The Changing Role of the CFO

How has the CFO role been changing and what does this mean for your business?

For many, the CFO in a company has long been considered as the bean-counter (albeit the chief bean-counter). And in the past that’s been true. CFOs are nearly always accountants with responsibility for the core traditional finance function in the company – financial statements, monthly management accounts, cash management, compliance, that sort of thing. So it’s a highly specialised and professional role that requires the individual to be qualified and experienced.

But I’ve seen the role change over the years and having recently read a KPMG survey on CFOs and their function, I thought I’d share with you some of the ways CFOs are now contributing to companies in a much wider capacity. It’s no longer about budgets and monthly reporting, but rather more about value creation for the business.

CFOs are now playing a key role in directing not only the financial performance of the company but also in strategic decision making. There’s a fundamental shift in expectations in the role as the CEO now wants the CFO to be a partner in business strategy as well as financial advisor and to assist in seeing the whole picture. Yes the technical skills still need to be there and the reporting still needs to be timely and accurate but strong commercial business skills are also required these days and an ability to convey an understanding of the financial implications of decisions.

CFOs are in a very unique position in the company in so far as everything that is important eventually gets reflected in numbers. The old line of ‘you can’t manage what you can’t measure’ still holds true.

Challenges for an early stage company

Every company, regardless of size, needs a CFO. But a full time CFO? Possibly not. The bootstrapping start-up or early stage company doesn’t need the added expense of another full time C level employee. But the value that a CFO can add to a start-up or early stage company in strategic decision making is invaluable.

As a start-up, more often than not the founder takes on the role of CFO (in everything but name), or indeed leaves it to the accountant or auditor who lacks focus and time commitment to the company. So they miss out on the strategy and planning elements that a CFO can bring.

The financial function tends to be outsourced - monthly payroll, VAT, and obviously the statutory yearly audit. And that’s fine. A CFO’s value isn’t in the performance of these functions, rather it’s partly to manage all these at a higher level to allow the CEO do what he does best – to drive the business forward.

And as the company gears up for possible external investment, the CFO has an important role to play in managing that process to ensure the company raises the right type of funding, from the right sources at the right times. And once external investment is taken on, the need for more comprehensive reporting on a monthly, or at least quarterly basis becomes evident. External investment also means that these relationships need to be managed and maintained.

So a part time CFO can undoubtedly add value to a company and the part they play in companies these days goes way beyond what most would traditionally have considered the CFO role to be.

And best of all, it’s a cost efficient way to get all the benefits of a CFO at a fraction of the cost.