Is Our Company Ready for a CFO?

In the world of Forbes and Inc. superstars, it can feel like every company has a C-suite full of execs. It can even feel like you’re not a “real” company if you don’t have your own CFO. But not everyone needs a CFO - at least not a full-time, in-house CFO.

So, how do you know if your company is ready for a CFO? At what point is it a strategic move to help you grow and not an expensive mistake?

What is a CFO?

Before you can discover if you’re ready for a CFO, you need to know what one really is and what he or she does. 

A CFO is NOT an expensive bookkeeper. In fact, they don’t do bookkeeping or accounting work in your company at all. A CFO isn’t just a high-end CPA (although they may or may not hold that credential). This is crucial to keep in mind because it can be tempting to “treat” your company by adding a CFO as if that’s what you get when you sign up for the gold plan on new accountant day. 

Your Chief Financial Officer “will” work closely with the accounting team to gather financial data. However, he or she won’t be directly involved in accounting. They’ll lead the accounting and finance departments and oversee financial reporting.

A CFO is responsible for the big picture of the company financially. Forecasting, budgeting, analysis, and strategic planning with the CEO are all part of a day’s work for the CFO. If the company is public, the CFO is responsible for ensuring reporting meets SEC filing requirements and accurately represents the company. 

What a CFO Brings to the Table

Adding a CFO to your payroll is a big decision. For one thing, it’s a significant investment (more on that in a minute). It’s also a step in business growth that needs to happen at the right time. If you need the insights of a CFO and don’t have one, you’re exposing your company to financial risks and likely losing money. If you don’t need a CFO but hire one anyway, you're likely to be wasting money and adding layers of unnecessary complication. 

The CFO serves as a forward-thinking planner, helping to steer the financial decisions of the company. The more complex your financial situation, the more you’ll need that level of help.

A CFO will be the one to set financial goals, share those goals with stakeholders, and develop KPIs to help the company measure progress. If your company is public, stakeholder communications and relationship management become an even more important part of the job.  

Though there’s no hard and fast rule for revenue, smaller companies generally don’t need a CFO on staff. It becomes much more likely as you near $50 million or more in annual revenue. If you’re smaller than that, a private company, and fairly straightforward with your financial situation, it’s like that your financial controller can take care of everything you need.   

Alternatives to Hiring a Full-Time CFO

So, what do you do if you’re right on the threshold of needing a CFO? What if your industry or financial arrangements make your situation complex even though you’re a bit below $50 million in revenue? What if you need a higher level of planning and insight but you can’t commit to investing in a full-timer?

Let’s back up and talk about that commitment for a second. As a full-time employee, the average CFO costs about $250k per year. This is factoring in benefits and employment costs in addition to base salary. That’s a serious investment if you’re not in a position to make use of a full-time employee. But what’s the alternative?

Thankfully, technology makes it simple to work with experts outside of your own building, or across the country. Outsourcing your CFO needs to a fractional CFO provides you with the expertise and support you need without the hassle and cost of a full-time employee, and also gives you a tremendous amount of flexibility. 

The easiest and most effective way to make sure all your finance and accounting needs are met is to work with a company rather than an individual. One of the major benefits of this is the flexibility to grow your services to match your needs. You can start with a very limited package and increase as your company grows. Depending on what your company needs, you can get a bookkeeper, accountant, controller, and some CFO services all in one place without ever wasting money on support you don’t need. 

At Basis 365, our flexible accounting services provide everything most small- to medium-sized businesses need. With a strong accounting team in place, you may find that a CFO isn’t even necessary yet. An accounting manager and controller can often provide everything you need to thrive. They can also let you know when you would benefit from bringing in a fractional CFO. 

Once you reach that point, Basis 365 can introduce you to some amazing fractional CFOs and work directly with them to provide you with a seamless finance and accounting experience.

CONCLUSION

When your company is ready for the guidance and financial leadership of a CFO, the extra support will allow you to take it to the next level. Jumping in too early is an expensive move without much upside but waiting too long can be costly as well. Before you jump in, make sure you have a solid accounting team in place and the guidance of a good controller. That’s often all you need, and can also smooth the transition when you’re ready. The expert team at Basis 365 will provide a level of service tailored to your needs and help you determine when it’s time to take the next step.