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When to Bring In and Engage a Chief Financial Officer?

Updated: Feb 22, 2019

Financial management concerns can change quickly for any business due to changes in its business, in its technology or in its external environment. Staffing a CFO to anticipate and respond to business changes using proven strategies and tactics is a big advantage when trying to avoid business threats, fulfill business obligations or take advantage of business opportunities.

To ease the pain, C-Suite-Consulting provides finance and accounting expertise on an interim and consulting basis. In addition to holding several CEO positions, Ralph Proceviat, CPA, CA, is also a seasoned CFO who is accomplished in helping CEOs, board members and senior executives understand and address financial management concerns on an “as-needed” basis and at a cost that makes economic sense for smaller companies.

Many companies, based on their size or revenue, are unable to justify hiring a full-time CFO, yet need the expertise and maturity that a seasoned financial professional can provide on an ongoing basis. can support clients as their virtual CFO, serving as the long-term outsourced financial advisor providing stability and guidance to help them grow and thrive.

Occasionally you may need a CFO to fill a vacated role while you conduct a search for a replacement and need a a CFO on an interim basis.

If you’re a start-up or a small company CEO (especially for the first time), at some point you’ve asked yourself “Do I need to hire a CFO?” I've seen variations of this question pop up in online forums regularly, asked by entrepreneurs and young founders.

Threats to the business that can emerge when that growth is not carefully controlled. My view is that “It depends”! It depends specifically on two things that CEOs focus on constantly:

  • Opportunties for growth

  • Threats to the business that can emerge when that growth is not carefully controlled

A CFO can help you manage both of these phenomena. The Difference between Bookkeepers and CFOs

A bookkeeper or accountant generally can meet your needs early on.  When growth in a start-up accelerates, things change.  Growth means success is arriving, but in order to sustain it you have to control it. That is where the CFO comes in. The difference between a bookkeeper/accountant and a CFO is that a bookkeeper/accountant looks back while a CFO looks forward.  A bookkeeper or accountant records transactions in a business and looks at the history of the enterprise and what took place.  Think of it as driving a car while looking out the back windshield.  A CFO, by contrast, looks forward toward the future of the business and plans that growth and how to control it and maintain profitability.  A CFO drives the car while looking out the front windshield.  

That is the difference between a CFO’s contribution and that of a bookkeeper/accountant. CFOs plan the future; bookkeeper/accountants review and comment on the past.

Raising Capital and the CFO

In a start-up, controlling expenses and preserving cash is critical to survival. In a start-up “Cash is more important than your mother!” You need capital to grow. A bookkeeper/accountant can put together financial statements and go with you to the bank or to an angel investor to explain your needs for a small working capital loan in the early stages of your start-up. When growth takes off and you need serious capital to sustain it, you are likely talking to large, institutional lenders, or private equity or even venture capital investors. These pros want to see the presence of CFO-level skills and look to the CFO to help you achieve your growth objectives.

When to Talk to or Engage a CFO?

The CFO doesn’t have to be full-time or permanent. Part-time or interim is often enough at the beginning and is affordable for the early-stage company. But those skills need to be present. Even in those cases where a bookkeeper or accountant can meet the on-going needs of a start-up early on, we generally find that the start-up is helped by a CFO to design the planning and reporting based on standards in the marketplace for that industry or business model. Oftentimes, that design determines structural elements of the recordkeeping that will open up the possibility to scale and, even, properly value the company for a capital raise or exit transaction.

Start-ups can benefit from a CFO-level person, be it for a temporary project need — such as developing a financial plan, setting up an accounting system, helping the CEO raise capital, etc. — or on a part-time basis to provide valuable yet affordable guidance as the company grows. Early stage companies can benefit from bringing in a contract or full time CFO who knows about cash flow forecasting, structuring equity and debt funding transactions, business modeling, establishing strategic and supply chain partnerships, GAAP and IFRS accounting, establishing bank lines, driving and collecting revenues and managing your dwindling cash balances.

Mature companies can benefit by tapping into a CFO's knowledge with mergers and acquisitons, and in some cases, leading a transformation or turn-around to increase and maximize shareholder value. You can call that person a CFO, VP Finance, Chief Cash Officer, or anything else. The title doesn’t really matter, but the function does.

CFO Valuable in Setting up Systems

A CFO can advise on how to set up your accounting system (in-house vs. cloud based) from a strategic as well as functional perspective, to help a young company create a solid financial foundation. For entrepreneurs looking for an exit in the future, having a financial reporting and accounting system is key to making it through the due diligence process with a prospective buyer.

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