Why Your Business Needs a CFO

Let’s face it: most small business owners do not find themselves looking forward to working on their finances. Some may even dread it. However, there is no avoiding it. Financials are an essential part of your business, so you cannot just opt out of them, but you can bring in an expert to do them for you.

And that’s where a Chief Financial Officer (CFO) comes in. If you like making the money but don’t like managing it, there’s no need to worry because CFO’s do. Their job spans over a broad range of responsibilities within the entire financial sector of your business. However, before you get all caught up in the idea of handing over the reins to somebody else, it is important that you understand the role of a CFO and how one could truly improve the success of your business.

What is a CFO?

As you can probably guess, a CFO is in charge of the financial sector of your business–but what does that really mean? Well, generally a CFO manages the cash flow and does financial planning, but the role goes much deeper than that. He or she fulfills a number of responsibilities, some of which include:

  • General financial leadership activities
  • Supervising of the financial department
  • Analyzing financial data and potential solutions
  • Devising and monitoring strategic business plans
  • Training and coaching financial managers
  • Managing budgets between departments
  • Managing accounting, tax, legal, and treasury departments
  • Implementing processing and accounting systems
  • Reviewing financial statements and reporting results
  • Monitoring legal implications that could impact the business
  • Ensuring that the company complies with all legal obligations
  • Interpreting data and creating financial forecasts
  • Maintaining the proper insurance to protect against risk

And that’s just barely scratching the surface! When it comes to working with finances, CFO’s are experts at what they do. In the long-run, hiring a CFO is a decision that can and will save you–and even bring you–remarkable amounts of time and money. Just because they can do all of this does not prove that it will help, though, so it’s important for you to know…

How a CFO Will Help Your Company

Hiring a CFO is a big decision for small business owners, so you need to know what you are going to get out of it. The role of a CFO has developed and transformed throughout the last several decades from someone who just crunches numbers into something far more substantial. As the job of a CFO becomes more multifaceted, the impact that a CFO has on the company becomes much larger. How can this impact positively affect your company, though?

Find the ideal business structure. Typically a CFO can determine the best structure for your company; since he or she understands the consequences (both positive and negative) of certain financial decisions, he or she can provide extremely useful advice on any situation.

Know what you need to do next. Since CFO’s are responsible for ensuring that your company complies with any imposed regulations and for keeping your company’s financial health at a maximum, they know the steps you need to take in order to get to where you need to be.

Take advantage of opportunities. If your bookkeeping is not done correctly, you might think that you bring in less money than you make–and this can cause you to miss opportunities. With a CFO overlooking the financial sector of your business, you can confidently make decisions based on your company’s financial data.

Get some insight into the bigger picture. It is the job of the CFO to supervise the budgets and finances of every department, so he or she is always looking at the bigger picture. As a business owner, with so many tasks on your plate, it might become difficult to take a step back–so the CFO can help you gauge where your business stands.

Share some of the decision making. Everybody knows that it can be a lot of pressure as a business owner to make decision after decision, especially since you have to shift gears between departments. When you have a CFO, you can share some of the responsibility with him or her. On top of that, you can ask your CFO for advice when it comes to difficult business decisions.

Allocate the work to someone who wants it. This might actually be one of the most important advantages of hiring a CFO. If you do not enjoy finance, you might get bored, or tired, and it could cause you to make a mistake. On the other hand, CFO’s usually like–or even love–what they do, and that passion can make them even more careful with your finances.

There are so many benefits to adding a CFO to your team of professionals, but the most important benefit of having a CFO is being able to rest assured that your finances are in the right hands.

The 3 Types of CFO’s

There are three basic types of CFO’s that you could hire, and it all depends on what you need for your business.

  1. Internal: An internal CFO is somebody who works full-time for your business. Typically you would recruit a full time CFO when your business becomes very large.
  2. Fractional: A fractional CFO is a person you hire to work part-time for you business. Essentially he or she is a part-time contractor who you hire to handle the duties of a CFO when you need them.
  3. Virtual: A virtual CFO can be either part-time or full-time, but their services are offered at just a fraction of the cost. They share the same capabilities as a regular CFO but everything can be done virtually.

The type of CFO that you should hire depends on what kind of services you need. Is your business very large and bringing in a ton of revenue? An internal CFO is probably right for you. However, if you do not need somebody to work all the time but just when you want, then you should hire a fractional CFO. Depending on your business structure and how you want the work done, you might even consider hiring a virtual CFO, especially since you can receive the same services for a lower cost. The decision is up to you; just weigh the needs of your business against the benefits of each type, and you will surely be able to find the right CFO for you.

When You Should Start Looking

As technology progresses, the ability for smaller businesses to prosper increases as well. However, as most small businesses have no more than a few employees, it has become necessary to outsource specific jobs. As you begin to manage your company’s finances, knowing when to give the responsibility to somebody else will help you grow your cash flow and improve the efficiency of your workflow.

Once your company reaches a certain point of growth, you should ultimately recruit some sort of financial professional. In many cases that would be a CFO, but you also might need to hire a controller. How do you know which one to hire? Well, you can read about controllers here [LINK to Controllers blog] to determine which kind of professional you should hire.

To keep your profit margin high, you will have to outsource specific services; any service that you think could be better done by a professional is probably a service you should outsource, especially if it takes up too much of your or your employees’ time. You might even want to outsource the bookkeeping processes to make sure that all of your data is correct and reports are completed on time; if you want to know more about outsourcing your bookkeeping, feel free to contact us.

Gita Faust

About the Author

Gita Faust has over 30 years of accounting experience in the real estate and property management industry, Gita Faust is more than just a real estate investor; she is also popular for her work as an accountant, consultant, mentor, speaker, QuickBooks Top ProAdvisor, QuickBooks Solution Provider, member of Intuit’s Trainer/Writer Network, and, of course, author. Gita is well-known for her exemplary leadership and advisory skills. In fact, she even helped pioneer the adaptation of QuickBooks to suit the needs of professionals in real estate and property management. To share her knowledge she has written a series of courses titled Simplified Accounting Solution, which provides step-by-step guidance for those working with QuickBooks.

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