Does your business really need a CFO?

As a business grows, it becomes more important that robust financial reporting and analysis are a key part of the management process. The business increasingly needs to be managed by the finances.

The question often arises as to whether a business needs a Chief Financial Officer (CFO). At some point it likely will, but in many cases it may be better served by having a competent Finance Manager. A Finance Manager is typically not as high-level as a CFO but is closer to the business and more across the detail.

The role of a CFO is to operate as part of the executive team. It is primarily forward-looking. Examples of what you would look for in a CFO include:

  • Analysing and identifying profit-making opportunities
  • Involvement in pricing decisions
  • Investment analysis and prioritisation decisions
  • Experience and wisdom coming from a financial background.

The role of a Finance Manager is primarily to ensure that the business operates with order and control.

Duties would include the following:

  • Ensure financial and other reporting is timely and accurate
  • Management of finance team
  • Ensure processing of transactions and reconciliation of balances.

No doubt there will be overlap between these roles. However, it does not necessarily follow that hiring a more expensive and better-credentialed CFO will provide a better outcome in what is required in the basic area from the finance function. There could potentially be a gap if the CFO does not ensure that the detail is being attended to correctly. Even more concerning, it could result in complacency where the business owner mistakenly believes things are in hand.

Having a competent CFO should not be regarded as an alternative to a Finance Manager. Part of their role should be to take responsibility for the entire finance function and ensure that the reporting function is performing and being improved. The leaders in the business need to ensure that this accountability is clarified and followed through.