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When Do I Need a CFO?

Updated: Aug 30, 2021

As a business grows and scales up, there may come a time when it needs to consider whether to recruit a CFO. What exactly does a CFO do? When is the right time to hire one? Should it be a permanent, full time-hire or what other options are there?

What does a CFO do?

Let's examine what a CFO typically does and how this differs from the role of a Finance Manager.

Both CFO's and Finance Managers play important roles in building and sustaining successful organisations. Whilst it is possible for the same person to wear both hats in smaller enterprises, as a business becomes bigger, a need to specialize evolves. It is therefore useful to understand how a CFO differs from a Finance Manager and the skills and qualities each brings to the table.

A CFO's focus is strategy and value creation. A CFO is forward looking and collaborates with cross-functional teams - such as sales, marketing, operations, technology, and HR - to develop and deliver initiatives and plans that drive growth and improve business performance.

A CFO is a change leader who embraces ambiguity. A CFO is a storyteller who can clearly and succinctly enunciate the company's strategic plan in an easy-to-understand and non-technical language, and to diverse groups of internal and external audiences and stakeholders.

It is not unusual for a CFO to come from a non-accounting background in situations where industry knowledge, leadership and commercial skills are prioritised over technical accounting.

By contrast, a Finance Manager is a gatekeeper more than a strategist. In sporting parlance, if the CFO is member of the frontline or offence, the finance manager leads the backline or defence.

A Finance Manager is more dedicated to record-keeping, historical financial reporting, tax, and compliance. A Finance Manager typically oversees month-end reporting, balance sheet reconciliations, tax and other statutory reporting.

So, when do I need to engage a CFO and don't they cost a lot of money?

Hiring a CFO should be an investment, not an expense.

The cost of employing a CFO should be measured against the return on investment from accelerated growth and improved profit margins. If the business case indicates the benefits exceed the costs, then the CFO hire is self-funding and should proceed.

What if the numbers don't stack up?

In some situations, the business case may not justify the full-time services of a CFO, but it may support engaging the part-time services of an outsourced CFO, especially if there is a specific project requiring a higher level of financial expertise e.g., a long-term plan, an acquisition, a transformation project, a compliance issue, a cash flow crunch.

There is a growing market for agile, flexible, outsourced professional services and these days on-demand, tailored CFO solutions catered to needs and budgets are readily available.

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