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How much technical knowledge does a CFO need?

Carter O'Brien's Profile

Just the basics of the company's systems, or should they know it thoroughly in-and-out?

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Carter - By "technical" do you mean how the company operates, or technical knowledge of GAAP, finance, and how it all works?

If you mean how the company operates, I would say no, a CFO shouldn't know the company's systems thoroughly in-and-out. Here is my reason. A company I used to work for had a dysfunctional CFO and overall operations in many aspects. By dysfunctional I mean this CFO was involved in day-to-day transactions that I think the Controller should have been involved in. Eventually this CFO was moved into another position, replaced with a CFO that took a company public, and had many other successes prior to his arrival. The new CFO knew his position had been ignored prior to his arrival. This CFO went to work to shore up and fix things that CFOs fix. The new CFO made it clear he wasn't going to enter journal entries, and write up work papers for the auditors. After all that is why he had the staff accountants and Controller. I think the CFO should know how things work, but maybe in-depth knowledge of how the company's systems works, I don't think so.

There again this is coming from someone who has not been a CFO, only seen vastly different examples set.

Topic Expert
Lee Andrews
Title: P/T CFO, Business Consultant
Company: Pacific Bag, Inc./Other Clients
(P/T CFO, Business Consultant, Pacific Bag, Inc./Other Clients) |

I ask the same question Chris started with -- "technical knowledge" to me usually means GAAP, SEC, maybe some deeper tax knowledge, etc. Knowing the depths of the accounting system should not be the skill set required of a CFO. They should not live in the weeds.

Having said that, my answer deviates a bit, depending on company size and how much the company needs a CFO. I think a lot of companies benefit from having a full or part-time CFO with good working knowledge of finance, investor relations, understanding how to measure and manage profitable lines of business versus losers, mid- and long-term planning, the value of new investments in machinery or people, keeping other department managers and executives well aware of what has happened and what will happen, etc. This may all be "technical" in a sense, but it is more "experience". Even in this case a CFO should not be doing journal entries and bank recs.

Consider other factors -- size of company, public/private? Not all companies want to go IPO and need those particular skill sets, but depending on revenue size, the "life technical skills" of a CFO can be beneficial to even small/mid-sized companies -- maybe just not full time. Not a lot of those companies really need a GAAP expert -- the CFO should know enough anyway to provide what little they need there. And that kind of CFO can very functional.

So my answer ends again with -- what do you mean by "technical"? Maybe the best "GAAP/SEC/tax technical" CFO's are not always the best "business/growth/daily operational technical" CFO's, and vice versa. In either case -- knowing the ins-and-outs of the accounting system is not part of the job.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Chris linked knowledge with doing, which may not be what you asked...but it is what happens. I have sat with Auditors and discussed findings. In the same conversation I have turned to my Accounting support and told them the required Journal entries. Possessing a technical knowledge allows you to identify when things don't look quite correct, faster than if you did not have that knowledge.

Derek Quackenbush
Title: CFO
Company: Rising Data Solutions
(CFO, Rising Data Solutions) |

I think a CFO needs to be reasonably technical--not necessarily down to the nuts and bolts of every accounting rule, but enough to at least know when to seek guidance, whether from auditors, counsel, etc. A CFO needs access to great advisors. (An early-stage CFO may need to post a few JEs (perhaps just to address "segregation of duties" matters), but I agree it's not the best use of a CFO's time!)

As for knowing the business at a technical, or "deep," level, I say absolutely. I believe a CFO needs to understand the business at an intimate level in order to contribute to strategy, provide good advice to other managers, and to articulate/defend the vision and the numbers to stakeholders, e.g., investors. You see increasing literature about CFOs needing to be more strategic and better partners. Whether this is new or not is up for serious debate. But that aside, it's true and I believe the best way of doing that is to dig into the business.

If I had to recommend one over the other (being highly technical v. knowing the business) I would pick the later and say find yourself some good advisors and a great controller! Just my thoughts...

Chuck Boecking
Title: Open Source ERP and Business Intelligenc..
Company: Chuck Boecking
(Open Source ERP and Business Intelligence, Chuck Boecking) |

I answer 'good technical knowledge'. I would offer that a CFO is accountable for "accuracy and insight". I am speaking for a Dir of IT perspective. If anyone disagrees, please speak up!!

I have not sat in the seat of a CFO. However, I have had the good fortune to sit next to a few good ones. Here are my observations in terms of technology:
* They could articulate what they wanted from the ERP and BI systems.
* They could teach me the concepts that drive good decisions.
* They could help me write control reports that defended the system accuracy and insight.
* They fought to make systems efficient and easily defend-able. This point is big. I have made a few CFO's red-faced challenging their needs. It took me a while to understand their perspective.
* They were very demanding of their own team regarding accuracy, and they quickly knew when things tipped out of balance.
* They helped me visualize the data.

Let's put it into perspective. Let's say you have a $200M business. You have three webstores in each of the major continents. These stores funnel into two different ERP systems. You have a business intelligence (BI) layer on top of all three stores and both ERP systems. As a CFO, part of your responsibility is to interpret the activities that drive the financial model. You will influence what happens at each of the ERP systems. You will drive the presentation in the BI.

Essentially, they (the good ones) were very good teachers and modelers of the business domain. In my experience, the only way to accomplish the above is to be 'technical'.

My 2 cents - I hope this helps!

Chuck Boecking
www.chuckboecking.com

Robert Israch
Title: Chief Marketing Officer
Company: Tipalti
LinkedIn Profile
(Chief Marketing Officer, Tipalti) |

I think the CFO and controller both need the skills to proactively identify the gaps in their finance organization today and to anticipate the needs as their business changes in the future. They also need to have up to date knowledge of the financial technology ecosystem to understand where technology can add value to help their org scale and maintain top competitiveness. The details of the technology itself are probably less important than the vision and expertise on when and how to apply it to help their business. Rob

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

If you look at the answers to date, technical is being divided between technical account knowledge and technology, which is Information Systems.

In my humble opinion, they need to understand both, know what they they want to accomplish and more importantly know what questions to ask of their staff and consultants.

Do I need to know how to enter an invoice into my ERP system, no. Do I need to understand the flow of information, yes, of each field, no. Do I need to know each FASB or ASC? No, but I do have to understand those pronouncements that affect my business and industry and then discuss them with my experts.

The role of the CFO is more than 1's and 0's today.

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