The idea of hiring even a part-time CFO may seem to some SMEs a bit OTT—like paying Quentin Tarantino to make a 90-second home page video or booking Wembley Stadium for the company’s five-a-side friendly football match.
But for companies whose ambition is to get into and survive the coveted scale-up phase, hiring a part-time CFO makes perfect sense. They know that they’re getting a finance veteran, someone with big business experience, who can provide the guidance they need to grow rapidly and help them to avoid the costly mistakes that so many ambitious SMEs make as they attempt to move into the Big League.
As Colin Mills, the Chairman of the FD Centre, said in his book about scale-ups, “The reality is that there is great value in having someone from the next level if you’re aspiring to get there.”
Companies who hire part-time CFOs understand that today’s CFOs are capable of delivering far more than bookkeeping or accounting services. They provide the kind of strategic business perspective and support that fundamentally alters the performance/profitability and long term potential for a business. They can work with your board of directors and external stakeholders such as your bank or investors. They can also advise you on mergers and acquisitions. Besides strategic analysis, they can provide operational support on everything finance-related in your business.
Their responsibilities might cover business planning, capital structure, risk management, auditing and reporting, tax planning, capital expenditure, investor communication, R&D investment, working capital management and company budgeting.
Companies that don’t hire CFOs are often unaware of the opportunities and profits they’re missing out on. When asked why so many SMEs don’t hire CFOs, Matthew Bud, Chairman of the international Financial Executives Networking Group, said business owners are either unaware of their need for a CFO or reluctant to spend the money.
“What many entrepreneurs don’t realise is that they’re already spending that money in lost profits and misspending,” he told Inc.
“They’re not seeing the dynamics of the business from an educated financial perspective. You can’t always go with your gut in making financial decisions, which is what a lot of entrepreneurs try to do.”
So, what can you expect from a part-time CFO?
Well, the role a part-time CFO will play in your company will depend on factors such as the size of your business, your expectations, your industry, and your corporate strategy and business goals. But a good CFO will work on your company’s finance strategy and finance operations and manage areas such as compliance, tax planning and legals, outsourcing and banking relationships.
To achieve success in these different roles, a CFO will need outstanding hard and soft skills.
If you’re a CEO, the CFO will be your strategic partner, providing financial insight and strategy and helping you to improve profitability and cash flow.
A good CFO won’t, however, be a ‘Yes’ person, someone who rubber-stamps every initiative without due diligence. On the contrary, they will challenge you and your vision for your business asking the kinds of questions which leads to transformation as opposed to incremental improvement.
Charles Holley, CFO-in-residence at Deloitte and former Walmart CFO, says good CFOs are independent-minded yet supportive of their CEO.
“My CEOs counted on me to be the truth teller, to form my own opinions on important company decisions and to speak up. At the same time, they expected my support for execution.”
Great CFOs challenge the business, he says. They point out problems and propose possible solutions to “spark the debate”.
“CFOs are in the best position to call attention when the numbers aren’t supporting the strategy. For example, CFOs can push the business to change capex priorities when the underlying ROI assumptions are no longer supported by the numbers.”
Besides being a trusted advisor and sounding board, a good CFO will help to raise efficiencies, identify opportunities, manage risk management, and manage capital structure.
Since they speak the language of financiers and understand what they are really interested in, CFOs can also liaise with financial institutions, investors, and auditors on your behalf.
In other words, a part-time CFO can help you to manage the transition into the scale-up phase more smoothly and ensure you reach your growth targets sooner.
How it works in practice
The CFO Centre’s part-time CFOs use a proven framework known as the ’12 Boxes’ to identify where the problems are within any business. They use it to review every aspect of your company finance function and identify every problem area.
They will help you to understand your company’s finances; eliminate cash flow problems; identify cost-savings, and improve profits.
They can also help you and your team to understand your main profit drivers; find and arrange funding; identify your Critical Success Factors and Key Performance Indicators (KPIs), help you to expand nationally and internationally; and build value to make your business more attractive to investors or buyers.
To discover more about the 12 Boxes, click here.