First, what does a CFO do vs. a Controller or Accountant or Bookkeeper?
An Accountant or Controller knows the financial matters of the firm inside out, and is deeply familiar with how revenue is generated and how it is spent. The Controller or Accountant can also generate financial statements, deal with tax matters and other financial aspects of the firm.
A CFO, on the other hand, while intimately aware of these same matters, goes well beyond the Controller functions, by providing a strategic perspective to the financial management of the firm. The CFO is a partner to senior management, working within the firm with key members of the management team, providing analysis and insight into financial aspects of the business which contribute to firm growth and development. The CFO is involved in strategic matters such as the capital structure, M&A activity, as well as firm funding and cash management (Treasury) functions. The CFO is the firm’s risk manager, as well as externally-focused, the CFO is the interface to the firms’ Auditor, the legal team, the bankers financing the firm.
When does a firm need a CFO?
Size and complexity of business – As a firm’s business grows beyond $10-12 Million in Sales, and the business grows in complexity (i.e., foreign sales, revenue recognition issues, etc.), a CFO may be needed to ensure maximizing enterprise value.
Capital event – As market opportunities grow, an injection of capital, a change on the capital structure of the firm may be necessary, as well as the possibility of an M&A transaction (purchase of another firm or sale of the firm), a professional, experienced CFO could be needed.
Strategic shift – If the firm shifts its Strategy dramatically or expands into a new line of business or enters new channels or new markets, an experienced CFO is often desirable.
Other Event – New management or transition of management from one generation to the next, or sale of a partnership interest in the business all are events that may make a CFO a desirable addition to the management team.
A variety of options exist for a CFO, including direct hire. However, a fractional-share CFO or interim-CFO during a transition could be desired, if the firm cannot justify a full-time CFO.
The key is hiring a member of the management team, who is a partner to the leadership and can get the firm to the next level, rather than purely an Accountant or Controller.
Merit Harbor Group can assist with all three options.
Steve Szirmai, Principal, Merit Harbor Group