As your business grows, the CFO is one of the most important positions that you will need to fill. A CFO (Chief Financial Officer) sets the standards and budgets for a company, reports on the financial state of your business to you and other management, maintains compliance with state and Federal financial requirements and manages financial risks and cashflow.
Each aspect of a CFO’s position is important to the future operating capabilities of your business. From tax compliance to securing future funding, wellmanaged financial operations are the key to your growing business’s success. Many business owners get by with just a bookkeeper and outsourcing to an accountant. The following shows when your business needs to move to a dedicated CFO position, even if outsourced.
CFO vs Bookkeeper
A bookkeeper is usually one of the first financial positions growing companies will hire. Here is a list of the differences and the moment when you need to move up from a bookkeeper to a CFO.
Gatekeeper vs Partner. A bookkeeper functions as a gatekeeper to your funds. Although you will consult with a bookkeeper over whether there are funds available to act now, a bookkeeper’s function is not to council and assist in planning. A key part of a CFO’s responsibilities is to function as a key part of the executive team of their organization. This includes not just keeping watch over the finances and budget but playing an active role in planning and engaging finances.
Individual vs Department. The nature of CSuite positions is they oversee and delegate tasks to others. Often a bookkeeper is one person who spends as much time as necessary to ensure your company’s financial books are up to date and accurate. A CFO will often have bookkeepers and accountants working on the team under the CFO position. In one case you are hiring an individual to provide you a service, in the other you are building an essential part of your organizational structure.
Service vs Training. A bookkeeper is providing you a service. A CFO will ensure that your bookkeeper has the proper training to provide a solid foundation to your accounting and finances. While a CFO must have the capability to do great bookkeeping work, their main goal is to ensure that your entire financial team has the training, standards and goals necessary to give you the best of financial service your business needs.
Reporting vs Business Intelligence. A bookkeeper gives you the necessary reports to run your business, to give account to government oversight and to interact with banks and investors. A CFO gives you the information to understand your reports and make sound business decisions with the information you have.
As you can see, a CFO does not replace your bookkeepers, but adds to the accounting system you already have in place. Many growing businesses think that changing from a small accounting staff to a CFO means that they are replacing key positions with a CFO. This is just not the case.
When you are ready to hire a CFO, it is because your accounting team needs guidance, training, standards and the inspiration that comes from great leadership.
Accountant vs CFO
An accountant is a valuable asset to have in your organization, both internally and externally. An internal accountant gives you information concerning finances, laws, reporting and taxes that you can use to operate and grow. An external accountant will verify your financial statements, taxes and more and certify your business for the world to see.
Both of these are important parts of your accounting system which a CFO will interact with. Again, a CFO provides the internal oversight necessary to match up your accountant and bookkeepers with your management and employees to get the most reward from your money.
Because of the comprehensive oversight a CFO provides, most companies do not need a CFO. Unless your business is doing $20 million a year in income, you probably do not need to hire a full time CFO. The cost just cannot be justified. If you’re making less than $20 Million and you choose to bring on a highpaid executive to fill a CFO position, there is a good chance that your CFO will do a lot of basic bookkeeping tasks. This is great, except you won’t be paying a bookkeeper for these task, you’ll be paying an exorbitant CFO salary. That’s not to say that the insight and vision a CFO can bring to a company isn’t valuable. Most companies just don’t need to pay a full time CFO. In order to transition from breaking $1 Million a year to the $20 Million mark, you need an accounting service that will handle your books, keep track of cash, and provide financial planning and vision. Instead of hiring a fulltime CFO, or a parttime CFO that will only provide direction, but cannot help you get your books in order and perform the foundational training and oversight.