The question you should answer is what type of CFO do I need? There are two major skill sets that you will eventually need as you move towards a company that has more sophistication and value.
The first type of CFO is a tactical CFO. This person will help you put a basic bookkeeping system together that provides timely and accurate reports. They often will work developing a chart of accounts to help you account for financial activities in your company in methods that will give you good basic information.
This person will work with your staff to train them on making sure you have great systems where your numbers are tied down on a monthly basis. When I had my vending company I insisted on tied down statements by the fifteenth of the following month. This means that if the month ended on January 31st, I would have a complete set of accurate financial statements by February 15th.
Your tactical CFO should help you learn how to read your statements. Unfortunately too many private business owners don’t know how to read financial statements. Your tactical CFO can help you understand not only your profit & loss and balance sheets, but your cash flow statement as well.
It’s important to remember that private businesses run on cash. Understanding where your cash comes from as well as where your cash goes is crucial. Without understanding this part of your reporting system you can be profitable, but run out of cash and then go out of business.
Once you reach tactical excellence, it’s time for a strategic rent a CFO. A strategic CFO will help you take numbers that are not part of your normal reporting system and put together key performance indicators as well as drivers for your company. This strategic CFO can also help you look at the capital structure in your company and help you understand how to fund operations as well as growth.
Strategic finance should always come after your regular reporting is under control. The challenge for you as a business owner is to understand when to have tactical help and when to have strategic help. You also will want to know when it’s time to make the move from tactical to strategic.
You might find that you’ll need a different person for this help and this is the beauty of renting a CFO. You get to use the proper person for the proper uses. Not having a full time person on your staff allows you to match the right skills for the right situation.