Private businesses will often have three different types of financial people who work in their companies. These three positions are bookkeepers, controllers and chief financial officers. All three are used at different times in the development of a business.
I believe in most instances a private business will never need a chief financial officer (CFO) on a full time basis. There are times when you might need a part-time CFO and for those instances, I fully support hiring a rent a CFO to work with you on this basis.
When you hire a CFO on either a full time or part time basis, here are the tasks that a CFO would typically do:
- Work with you on getting financing for your business.
- Develop key performance indicators for your company.
- Develop drivers for your key performance indicators.
- Develop proforma plans for growth and needed financing.
- Put together measurement systems for analyzing profitability of customers and product lines.
- Develop a weekly dashboard that outlines and reports on the important metrics in your business.
A controller would take the programs your CFO has put together and make them operational. Your controller would be responsible for providing you with the information once your CFO has developed the information that is needed. Under this scenario, a controller would not only provide you with this information but also do the following activities:
- Assemble budgets for the company.
- Prepare cash flow statements and cash flow needs analysis statements.
- Prepare your monthly operating statements, balance sheet and cash flow statements.
- Oversee the general accounting activities in your company.
- Prepare or supervise internal metric and dashboard reports you use for understanding your companies economic position.
If you have a complicated company, you will want a controller for this job. If your books are relatively simple, then just having a bookkeeper would most likely be totally adequate.
The most important thing you can do and something I believe is absolutely crucial is to have a thorough understanding of the finances in your company. This means at a minimum, you as an owner must understand your profit and loss statement, balance sheet and cash flow statements. In addition, when your CFO (and I recommend it’s a rent a CFO) specs out the strategic financial reports for your company you must understand how the reports help measure and drive the profits in your company.
I see too many business owners who don’t understand the basics of reading financial statements in their company. Finance is the language of business. I believe that to successfully run a business, you must understand how finance fits in with your business success. Learning the language of finance is the only way you can do this.
As always, I’m interested in your thoughts on this subject. Please add any comments you might have to the discussion.
I’ve written a special report on using key metrics in your business. I encourage you to download this report by clicking on the button below. I believe you’ll find this report fits in nicely with the entry above.