A chief financial officer, or CFO, traditionally serves as leader of all finance and accounting matters within a business organization.
In short, the CFO is primarily responsible for the fiscal health of the enterprise.
Acting as a close business partner and advisor to the CEO, the CFO ensures that financial decisions align with the overall strategic goals of the organization.
You might be surprised that, although accounting is referred to as the language of business, many business leaders do not fully speak and understand that language.
So, it’s also the critical role of a CFO to be a great business communicator or storyteller, for the benefit of stakeholders both within and outside of the organization.
We’ve found that to be truly effective, a CFO must have a wide variety of skills that include leadership, accounting and finance knowledge, and technical insight – plus they need to be a strategic thinker and implementer.
What Does a CFO Do?
A CFO executes unique and important functions for a family business.
First, they must oversee the finance and accounting professionals within the organization.
The CFO serves as their leader to ensure that financial reporting to both internal and external users is accurate and relevant to the organization’s need, the industry, and current professional standards.
In addition, the CFO is responsible for identifying and procuring in a timely manner the financial resources an organization needs – at a competitive cost and optimal risk for the given circumstances.
The CFO also serves as a member of an organization’s senior leadership team, and meaningfully contributes to the planning and execution of the organization’s strategic plan.
How is a CFO Role Different from Other Accounting Roles?
The CFO role is different from other traditional accounting roles in the sense that it’s required to successfully engage with all other leaders throughout the organization – a strong CFO must collaborate with all sales, operations, and personnel leaders to ensure that everyone within the organization has the resources and financial understanding they need to function with harmony and effectiveness.
While other accounting professionals may focus primarily on past financial performance, a CFO is equally focused on the future, identifying, and nurturing strong external relationships to make sure the organization’s financial resources and growth opportunities are effectively managed.
Finally, the CFO typically leads the application of advanced financial technology in order to improve the organization’s profitability.
Why Does a Family Business Need a CFO?
A strong CFO brings several benefits to any organization, chief among them making sure that the business has sufficient financial liquidity at a competitive cost and identifying the best alternatives for financial ROI.
In short, we’ve found that installing a CFO ultimately improves the overall value of the family business by providing accurate, timely and effective internal management records, plus external financial reporting in accordance with professional standards.
What Exactly is a Fractional CFO?
A fractional CFO is, like a traditional CFO, responsible for all financial matters and reporting for the organization.
However – fractional CFOs provide their services on a part-time basis, making them a cost-effective solution for less mature enterprises that need access to CFO skills but cannot make the investment in a full-time CFO.
Less mature family businesses could consider a fractional CFO, especially if they anticipate developments like rapid growth, financial or competitor threats – or new and significant financial events such as the need to raise capital, a merger or acquisition, or even an exit scenario.
The Power of a CFO in Action
We once worked with a commercial fuel distributor business whose leadership determined that it would behoove the company to purchase large volume pipeline quantities of bulk fuel. This was something the company had never done before.
While it made good business sense, from an operational point of view and a market pricing point of view, it was something new that was riddled with financial considerations.
And while this family business had previously relied on its comptroller for most financial and accounting decisions, that practice just wasn’t good enough to meet this kind of challenge.
I don’t think you’ll be surprised to learn that they ran into issues and complications. They ultimately brought in a fractional CFO to right the ship and make recommendations for the future.
The fractional CFO reviewed the transaction history and staff skills and was able to identify the root cause of trading losses.
The CFO recommended process changes and improved third-party due diligence standards, which led to better internal processes and accounting standards.
We’ve always found this a good example of a new financial challenge, with a high level of risk, and certainly beyond the pale of what could be expected from even a very competent controller.
It’s exactly the kind of situation in which a fractional CFO can prove invaluable for your business.
If you’d like more insight on how the addition of a CFO, a fractional CFO, or even mentoring a current accounting leader to become a CFO can improve your business, then let’s chat.
Reach out today to set up a consultation call – we’d love to help!