WHEN SHOULD A COMPANY RECRUIT A CFO.
Answers
When it needs (in no particular order) a) strategic planning and thinking, b) an interface between the company and bankers, lenders, vendors and customers who feel that the person knows them as well as the company, c) financial analysis, budgeting/forecasting, d) interface with complex topics such as insurance, real estate, health insurance, accounts receivable and legal issues.
The controller handles the day to day accounting issues with oversight by the
Hope this helps
You hire one in the beginning, i.e. your second or third employee.
A business owner would probably say - I will start with a bookkeeper. As my needs grow, I will hire a Controller. If I grow even more, I will hire a Manager of FP&A. If in the end I need an across the board specialist in Accounting/Finance/
Problem - In this approach you are always playing catch-up. The business owner realizes they need the next hire after an error has been made that has financial or
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This would make sense in a perfect world, but alas you are correct as to what a Business Owner would say/do and not only are they playing catch-up, they've made some real mistakes with real negative impact on their bottom line...
A CFO is looked at from the perspective of book keeping and compliance rather than a strategic thinker who brings in a pool of resources and administers the operation from the strategic perspective bringing in efficiency, visibility and good governance. Quite a few of Indian Entrepreneurs ( most of them being either family oriented businesses or are first generation entrepreneurs) would not share strategy with their CFO's as they think that he is either a police person or will always discourage the strategy coming from a conservative background. He is taken as a controller or a
In India , there are a few organisations that have understood the CFO's profile but largely the thought process is undergoing a change but slowly. I guess, when the organisations like SEBI and other regulatory bodies give prima facie recognition to the job of a CFO who should be prime responsible for majority of the organisations value addition and compliance, the importance would be felt, until then I would say the CFO positions is evolving.
My experience with start-ups strongly argues for Wayne Spivak's position, and I also can vouch for the reality of Anonymous' comment that "a CFO is looked at from the perspective of book keeping and compliance". It's certainly not just true in India! The ideal "CFO" for an infant organization might be a person with the experience, skills, and willingness to play multiple roles effectively -- CFO, Controller,
CFO's role is to understand where the company is headed and to make sure it has the resources to get there. So whenever a company is in a transition stage (growth, contraction, or exit) a CFO should be considered.
In some early stage companies the founders lack the experience and understanding of the CFO's role. Too often, accountants flatter themselves by accepting the CFO title, but do little more than bookkeeping and reporting chores. To be effective, CFOs should only serve in those organizations that fully embrace the CFO concept.
Small companies miss the value of CFO guidance from the start. The best solution is to retain a consultant CFO if only for a few hours a month from the earliest time that it can be afforded even in the new business planning stage. Allow that consultant to guide you in the development of bookkeeping /
I was interviewed last year by
It comes down to three main things, in my opionion...size (usually $1 million in annual revenue for a part-time CFO, $25-$50 million for a full-time CFO), complexity (thousands of SKUs, lots of investors, complex debt instruments, etc.), and trajectory (is the business growing or shrinking rapidly). If a business can answer yes to at least one of these questions, then it's time to consider a CFO, at least on a part-time or outsourced basis, and possibly full-time.
Alternative some companies consider is "hiring a smart" individual early, have them grow into the role and invest in their development. This comes down to a "buy" or "build" decision as far as talent. Depending on the resource constraints and rate of business growth, companies may not have a choice.
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I don't believe (except for the under $1M companies) that they can't hire someone who knows what they are doing, at least in a part-time mode while they "build" from within.
"Buy" and "Build" is fraught with large learning curves which often time lead to large errors in judgement, due to lack of experience.
I like this strategy, I just haven't seen it work very often. The reality is that few early-stage companies really understand what a real, full-blooded CFO looks like (in terms of skills, experience required, and overall value add to the company) and how that individual can become the most important asset to "nailing" the business model and building a culture of execution.
First of, small to medium size company owners need to understand what a CFO does and how vital their contribution to their companies' performance are. A lot of them think of CFOs as the "necessary evil". I worked for a company as a CFO/Controller for eleven years and one of the partners still referred to me as his bookkeeper.