Long story short, I have been acting as an external director / advisor for a small company. It's a very good company, run by a small group of outstanding people. They work hard, they treat employees and clients right, they have integrity and they are good at what they do.
The current CFO is leaving due to another opportunity at a bigger firm. The CEO is outstanding at his specialist skill set but he is not 'financial savvy', so to speak. He, with the Board's backing, has approached me to ask if I would act as interim CFO while they find a full-time CFO, and he also asked if I would be interested in the CFO position full time.
So my response is the same thing I'm asking here: What, exactly, does a CFO at a small company do? I've worked in IB, banking and corporate finance for 25 years and in a weird way, have a better idea of a CFO role at a big firm compared to a smaller firm....
Bump, interested in this as well
From my experience (my firms does have a few investments that fall into the lower mid market), the CFO role in small businesses is often more of that of a glorified controller in the sense that financial planing and reporting are what they dedicate 90%+ of their time to. Smaller company means there's usually not much complexity in terms of banking / treasury and no corporate development / M&A function.
I was seconded to be the CFO of our of our portfolio companies (EBITDA ~$15mm) for 2.5 months (the CFO had an accident...) and while I really appreciated the experience, it really wasn't what I would have expected. Almost all I did was accounting related and I spent an inordinate amount of time doing things that I would really have thought were below a CFO such as reviewing or even inputting manual adjustments to the GL, running after receivables and paying bills. Not saying it's not an interesting role, but definitely different than what I would have expected.
the CFOs we've worked with have described their role as this: you have the obvious functions like overseeing reporting, accounting, etc. but it really depends on the organization. for example, a company like Microsoft won't have their CFO combing through the numbers, but if you're at a small company and you don't have a chief accounting officer or other VPs of finance you trust, you're going to have to double check the work to some extent. after all, you sign off on earnings to auditors/shareholders/regulators. I should mention that most of our CFO clients were at larger companies, so while they did the 3 statement stuff, that wasn't their primary role.
you have the less obvious functions that will depend on the company. say your sales numbers are great but your margins are declining, why is that? the CFO may be able to digest the data better than the CEO or VP Sales to guide strategy. this has numerous applications: say you're hemorrhaging talent (as evident by certain parts of SG&A ballooning), why is that? HR may not have visibility into the costs associated with that, but the CFO will notice that.
other functions could be weighing in on other investments. if you're Google, you have to constantly evaluate whether or not it makes sense to stay invested in YouTube for example. CFO's have the clout and the visibility into the company to get enough data to make those decisions. you'll also have to mind the company's assets, make sure you're current on all obligations, negotiate terms on financing, help figure out how to structure compensation, manage the company's investments (assuming you don't have enough people to have a treasurer), and so on.
CFO's are, in reality, deputy CEOs as far as I can tell. they rarely have to deal with the company's vision, sales initiatives, etc., that the CEO does, but nearly every important function can be connected to the CFO.
Ive always thought of it as, CEO's are the Income Statement (what you did/are doing) and CFO's are the Balance Sheet (how the stuff you are doing gets paid for). And in keeping with this potentially terrible metaphor, COO's are the Cash Flow statement (a bridge between the two).
Interesting, good luck
Dlte
Shocked that you think you're going to find a satisfactory answer to this question on this fora...
And yet.....I did. whoda thunk it, huh?
Maybe I'm old fashioned but I thought a CFO's main responsibility was to cook the books. Thoughts?
That's the head of accounting, the CFO then signs off and feigns innocence.
In my experience, CFOs are useless for small businesses. Usually the 3-statements are so simple, if I could have outsourced it to an enthusiastic university kid looking for some experience in finance, I would have done so (we did it on our own using online templates). Usually, for annual filings with the companies registrar, you would have to get those numbers audited, another task that can be outsourced. Also, as for reporting to investors, any CEO could just call his investors together for a weekend retreat in some fancy resort and just spew enthusiastic stuff about the company.
As for CFOs acting as deputy CEOs, I would disagree. COOs and CTOs play a much bigger role, followed by BD heads, depending upon the type of business. Even most VCs agree that having a CFO for the early stage is unnecessary, but they would also prefer the team to have some financial knowledge - nothing biggie, since all of it can be learned with one sit-down session on Investopedia.
Really depends on situation of company. A steady state CFO at a small firm probably is more mundane, accounting oriented. A CFO at a growth company will be working to secure financing, meeting with investors, etc. Also, will have the chance to help with strategy insight, develop and monitor key metrics for the business, and build a team. I think a CFO at a small but growing firm would be a real cool opportunity.
How small is the company? Without divulging the company what industry are they in?
About 70 employees, mixture of full-time employees and external contractors. It's a niche market, but I guess you could say the industry is IT-related.
I did Big 4 to BB IBD, to HF, to CFO of a $30mm revenue company.
Your situation sounds very similar to the one I was in when I moved over to my current company. The founders, very good at their trade but not "finance savvy", as you put it, wanted to raise capital and needed someone that speaks the language.
So far, ke18sb's answer is the most accurate. There's no one size fits all response - it depends on the type of company, what stage of life it's in, what their overall business strategy is, and what they imagine their CFO will do coming in.
At my company, I do everything. The normal accounting, audits, taxes, but I also run M&A, financial analysis of and structuring of new deals (we're a specialty finance company), raising debt capital, raising equity capital, overseeing salespeople, and sourcing JV's. I think of myself as much more of a CEO #2 than just a CFO (and far from a three statement monkey).
Also, I have a lot of latitude to define my own role. Shortly after I started I pitched to the founders why I thought we should start acquiring companies in our industry. We had cash to invest, unique access to capital that almost no one else had, and huge potential economies of scale. They listened, agreed with me, and now we're doing that.
That all being said, when I started the business was already strong with growing cash flows, there were tenured accounting staff who I could rely on, and the company's business model is crack to investors and was very easy for me to pitch.
Every situation is different.
Natus odio eius totam error voluptatem qui cupiditate. Voluptatem repudiandae laboriosam molestiae. Delectus doloremque sunt excepturi accusamus voluptas voluptatem illo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...