What is a Small Business CFO?

In small business, we live in a world of title inflation. That means the CFO designation is anointed to anyone who runs the accounting and finance functions. That’s a narrow view of this role. It’s time to get educated on who a small business CFO is and what they do.

A CFO Definition

I’m asked this question a lot, “Mark, what is a CFO?” I even get this question from financial managers aspiring to reach the next level. Here’s my answer.

A CFO is any senior business leader who can step into the CEO role for one full year without sales, profits, enterprise value, or the company’s culture decreasing – increases could even occur on the CFO’s watch.

If a CFO cannot perform the CEO’s role, then he/she is more than likely a controller. Is that a problem? No. Every small business needs a controller-like professional long before they need a CFO.

You may be asking why a CFO doesn’t become a CEO. Some do, as that may be their long-term plan. I love what I do. I could probably outperform most of the CEOs I serve. But I also know my gifts, unique abilities, and desires. I’m a great number 2 person who enjoys watching the back of the CEO and also helping them to perform at their very best.

In this definition, I’m not saying the goal of the CFO should be to become a CEO. I’m not implying that. Instead, the CFO should know the CEO role so well they could perform it for at least a year.

If a CFO is not some sort of super controller, then what are they? Before we answer that question, we need to address an important concept and a few critical back-office roles in any small business.

The 4 Accounting Roles™

Since your business mindset is probably pigeonholing the CFO as a super controller-type person, let’s stick with that concept.

I have created The 4 Accounting Roles™ framework to help my clients better understand every position in accounting and finance. Here’s what that framework looks like:

Unpacking the Framework

Let’s start defining each role in the accounting and finance function, starting with the A-Player.

1. An A-Player is humble, hungry, and people-smart (I highly recommend the book, The Ideal Team Player). They are also technically capable of performing their duties as the position requires. This person also loves learning and wants to keep growing their mind. Is your finance function full of A-Players? Do you have a system for finding, hiring, and growing these team members? I do.
2. The Auditor is not your KPMG or PWC professional investigating the books at all times. Think of the auditor who ensures the game plan is followed flawlessly. Typically, the auditors in this context are accounting managers, controllers, or even senior VPs of Finance and Accounting. Your small business cannot grow without these first 2 roles.
3. The Analyst role is hard to pay for when a business is small. But an analyst is like icing on the cake once you bring one on board. Analysts cut, slice, and dice every critical and meaningful number in the business. I personally believe that you need to find this person before you hire the CFO. In most cases, the CFO plays the analyst role if they possess that gift and toolset.
4. The Architect is the mastermind who creates the blueprint allowing the CEO to achieve his/her dreams and objectives. This is especially true in smaller organizations where a COO or general manager does not exist (the CEO is filling that role). The Architect is fluent in marketing, selling, operations, and all the support functions of the organization. That’s why they can execute a winning blueprint leading to a winning financial performance.

Q&A on The 4 Accounting Roles™

Here are the questions I am frequently asked when I share this framework with owners.

Small Business Owner: I’m a small business. I can’t afford all these roles.

G3CFO: I know you can’t. But you have to have the A-Player in place. Without them, you’ll be stuck even if you have a great product, great marketing, great customer support, and strong team members outside accounting and finance. You need strong backstage positions allowing the frontstage to click on all 6 cylinders.

Small Business Owner: Okay, that makes sense. Which role do I hire next?

G3CFO: This is where a coach or consultant can help you. Many small business accounting managers and controllers lack the experience and knowledge to create the ideal accounting and finance backstage. And that’s partly your fault because you see CPA as a credential, and you hire them immediately. They might know debits and credits along with GAAP, but general business knowledge and systems thinking, and know-how are missing.

To fill this void, I created the following systems and tools:

• The blueprint for a timely and accurate close within 1-2 business days (and even weekly financials with a virtual close)
• Forecasting tools allow you to see where your cash will be in 4, 8, 12, and 16 weeks with at least an 80% confidence level
• Systems and processes where nothing gets missed in terms of daily, weekly, monthly, and quarterly administrative, financial, and accounting requirements
• Smart performance measurements that are updated in real-time and built with the best analytical tools on the planet, giving you marketing, sales, and operations insights

Again, most accounting managers and controllers that I’ve encountered in businesses with sales of less than $50 million cannot create the blueprints above for the businesses they are serving.

That’s where the coach/consultant can assist. If so, you can probably work with just an A-Player and an Architect until the business grows enough to be able to afford the Auditor, who is your accounting manager or controller.

Small Business Owner: I’m not sure I fully understand the Analyst. Can’t the Auditor perform this role?

G3CFO: I wish. We’re all wired differently. How can I explain this? Managers love managing. And some can perform analytical-type work. But their gift is in managing. If you moved that person full-time to an Analyst role, they might deal with anxiety or some other form of stress.

Similarly, if you moved an analyst to the Auditor role, they would grow bored very quickly. They’d quit.

You’ll know an analyst when you meet one. That’s essentially me, but playing the role of an architect comes easy for me too.

As I mentioned, having an Analyst is the icing on the cake. Once you can afford one, you’ll never let them go. They are indispensable in the data-driven world we now live in.

Small Business Owner: What else do I need to know about your framework?

G3CFO: Staring with the architect, draw a vertical line down the middle where the model is cut in half. If accounting is the greatest weakness in your organization, then you need a CAO-centric consultant. CAO is short for Chief Accounting Officer.

If you need a consultant who has much broader skills in all parts of any business, then you probably need a CFO. They excel on the right side of the framework.

Remember, frameworks are not an exact science. I love recreating the accounting function because reengineering systems and processes are second nature to me. But I enjoy the problem-solving requirements of the business as a whole.

Most consulting CFOs can wear the CAO hat because of their accounting backgrounds. However, not all CAOs can perform the CFO role because of their narrower skill set. But many CAOs I’ve encountered are fine with that because they love accounting and are great at it.

The Most Critical Meeting With G3CFO

Now it’s time to start looking at how I view the CFO role and how I can determine if I can even add value to your business – sometimes, I’m not the right fit.

Before we meet, you will have already given me 72 months of financial history along with detailed marketing and sales metrics.

After I build your blueprint for a winning financial performance, we’ll go through the G3CFO Small Business ING Framework™ as shown in the video below.

G3CFO’s Perspective on Small Business Reporting

Every small business CFO should be an expert at PRA™. PRA™ is short for planning, reporting, and analysis. It’s all about quantifying as best as possible the objectives, goals, and strategies of the CEO. More than solid accounting, PRA™ is the strongest analytical tool a small business CEO has at their disposal.

For the sake of brevity, take a quick peek at some of the planning, reporting, and analysis my clients are exposed to regularly –

Not Your Typical CFO

Would you like to work with a strong small business CFO? I know many of them and can steer you to them. I’m also familiar with B2B CFO®, the best small business CFO firm in the U.S. I’ve even recommended them in numerous CEO meetings.

If you like what you are reading and hearing, connect to me on LinkedIn and drop me a line, and we’ll start a conversation.

I do not sell. I listen. I then determine if your need is strong enough for what I can provide. I also determine if I’m even a fit. But it all starts out with an enjoyable conversation because I love business, and I love hearing CEO stories of how they got started.

More importantly, I hope you have a better understanding of what a small business CFO does.