CFOs: What We Bring to the Table

Ron Wilkinson
Ron Wilkinson

A CFO is responsible for far more than Finance and Accounting.  We’re responsible for the overall financial health and well-being of every department in an organization including, but not limited to, treasury duties, forecasting, budget preparation/review, contract negotiation, and so much more.

For example, when the production floor needs a new fixed asset, the CFO calculates the Return on Investment of the asset, provides a recommendation to the CEO, negotiates the price, and reviews and signs the contract.

When HR needs a new payroll package, the CFO reviews the shortlist, attends demos, negotiates pricing and maintenance, assists with the final selection.

When marketing builds a new campaign, the CFO reviews the budget, asks the tough questions, analyzes the cost/benefit, and discusses the pros and cons with the CEO.

In addition to the above roles, a CFO has to attend to other crucial responsibilities. The CFO is the right hand of business. They advise your business while looking at things from a wider perspective. The broad view and the close attention to financial details help decision-makers form a more comprehensive picture regarding the current state of the business and chart the course for its future.

A CFO oversees the process of raising the capital needed for growing the business. From weighing options, like equity and debt, to the timely collection of revenue, a CFO ensures that a business has the funds for financing its growth.

A CFO must have command over all essential Key Performance Indicators and driving forces in both the business and the industry that you operate in. Companies today are more data-driven than ever and this means that CFOs should continually keep current with all the latest information. Being aware of all the vital data means that a business can use the numbers to benchmark against the competition and gain insights needed to remain competitive.

A good CFO will strengthen and deepen the relationships with the source(s) of capital, relieving you of the burden of managing relationships with your investors, lenders, and critical partners, etc. This allows you to focus on building your business. 

A specific and, perhaps, non-intuitive example of the value of a CFO is a timely issue we are all facing right now, and that is ransomware.  Any and every CFO across the country is trying to figure out how to help protect their companies from a cyber-attack. For many companies, a ransomware payment or even just a short-term data-breach could financially destroy them. CFOs are mobilizing their various IT resources to learn how to teach their employees what to look for and to build protections into their systems. If a company has the luxury of a CIO these two will work together, but it is the CFO that will take responsibility for the results.

How do you know when it’s the right time to hire a CFO?  Is it company size?  Number of years in business?  Number of employees?  Yes, to any or all of these, is the best answer.

A key to determining the need for a CFO is the complexity of the business or of the associated taxation and regulations under which it must operate as well as where it expects itself to be in both the short and long-term.

The CFO forecasts and sets future goals for the business while providing leadership in assembling funds necessary for achieving the strategic goals.

Here are some other scenarios that may prompt a business to hire a CFO:

Developing New Products

With the rapid advancement in technology and changes in trends, current markets are unpredictable. Disruptive technology and shifting market dynamics mean that the new leadership models require change and the ability to adapt.

The CFO can understand and anticipate the need for change, making the position crucial for the business to capitalize and plan for future growth. A CFO will ensure that the objective to launch a product or to expand doesn’t fall flat by asking all the right questions and analyzing the available data.

Planning for Taxes

As a business grows its operations, it becomes exposed to further complexities, of which taxes are one.  An increase in the size of a business means that it needs to uphold its tax obligations at a much larger scale now. Companies that are facing increasing returns and profits often face complex tax rules and regulations. A CFO helps the business by interpreting and analyzing the changes in the law. Once the difference is accounted for, the CFO provides guidance on improving current tax situations as well as building and preserving assets.

To Execute Strategy and Provide Leadership

As the owner of a business, you get to decide its future and lay the foundation for the targets that need to be met. It is the job of the CFO to inform you of the feasibility of each of your targets.

While ensuring that the financial constraints of the set target are not too risky, the CFO provides financial leadership so that these targets can be achieved. While achieving those targets, the CFO will share vital information with all the concerned stakeholders and decision-makers.

Lack of Detailed Financial Data

Another thing that is necessary for ensuring the well-being of a business is the easy availability of detailed financial data.

As the owner of a small business, you can make decisions based on your knowledge of the market. However, as the business grows, the evaluation criteria require changes too. You can no longer make decisions based on your gut feel and a slight error in decision making can prove to be fatal for the business.

A CFO has access to data about your cash flow and working capital as well as a forecast of liquidity. Additionally, the CFO is also aware of the economic, regulatory, and industry changes that can affect your business.

When you feel the need for making calculated decisions that take into account the performance of the business and its set targets, then it is high time to call in a CFO. CFOs are in a perfect position to help the CEO establish a financially strong company and create wealth for its owners. 

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