A CFO can shine a light on cash flow, risk, and profitability. It’s a strategic advantage for even the smallest organization.
Think your company is too small to have a chief financial officer (CFO)? Or will you hire one once you’ve reached a certain size or level of profitability? I believe you might find value in having CFO knowledge even for a few hours a month. Here’s why:
The right CFO can help you 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. He or she understands “business drivers,” risks, and how to create value. The CFO is not a “bean-counter,” but rather, someone who works hand-in-hand with the CEO to carefully navigate the opportunities and the risks of taking your business to the next level.
Let’s get more specific. A CFO can help the 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 importantly, good 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 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 your 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 you have the cash flow available to keep operations running smoothly regardless of the state of your organization.
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 you with the lines of credit or working capital you need to expand.
Manage organizational changes — Mergers, acquisitions, and IPOs are all major ownership changes that your company may want to consider as part of your growth strategy. A CFO with the right background can provide the appropriate quantitative analysis and strategic direction to lead your organization smoothly through the process.
If you do begin 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” you envision and knows how to take you there.
How we can help
Determining what level of a CFO is right for your business depends on what you need to do or accomplish. For smaller companies, it may not make sense to have a full time CFO. In that case, you might enlist the support of a part-time outsourced CFO. We can help assess the CFO capabilities you need or act as your guide in a search for a full-time CFO.