Roles of CFO at Private Companies
In my tenures as senior finance executives at both public and private companies, I find it fascinating that many CEOs think the chief financial officer is a utility position, they see their CFOS as a super charged accountant, back office managers, keep tracks of cash flows, which, in fact, is a small portion of CFOs’ values. Good CFOs do not just keep track of those nor count the beans, they manage the company and bring things together. If managed properly, they are an A-team player on the executive team and I can tell from my personal experience, especially in private companies.
Like CEOs at fast-growing private companies, CFOs wear many hats. One day, they operate the data flows around their business, provide visibility to the data that they possess and help the team make informed decisions and provide insights to improve business performance. CFOs also assume, to an extent, operations, including legal, compliance, HR, trade, internal controls, which bring “order” to an often, chaotic, environment when people run around without directions.
To the external community of investors and potential investors and customers, CFOs is the face of the company along with CEOs. Investors deeply care of the company’s forecast as it provides the outlook for the business in top lines as well as how the expense structure and headcount plans are laid out. When managed well, the expenses and hiring practices translate well into cash planning, and expenditure mapping, hence avoiding a situation of raising capital, managing time to look for alternatives to equity raises such as revolvers and term loans, avoiding equity dilution and carrying the company over the hump, etc. So, as you can see, managing the financials, providing visibility and efficiently running the company are, after all, the CFOs are hired for.
The complicated part of hiring CFOS at early stage private companies is that they may not need the full time CFOs but need their deep insight into markets, and their knowledge and steady hands to oversee financial operations and fulfill the role of being the trusted advisor for the executive teams. This is where part-time CFOs come in and make the impact on the organization, bringing all of their knowledge, expertise in technical accounting, operations, legal, HR and compliance.
Lastly, it gets very hard and consuming to unwind ill-conceived structures, hiring the right talent from the get-go pays itself in the immediate terms. Often times, I recommend to my clients to hire part-time CFOs if they do not see the need for it or they want to just do it with low-level accountants. For the all the qualities and benefits that good CFOs bring to the table, if you bring them onboard, you will reap the benefits early and build a stronger company.