A typical company finance function can be divided up into 3 areas, however many businesses believe the finance role is principally to produce accurate accounts.
Ask any bank manager and he or she will tell you the bank’s most problematic customers are those who don’t truly understand what is going on in their business. Some customers ask for finance or expect to maintain an overdraft, yet cannot even produce up to date accounts.
Most SME business owners want to focus on the business and not the numbers. The business is their baby and they want it to be their sole focus – not financials!
The areas which the business owner will seek help in first will be determined by the focus and needs of the business whether in sales, operations, admin or finance. If we look at the finance function, it is traditional to break it down into 3 roles:
1. Finance direction – the CFO
2. Finance control – the Accountant
3. Book-keeping/basic accounting/ AP & AR – the Finance Department Staff
Many business owners think the finance role is transactional in nature and so concentrate just on producing accurate accounting records. This is essential in itself, but not enough to manage and develop a growing business. When focusing on the CFO role specifically then, what are the key tasks of this role and what does the CFO bring that the other finance roles do not? Why would you need a CFO?
I suggest the following four main areas of expertise and input:
Co-ordinating and developing long term business plans; defining the implementation timetables; assessing the risks involved and seeking the funding required to deliver the proposed plans.
Developing internal controls; managing and developing the reports needed to run the business; improving profit levels; managing cash flows. Does the business owner fully understand the profitability of each product / service they offer? Often the answer is no.
Instilling a financial approach and mind-set throughout the organisation to help other parts of the business perform better
Tax planning and legal issues; compliance issues; managing external relationships; outsourcing relationships.
The modern CFO provides oversight on tax and compliance issues, develops and maintains key relationships and much more. There are many other considerations that go beyond the pure “job description” above.
What’s the difference between an accountant and a CFO? A CFO looks forward and financial accounting looks backwards; it’s where your business is going that matters as the past cannot be changed – but learnings can be made and changes made so that past mistakes not repeated.
Experience: it is important that a CFO has a wide range of commercial experience, not just financial. Good CFOs do not learn their skills from textbooks alone, in fact they learn very little from textbooks – they learn by doing. Commercial experience means leaving their offices and talking to customers and engaging with the production and operations teams.
Written by Peter O’Sullivan, Regional Director, Victoria