40. I have an Accountant – why do I need a CFO?

We are regularly asked why a business should have a chief financial officer when the business owner already has an accountant who completes his/her annual report and accounts.

The answer is that they perform very different roles.

As a keen archer, I use the analogy of receiving a report of your scores at the end of the year (your accountant), to having someone on the field with you throughout that year (your CFO).

Your club captain may send you a report at the end of the shooting season showing the number of rounds shot, the average score per round the number of “golds” hit etc., and how that compares to the previous year. This can be both useful and interesting, but not necessary helpful in pushing you to be a better bowman. This is what your accountant will provide at the end of your financial year. Your annual report and tax submission is needed to comply with your reporting requirements; but it is not so helpful in terms of generating a better business.

Now consider your club coach. That’s the person who is out on the field at your side; watching how you shoot, walking the range with you, looking at where the arrows land, suggesting how to change the sights on the bow, your stance or how you pull the bow back. He is like your CFO.

After you fire six arrows you and your coach will walk to the target, look at where the arrows landed, score, compare your performance to the last six arrows, and then walk back to the bow to make any necessary adjustments before firing the next six arrows. Then walk to the target again etc. They are fully involved in your performance, showing an interest in you, they mentor you, helping you to improve gradually over time.

What does a CFO do?

Your CFO will:

– Produce monthly detailed management reports showing how the business has performed over the period

– Compare your performance with previous periods and to your target

– Suggest actions necessary to improve the performance of the business

– They will even walk the site with you to get a clear understanding of how the business is performing

Just like your coach they become part of the team, helping and mentoring not only yourself but the rest of the team and thereby helping the business to achieve its objectives.

Some businesses respond saying that their accounting system (or their accountant) provides monthly accounts. Which they may do; but who then sets the budgets and targets, who interprets the numbers on the report, explaining what the numbers mean and gives you the reality behind the numbers.  If you are doing this yourself then ask yourself:

  • Are you being realistic or challenging with your targets?
  • How long does this take when you could be working on growing your business?

An experienced CFO will also:

– Support you when engaging with your accountant or bank

– Have the knowledge and skills to understand the questions being asked and what information is required

– Work with your suppliers to ensure you are getting value for money

– Have a broad range of contacts to ensure you are getting the right advice (and help reduce your costs, too)

– Add credibility to fee increase demands, supporting and defending the true cost of your business

By using a part-time CFO, you only pay for what you need.  The cost is often no more than that of taking on an intern.  There are no overheads, no hidden costs and you can dial up and down as you need to.

To find out more about hiring a part time Finance Director or if you would like to discuss any of the topics covered above further with Tectona Partnership, please contact Mark Nicholls on 07818 407061.

Posted in FD Role, Tectona Ten - Strategic Leadership.

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