What is a CFO and why does it matter?

One thing that I have noticed is the lack of formality and specificity with which we use the terms “accountant”, “controller” and “CFO”.  I have often heard CEO’s comment after realizing they have an issue, “I thought my CPA or controller was taking care of that”.  I recognize business owners are focused on running their business and not interested in being an expert on all financial functions.  But in today’s specialized world who would you refer to for guidance on selling your business, analyzing a potential acquisition, forecasting sales on a new business line or increasing the profitability of the company you have spent 20 years building?

So, in order to help businesses, I felt some time and space should be dedicated to explaining the distinction between a CFO, a controller, and to a lesser extent, an “accountant” or “bookkeeper”.  In simple terms a CFO is a highly experienced financial executive, who can help drive your business to greater profitability and end value using a variety of techniques and analysis.  This is different than your CPA or controller.  Although there are exceptions, most CPAs and controllers do not have CFO experience. “They report the news, they don’t forecast or shape the news.” The outside CPA, or a controller within your organization, may prove an excellent resource on taxes and accounting regulation, but they likely have little experience with running a company – other than a CPA firm. CFO’s are typically involved in all aspects of your business and have direct experience running and operating business units.

Another way to view this is to break down the roles between strategic and tactical.   That is, an accountant, controller or CPA generally has a tactical purpose of documenting and reporting on the transactions the business has engaged in, for purposes of compliance with IRS or requirements of your bank.  While a CFO will certainly be involved in that reporting process, his focus is on taking that historical data, evaluating the performance of business units or products in the company and developing future plans. These may include strategic plans, multiyear budgets and financial models to either predict future performance of those units or to evaluate and enhance their performance with the purpose of achieving the owner’s longer-term goals of growth, expansion, exit, etc.

Please let me know if you found this helpful or have additional thoughts to share on this topic. Send any examples you have found useful in your business.

If you would like to learn more about the role of CFO’s and how that could help your business please see me an email. I offer a complimentary analysis to qualified business owners that includes an Industry Comparative Report.

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