Good to Great: How to Scale With an Outsourced CFO

The traditional definition of a Chief Financial Officer (CFO) is that he or she is the senior manager of all things financial for a company or corporation. The CFO keeps an eye on the company’s cash flow, analyses the company’s financial health, and suggests possible improvements. The CFO also oversees the financial accounting of the company, including timely and accurate reporting. One important point about this definition is the word “traditional”.

Although it is still extremely important that a CFO has a solid grasp of basic finance, the trend has seen the role of the CFO expanded to include involvement in both strategy and operations.

What Skill Are Important for CFOs?

The basic financial skills are important because the CFO is a primary player in structuring the company’s use of capital. Use of capital includes managing investments, revenue, and expenses. A good chief financial officer is critical to the success of any organisation, and a bad one may cause that organisation to fail. The question is; what makes a good CFO?

The great CFO’s are almost universally well-educated and share many common key attributes. Here’s what we think makes a good CFO:

• Thinking strategically inside a well-defined vision
• Focused on the operation and how top and bottom line growth are affected
• Has a comprehensive understanding of the business
• Has insight into what drives the numbers
• Is an intuitive leader who motivate others
• A master at effective persuasive communication
• Ability to identify and explain opportunities
• Approaches opportunity with caution mitigating risk
• Uncompromising integrity and the highest ethical standards

What Makes a Good CFO?

The really good CFOs take part in creating the strategic plans that move a company forward. They earn a reputation for effective leadership not only with their departments but with the company in general. They demonstrate a respectable executive presence among the whole executive management team.

As CFO, he or she must clearly understand how their company functions – the operations and business model. The CFO must not only report numbers but also expertly interpret and explain the “why”. CEO’s will tell you that the best CFO will answer a question before anyone even thinks to ask it.

Why are Communication Skills Important for CFOs?

Effective communication, oral and written, is fundamental. Every key player must understand where the company stands concerning performance and resources, and it is the responsibility of the CFO to forward that information clearly. Many CFOs see their role as making the numbers tell a story of opportunity, investment, the company direction, and potential risks. CFOs use numbers to tell the story of how financial knowledge, teamwork, and problem solving can help each department align with the other to add value and accomplish the company’s mission. CFOs must maintain the highest ethical standards and create trust and confidence in others. Great CFOs understand and honor the unspoken notion that hey hold the keys and are responsible for protecting everyone's money. 

Do Small Businesses Need a CFO?

Clearly, CFOs play a critical role in their company’s success. Clearly, their role is evolving into one that plays an even larger role than in the past. One could argue that without an effective and talented CFO, many businesses would fail. That argument begs the question; what do many small, or even some medium size businesses do if they cannot afford to spend a compensation package large enough to attract a talented CFO? How can they tap into the benefits acquired from the expert advice that large companies and corporations have? Outsourcing (or renting one?) is the answer. Many small business owners don’t even have a CFO but could benefit enormously from that type of financial advice. The time has come to consider outsourcing this position.

Outsourcing a CFO is much cheaper than hiring one. The employer doesn’t provide benefits, can set the number of hours necessary, and the hourly or value rate is often negotiable. Keep in mind that a confidentiality clause is a must when contracting a CFO, and it’s best to find someone who has some familiarity with the intended industry. Outsourcing for a CFO is very similar to any delegating in that it will free the small business owner’s time for other important matters. In addition to freeing up the owner’s time, the outsourced CFO can function as sort of a trial run of how a full time employed CFO might contribute to the company.