Do I Need a CFO?

People make money; they want to know how much.  People lose money; they want to know how much.  You will always have a job. – Rose Leone

When I was a teenager in the early stages of considering a career, I found myself taking a liking to math and business.  Accounting seemed to be a natural fit and I mentioned it to my mother one day.  Since my dad had passed away a few years earlier, the woman with the fourth grade education provided this sage advice.  For those of us in business, this role takes the form of a CFO and in honor of my mother’s recent 98th birthday, I thought I would pass it along to those entrepreneurs who wrestle with this question.

Well, coming from a CPA who helped place loads of CFO’s, the answer is an unequivocal yes.  And, the good news is that today the profession has evolved to the point where no matter your stage of development, a CFO is available to help.  You just have to know where to find them.  Maybe some clarification will help.

To begin with, a CFO is really a function and not a person.  Without too detailed an analysis, suffice it to say that this function has two key components – compliance (financial reporting, tax filings, etc.) and advice (strategy, funding, etc.).  At different stages of a company’s evolution, this function can take different forms.

Startups

The financial reporting can be handled by owners (usually using software like QuickBooks or Xero); and a CPA can help with the tax reporting and the advice part of the equation.  Those CPA firms in this space may offer this service at a very discounted rate.  There is also a group of complete outsource capabilities available.  The unfortunate point is this function is usually seen as a cost center versus a “value add” so owners often delay for too long the step of getting this function filled.

Growth

At the early growth stages, some of what is outlined under Startups may still be applicable here.  The good news is (again) fractional CFO services are available and, at times, you can get some real, experienced and trusted advice from someone you only use a couple of days a week… a great value to you, the owner.

At the later stages, especially if your funding becomes more sophisticated (venture capital or even IPO), you need that appropriate financial partner and should hire a full-time CFO.  Again, at times, the fractional CFO groups sometimes offer a “temp to perm” service which has great benefits.

Mature

In a lifestyle-type business, I tend to see models similar to startups with a bookkeeper-type person handling the basic financial reporting and the CPA covering taxes and advice.  For other mature businesses, I have seen more fractional CFO’s who can also help with succession planning and even the exit of the owner from the business. CPA firms are also playing this role.

So, my simple advice is to make sure your CFO function is covered regardless of your stage of development.  Doing so is a best practice and will help ensure the success of your business.

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