The most basic definition of the role of a CFO is that they are a senior executive responsible for managing all the financial actions of your company. Your CFO can assist you with forecasting, cost-benefit analysis, obtaining funding and cash flow management. Not only can your CFO manage the financial reporting and compliance, but they can play a vital role in influencing your company strategy. Some not so commonly thought of benefits of a CFO is that they can act as your quarterback and advocate when negotiating new debt structuring terms with your banker or tax strategies with your CPA.
If you are using a bookkeeper already, then you know this is a primarily an administrative function, albeit a very important one. Using your CPA for some CFO functions could limit you and your business. CPA’s and CFO’s have vastly different functions. Where a CPA is typically tax focused, your CFO is someone who can assist you with:
- Forward-looking and long-term financial analysis (not just reactive strategies)
- Revenue management and cash forecasting
- Budgeting and expense control
- Compensation plan development
- KPI development and analysis
- Securing financing and raising capital
- Advocate for you and your business with your CPA, banker and bookkeeper
There are important factors beyond your growth and revenue generation that can impact your decision to add a CFO to your team. Ask yourself:
- Would it assist you with gaining respect from your customers, vendors, banks or shareholders?
- Are your financials up to date and have the integrity to forecast future cash requirements?
- Could you benefit from having the CFO facilitate tax planning strategies with your CPA?
- Are you struggling to make payroll, pay your bills and still running short of cash each month?
- Are you planning on taking on more debt or needing to restructure debt?
- Do you have a rapid rate of growth?
- Are you preparing for a merger or acquisition?
- Have you considered the benefit to your business of having a CFO with diverse industry experience? Or what about a CFO with CEO experience as well?
How much will a CFO cost you?
That is a complex question when you factor in how much money your CFO will save you. You may also benefit from using an outsourced or part time CFO, especially when you don’t have 2,000+ hours of work per year to give to them. The cost of a full-time employee with benefits can be very steep. You may be better served hiring a part-time CFO at $300/hour rather than bringing someone in at $377,298 salary + bonus (Source: Salary.com – midpoint for Denver, CO) per year plus benefits. Your level of investment will also prove worthy when you can ensure that critical things like financial reporting actually gets done.