. Let’s unpack each of these roles.
A Strong Accountant
I still have clients saying, “He or she is a CPA. They have to be good, right?” Not if you want them auditing or doing taxes.
What you want is a person with 5-7 years of solid experience having worked under a great CFO or controller.
Once you find that person, you need someone who can get bills paid timely and accurately. You need clients billed on time and the cash collected ASAP. Even if payroll is outsourced, you want a flawless process for getting staff paid along with taking care of Uncle Sam’s portion for taxes.
The accountant is also responsible for financials that are cranked out the 2nd or 3rd day of the month once every balance sheet account has been reconciled.
Getting a strong internal accountant is job number 1.
A Strong Money Person
If you allow the accountant to be in charge of money, something will suffer in their accounting role. That means you’ll generally be the money person for a while. That means making sure bills are paid timely and clients pay on time. Inventory has to be tightly managed and other spending needs controls too.
You might be saying, “This role is taken care of.” But is it? I walk into many money issues each time I start new client work. If you are not a such person, you are in the minority.
Money management is also job number 1.
A Strong Finance Person
Who will fund that next large equipment purchase? Who will help with the $4 million LOC renewal? How much will you pay for that acquisition that would be a great fit for the business?
Is cash tight? Will profit levels provide adequate liquidity over the next 6-9 months? How will income taxes be funded? How much money can be pulled from the business for personal use?
Your finance person answers these questions.
Once accounting, money and financial management are covered, you need that strong analytical person who understands how all the parts connect inside and outside the business.
Their favorite two words are ‘what if’ and they provide multiple answers to those two words.
The CFO Role
I’m not saying you never need a CFO. The emphasis is ensuring the above roles are covered first.
Furthermore, I’d even opt for the experienced controller first before hiring the CFO. The best controllers are already performing CFO work–they just don’t have the title.
Accordingly, focus on your need, not the title.