In the lifecycle of most small and midsized companies, a point is reached where business owners must address the matter of hiring a chief financial officer. These professionals offer firms expert financial insight and leadership not provided by outside accounting firms.
While not necessary for every growing company, a CFO often plays a crucial role. Their day-to-day responsibilities typically include accounting and budgets, financial analysis, strategic guidance and oversight of business-related banking, insurance and legal issues.
Hiring a CFO is a multi-faceted process. A business must not only decide whether or not hiring one would be to their benefit, but also consider the skills required for the job.
Signs it’s time to hire a CFO
Businesses often reach a tipping point where their size and complexity makes it difficult to organize finance and track performance across multiple operations.
According to The New York Times, this tipping point can be measured by revenue – generally when companies hit the $10 million to $20 million range. At that size, paying a CFO to gather and interpret a wide array of data is both more palatable and a smart business move.
Revenue stream is not the only justification for hiring a CFO. Doing so becomes imperative when a CEO is stretched beyond their limits.
“When the CEO is being distracted from critical revenue-generating activities to handle financing or similar issues, it’s time for the CFO to take his place and make these things happen,” Mike Henderson, the finance chief of Lendio, a small business lending company, told The Times.
“Once the CEO starts to feel the pain, act quickly, because a good CFO can provide tremendous unforeseen support and help avoid some of the growth problems companies face,” Henderson added.
Perhaps the simplest way to state the necessity of a CFO is this: As soon as a company can afford to hire one, they should do so. .
What to look for in a candidate
Once the fundamental need for a CFO has been established, the question becomes where to look and what to look for. Should you look for employees who have excelled in accounting jobs or target an experienced professional?
The decision to promote from within or hire externally should be based on a company’s preferences and size. Small businesses, for instance, probably haven’t yet established a succession plan, and should therefore look for someone with previous experience in the role.
Finding a great CFO starts with finding the right skill set. Great candidates share a variety of different qualities and many have certifications that can help narrow down during the search.
“A strong grasp of all accounting department functions is the bedrock of the CFO position.”
A fundamental grasp of all accounting department functions – from accounts receivable to accounts payable to payroll – is the bedrock of the CFO position. Most candidates will have an MBA or master’s degree in accounting, in addition to being CPAs or CMAs, showing employers that they’ve truly mastered the material.
Beyond certifications, the best candidates will have experience with a broad range of finance operations. They should be able to review invoices, meet and plan with auditors, and negotiate contracts comfortably.
With so much responsibility placed on a CFO’s shoulders, companies are right to seek only the most talented candidates.
“My expectation from a CFO tends to be high,” Brendan D. Anderson, a partner in Evolution Capital, told The Times. “I almost view the CFO as the next step to the CEO in that they understand everything and can communicate verbally and in writing how the business is performing, how the plan is coming together and also forecasting where budgets and projects are headed.”
Hiring a CFO is obviously a big step for an expanding small or midsized business. It starts by looking for well organized candidates with strong accounting backgrounds who aren’t intimidated by the responsibility of shaping and supporting a company’s financial future.