All of you reading this article I’m sure has heard the acronym “CFO” used before. You probably even know that it stands for Chief Financial Officer. I would bet the farm, however, that the majority doesn’t know what a CFO does and why it is important for an Entrepreneur to hire a good one early in his business’s history.
Using a football analogy (it is Super Bowl season after all), the CEO is the Owner and the CFO is the Head Coach. The CEO assembles the team and creates the vision. The CFO uses a thorough understanding of the game (offense, defense, special teams, training, player relations) to coordinate the team’s efforts and produce wins. He uses statistics and his experience of what works to keep the team in line with the game plan (business plan).
The CFO is the heart of your business. He coordinates the efforts of other departments. He keeps score (management reports) so you know if you are winning and why. He keeps your other team members honest (numbers don’t lie). He keeps everyone on track (comparison to budget and business plan). A CFO is the sidekick you can always depend upon.
Now lets get down to the nitty gritty. What specific tasks does a CFO perform? Below is a sampling. Go to the Mindful Business Solutions website (www.mindfulbusinessinc.com) for a more complete list.
- Insure all monies owed are collected timely.
- Project what your cash flow will be in the near future in order to avoid shortages.
- Analyze business operations to improve efficiency and profitability.
- Analyze the sales and marketing team to insure their efforts are effective and providing an appropriate return.
- Configure, coordinate and manage separate software systems in order to capture important management information.
- Invest excess cash.
- Oversee the accounting function.
- Develop a sales commission system that appropriately rewards Sales Reps for their efforts.
- Determine which products and services are the most profitable and decide whether the pricing structure is adequate to meet the company’s profit goals.
- Create an annual budget.
- Create and implement systems to improve efficiency.
- Implement internal controls to protect you assets.
- Reduce costs without sacrificing customer service or quality.
CFO’s come in all shapes and sizes. I suggest that yours have at least the following qualities:
- CPA – In depth knowledge of accounting and business systems is a must. The CPA designation indicates the person has at least a basic level of knowledge.
- Hands On Operations Experience – Unless your CFO has actually managed the day-to-day operations of a business in an intimate way, he just has book knowledge. Once you’ve done it, you can help others to do it.
- Entrepreneurial Spirit – Your CFO must be willing to think and act outside of the box. He must be willing to take calculated risks. If he won’t your business is doomed to be stuck in idle.
There is an important difference between a CPA and a CFO. The two can be one in the same, but often they’re not. Much of the formal training CPA’s receive teaches them to be technicians rather than accounting entrepreneurs. They can produce a technically correct financial statement or an accurate tax return. Unfortunately they lack the insight and experience to fully understand how different aspects of the business are interrelated and interconnected. They tend to gravitate towards those things that can be expressed in numbers and shy away from things less tangible. That is why CPA’s can be uncomfortable with marketing strategy and they tend to focus strictly on sales production rather than the finer art of sales. This “blind spot” regularly results in one dimensional solutions….lay off employees, cut expenses.
A true CFO has a “world” perspective. He welcomes and actively seeks out information from as many sources as he can get. He enjoys the subtleties of sales and marketing and incorporates them into the financial plan. Solutions are almost never black and white and they almost always require humanistic qualities. A CFO understands that numbers are only tools. The real useful information comes from understanding the story behind the numbers.
No business is too small to have a CFO. When your sales and transaction activity don’t warrant a full timer, solicit the help of an outsourced part timer. If your business does not have a CFO, I strongly urge you to find one. A good CFO literally can be the difference between a profit and a loss, between surviving and thriving
