A Chief Financial Officer — or CFO — is a critical part of your business team. Small businesses don’t need one onboard right away, however. You know what they say about having too many cooks in the kitchen. But when things in your proverbial kitchen start heating up, you may want to start thinking about recruiting a CFO. Use the below advice as guidelines for when to begin looking, and for delegating tasks once you find yours.
What does a CFO do?
In small businesses, the CFO is responsible for the interpretation of the results, cost control measures, capital acquisition and forward thinking due to economic, industry, tax, government regulation and social issues. The CFO is in charge of the company’s entire banking relationship, as well. Furthermore, many times, the CFO is also the OFO, or Only Financial Officer, and relies on bookkeepers for accurate processing for financial information.
Marc P. Palker, CMA, director of CFO Consulting Partners, LLC —, told Forbes contributor Jeff Thomson that a CFO needs to have a hands-on approach and be extremely growth-oriented, especially as part of a start-up company.
“Being in the weeds is critical to controlling growth and communicating results to those with money at stake,” Thomson summarized. “As growth occurs, the company and its key customers, suppliers and employees will face new risks. Managing risk involves not only having insurance, but the CFO must also protect the company from regulatory, environmental and human capital risks.”
Is there a revenue figure I need to hit before hiring a CFO?
There is no uniform answer to this question. It largely depends on the industry and other individual circumstances. Rather than a monetary mark, the complexity of the transactions is what will point to you needing a higher level of expertise or not.
What internal gauges tell me that I’m ready?
The biggest tipping point within the company is when information that helps the business make timely and important decisions is not being prepared, Palker said. “Business owners make decisions at the pace of the business and must be able to rely on the accurate and timely information provided by CFOs.”
What external signs are there?
The easiest way to tell when you should bring on a CFO is when you have unexpected — or even expected — rapid growth. An expansion of automated systems is required to handle the growth, as is additional capital and/or financing. A CFO would be best suited to handle those aspects, leaving the owner to focus on the business side of the deal.
Acquiring a CFO could also help your credibility swell in the eyes of customers, suppliers, financial institutions, shareholders or government regulators.
Another indicator is if a business is preparing for a merger or acquisition. The CFO will be a main part of evaluating a target acquisition, which may involve doing so in-house or choosing a firm to which you outsource the duty. CFOs have the skills required to feed potential investors or lenders, as well.
If you think your small business meets any of the above criteria, be very particular in your employee search. Make sure you are 100 percent confident that your candidate is able to perform the internal and external responsibilities you place upon him or her.