Does Your Small Business Need a CFO?

Adding a Chief Financial Officer (CFO) to your small business is a big decision. There are many things to take into account, and a few specific indicators to look for.  If you’re on the fence about adding a CFO to your small business, here are a few things to take into consideration.

Internal Indicators That a Small Business Owner Should Hire a CFO

Financial decisions fuel businesses.  Business owners must be able to rely on financial information from their CFO in order to make fiscally sound decisions moving forward. The role of the CFO in a small- to medium-sized business covers many things, including:

• Cost control measures
• Capital acquisition
• Forward thinking due to economic industry government regulations, taxes and social issues
• Critical of banking relationships, allowing no slip-ups

The CFO can also be the Only Financial Officer (OFO) and must be able to rely on the company’s bookkeepers for the right financial information. Some people believe that a company should hire a CFO when their revenue hits a certain figure. Others believe it depends more on the industry and the business itself. Take, for example, a company that earns $10 million. It may be ready to appoint a CFO, but a company with a revenue of $20 million may not be. If a business’ transactions are complex, this can also determine that someone is needed with a higher level of knowledge or experience.   

External Indicators That a Small Business Owner Should Hire a CFO

Periods of rapid business growth can also indicate the need for an internal CFO. A CFO can be best suited to handle the company’s growth, but it is not ideal if a CFO cannot handle all areas that need to be taken care of, such as getting additional capital or financing the company’s growth.

Another indicator is when a business is ready for an acquisition or a merger. The CFO must be able to choose the right people to evaluate the acquisition. That will often result in outsourcing work to a firm that can perform the regulatory and financial due diligence. The CFO must be able to interpret the report from the due diligence team.

This way, the terms of the acquisition or merger can be specifically tailored to the findings. A CFO must have the ability to prepare the information needed for investors or lenders. If the CFO can anticipate their questions, that can shorten the process and prevent further digging.

What Characteristics Must a CFO Have?

A CFO should be oriented with growth and have a hands-on approach to dealing with owners, shareholders, insurance companies, banks and the employees. New risks will become evident as the company grows and the CFO needs to be able to manage that risk, as well as risks from other, less obvious areas.

A CFO needs to be proactive, analytical and strategically minded. He or she should also be able to communicate effectively, as well as effectively coach and mentor others. He or she should also have problem-solving skills and have a results-oriented mindset. These and other qualities are needed for an effective CFO.

Contract CFOs

There are times when a business may need strategic guidance and professional financial advice, but may not be ready for a full-time CFO. A contract CFO could be the answer you need. He or she can work with you to define strategy and support key financial decisions. Your business could have the support you need in all finance areas, such as budgeting and planning, internal controls, tax strategies, profitability analysis, bank and investor relations, capital investments, long-range forecasting, cash management and mergers and acquisitions.

Clear Accounting’s CFO consulting services can provide the full-time or part-time CFO your company needs. To learn more about our team of experts or to schedule an appointment, visit our website today!

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