I am a long-time
To answer the question I look not only to size or industry or money raised, I look more closely at the company’s current and expected growth, the makeup and strength of the
What a CFO does is a matter of some debate What a CFO does is a matter of some debate, so let’s start there. CFOs are typically the leader of the finance and accounting organizations within a corporation. There may be a Chief Accounting Officer leading the accounting organization and/or a
As the leader of the accounting organization the CFO is responsible for all accounting (capturing all cash, income and balance sheet activities) including accounting treatment for all transactions, financial reporting, internal and external audits, tax (which may be a separate organization under the CFO but not necessarily under the auspices of the accounting group), SEC reporting, and Accounts Receivable and Payable (which may reside on the finance side of the house) along with a host of other accounting duties.
As head of the finance organization the CFO is responsible for financial analysis, budgeting, forecasting, vetting and negotiating deals (which may be part of a Biz Dev organization not necessarily under the CFO), treasury and cash management (which may be a separate organization), fundraising, investor relations, and creation and execution of financial strategies among other finance tasks.
As a member of the executive team and a leader in the eyes of employees and the board the CFO must have and maintain the highest level of integrity, must do as he/she says, must have great depth and breadth of knowledge in accounting and finance as well as most other aspects of business and must be highly effective in all of the areas mentioned above. The CFO is also regularly called on to be the head of
That is one heck of a lot of responsibility but notice we still have not addressed when a company should bring in a CFO. I answer that question by assessing the importance of each of the responsibilities noted above and determining whether the company needs them and whether or not someone else (with a different title) can do the tasks.
Accounting, while critically important to cash management and communications with the board and shareholders, does not require a CFO. A skilled controller with a good team (or solo at small companies), or even a bookkeeper or
Financial analysis, strategy and execution (including fundraising) are more interesting reasons to bring on a CFO. You don’t find many financial analysts at small companies. There is a threshold quantity of analytical work that needs to be reached before you could rationalize such an addition. Further, many analyses benefit greatly from extensive real-world experience which a CFO brings and an analyst simply doesn’t have. If your company’s business model is still forming and you want an expert analysis from all angles, and you want to continually tweak and try different inputs and outputs, you may want to consider bringing in a CFO. Clearly you would not bring them in solely for the analysis, but this could be one highly compelling reason to bring in a CFO over other possible additions.
If your business is a financially driven entity insofar as you are in the business of leasing or you expect to build a large asset base and the return on those assets drives your profitability or in similar situations, you will probably want to bring someone on board sooner rather than later to work with the CEO and executive team on the strategy around how assets will be acquired, financed and deployed, and at what return on investment. These tend to not be point exercises, but rather ever-changing and complex analyses and strategies which need continuous care and feeding. In this instance you would want to bring on a CFO to help set and execute your strategy.
Fundraising is a critical part of the CFO discussion Fundraising is a critical part of the CFO discussion. There are certainly a large number of CEOs who are perfectly capable of putting a round together solo, and then leaning on a good Controller for execution of due diligence and strong outside counsel for putting together the deal documents. Many companies get their first funding from angels or other early-stage investors without the benefit of a CFO. Part of being an
Some companies get off the ground fine under the sole power of the CEO. But not every CEO can drive everything from market and
Which brings me to the final point: leadership. Some CFOs make great leaders. They are the rock that many companies lean on and are the quiet complement to the CEO. Most companies being built to last (to borrow a phrase from Jim Collins) are not the product of a single charismatic leader, but rather the result of a team of top performers each of whom does their job with an eye to both functional and total-company excellence. CFOs are well positioned, and you could almost say “trained”, to play the role of scalable and effective institution builder at growing companies. If your growing company is ready for this (and many are not ready for quite some time) then you would want to consider hiring a CFO.
A final note is that some companies find an interim, or contract CFO works for them. Once again, this depends on what skills you need and how often you need them. There are many excellent interim CFOs out there.
All told, the CFO plays a central role in any successful, large company. The question of whether to bring one on board is not about the size of the company or how much money it has raised. Rather, bringing on a CFO is about hiring the skills and leadership your company needs when it needs them – not before.