Here’s Why Hiring a CFO Is Incredibly Advantageous

Feb 11

Whether you are passionate about your business or not, you will still have to handle the finances in your business. This is one of the aspects that entrepreneurs need help with, and there is no getting away from it. Plenty of organizations and companies should look into hiring a CFO, or chief financial officer, when it's clear that assistance is necessary regarding the fiscal standing of the business.

This usually happens when the chief executive order (CEO) and junior financial staff don't have the skills to get it done. Other tasks that may have to be outsourced include:

Cash flow assessment
Future financial needs being forecasted
The business strategy being better informed

In some cases, experts have a certain figure as their marker that it's time for a CFO to be hired on a full-time basis. (This is generally at the $10 million mark, but that's not necessarily set in stone.) It should be noted at this point that virtual CFO "as a service" and part-time or fractional CFOs are actually available in certain contexts.

Is It Time To Hire A CFO? Ask the Following Questions:

Is data being used beyond the obvious areas? (CFOs are great champions for data use. Ecommerce data, for example, will better inform programs related to customer success.)
Is the company or organization starting to actively pursue a growth strategy?
Is there a repeatable, sound planning and budgeting process?
Is there full confidence behind financial reporting requirements?
What are the income, cash flow and P&L statements like?
Were intangible assets harmed by the economic downturn? (How will those be accounted for if the answer is yes?)
When was the last time valuation multiples were calculated?
Who will check the books should an acquisition opportunity come up?

Take note that considerations can also be specific to the industry the organization or company is in. Distributors, manufacturers and retailers alike were hit quite hard by the pandemic. Weaknesses came through in supply chain operations. Thankfully, having a CFO will address that problem with little to no issue.

CFO compensation in public companies is typically a mix of cash and stock. In both public and private businesses, remuneration is based on a number of factors, from company size and industry to geography, experience, seniority and how many finance/accounting divisions or departments report in to the CFO. In 2021, the highest-paid CFO by a wide margin was Goldman Sachs’ Stephen Scherr, at $20.2 million total comp. Among all companies, U.S. CFO pay as of early 2021 averaged $394,235, according to Salary.com data. But at smaller companies, pay hovers between $150,000 and $200,000, according to salary and job sites.

Skills & Qualifications

An effective CFO will have the ideal mix of soft and hard skills. Aside from a background in finance or accounting, an advanced business degree-MBA and all-are necessary. Data analysis skills and solid leadership talents are equally crucial.

Conclusion

The chief financial officer plays a major role in companies and organizations. They have the necessary skills to take a hard look at the fiscal standing of the business. It's important to ask questions such as whether data is being used aside from the obvious areas and when the last time valuation multiples were calculated.

Looking for accounting services in Denver? Drop Tottax x4 a line today! We help small businesses and their owners solve problems related to accounting.