Chief Financial Officers (CFO) are becoming increasingly vital to every function in medium and large businesses. In recent times, they have come under a spotlight for helping businesses transition to new and more resilient ways of functioning (especially during the pandemic period). They also help organizations find opportunities to increase efficiency, boost productivity, and reduce overall costs in the long run. Given the importance of the CFO role to any company’s financial health and long-term success, appointing the right CFO is absolutely crucial for a business.
To help businesses choose the best CFO for their needs, we have put together a detailed guide to hiring a CFO for your business.
Skills and qualifications of a CFO:
The first step in hiring a CFO for your business is understanding their job description and skill requirement. A CFOs job description is often customized for the specific requirements of the organization they are joining. CFOs are usually responsible for several activities in a corporate, including financial reporting, tax management, cash flow optimization, financial planning, and so much more. Moreover, today’s CFO roles have grown beyond just finance. CFOs of the new era truly have to be a master of all trades to help their business succeed and thrive in this competitive market.
While the job description for a CFO depends on the requirement of the firm, here are some skills that a CFO must possess:
Analytics has become a big part of helping organizations with decision-making, driving the growth curve, and controlling instability. While business analytics empower organizations to scale rapidly, CFOs should know how to leverage these analytics to enhance operational value. Hence, it is essential for a CFO to have an analytical mindset to help him/her use new-age reports and data to get the business closer to profitability.
Predicting and managing risk is one of the most crucial responsibilities on a CFOs plate. The Chief Financial Officer serves as the first line of defense in limiting and reversing the effects of any business crisis or threat. Naturally, experience with calculating risk and managing it is another key qualification to look for in a great CFO.
While this is not directly related to finance, an essential skill for CFOs of the new age is their readiness to adapt to new technology. Advances in technology have ushered in a unique way of thinking and mapping a business strategy. CFOs that are tech-savvy can adapt well to digital and business innovation and are more likely to include innovations and digital analytical tools in their overall business strategy.
One way to test your CFO’s ability to adapt is to ask them how they intend to:
- Bring the best out of all the resources in hand
- Create a high-powered environment to usher in creativity
- Introduce modern solutions to minimize repetitive manual labor
Great communication and collaboration skills
It is crucial for a CFO that all departments understand what he/she wants them to do when conveying the operational strategy to them. CFOs should be clear, concise, and direct when communicating with company owners, leaders, and, most importantly, investors. C-suite executives can’t afford their CFO’s message to get lost in translation among employees.
While a controller or managerial accountant can provide sound numbers, analysis, and financial reports, the CFO uses all of the above skills to advise the CEO and the board on the important strategic decisions the company should be making. A CFO with previous experience helping organizations with strategic planning will be able to provide better support on strategies.
This is something you generally do not need to worry about. All CFOs usually have a bachelor’s degree in accounting, finance, business, economics, and a postgraduate degree (usually in finance). A CFO with professional certifications such as CA, CS, ACCA, CPA, etc. can have the edge over the counterparts with only a master’s degree (even though that’s not always the case).
Role of a CFO in an organization
As said earlier, the key duties that a CFO can take up purely depend on the organization’s size, its industry/domain, whether it’s a public or a private company, and most importantly, its immediate requirement.
In general, a CFOs role can be split into three buckets:
CONTROLLER, TREASURY, and STRATEGY & FORECASTING.
As a controller, CFOs oversee day-to-day accounting and financial operations. They are responsible for creating reports that provide insights into a company’s financial standing, including accounts receivable, accounts payable, inventory, and payroll.
As a treasurer, a CFO is responsible for the company’s liquidity, debt, and assets. This includes monitoring any company’s investments, whether physical assets, such as buildings and equipment, or financial instruments.
STRATEGY & FORECASTING
Strategy and forecasting involve using available data and reports, both internal and external, to advise on areas such as product development, market expansion, human capital management, M&A, and capital investments. It’s also where structured planning and forecasting exercises, like scenario planning and FP&A are covered.
What type of CFO is right for your business?
Engagement with CFOs can come in many forms – Full-time (Permanent), Temporary (Interim), and Fractional. Another model commonly adopted these days is the Virtual CFO model. As more and more firms move to a virtual workplace, these designations are increasingly interchangeable. Let us now understand the meaning behind all of these roles so that you can decide which one is the right option for your business.
A full-time CFO is a financial professional hired full-time by the company to oversee the finance function. They are in charge of everything from financial reports and regulations to long-term planning. Most CFOs count on teams of accountants and auditors to gather, compile and analyze financial information. Full-time CFOs lead these accounting and other finance departments and are allowed to work with only one company during their tenure.
A fractional CFO is a CFO expert who provides part-time, retainer, and contractual services. They provide CFO services to the companies on a part-time or contract basis. Their engagement can be limited to a few hours or for a few days (depending on the organization’s needs). One thing to keep in mind about fractional CFOs is that they are free to provide their services to multiple clients (unless you have an exclusive agreement signed).
A part-time CFO (also known as Interim CFO) can be working for multiple clients but often not at the same time. Part-time CFOs are usually hired by a company when their full-time CFO is on leave or in between a transition period as they move in or out of the company. They can also be engaged to assist the full-time CFO when there are times of higher workload due to one-off situations like audits, M&As, etc.
Outsourced CFO/ Virtual CFO
Virtual CFOs are experienced CFOs who work on an hourly or fixed basis. These are common for companies that require financial governance but not on a full-time basis. They are most commonly seen working for startups or SMEs. Not only will virtual CFOs save you money, but you’ll also get access to experienced professionals who have worked with several other startups or early-stage businesses. They will be better equipped to spot opportunities and threats and can act in the best interest of your organization.
Another benefit when hiring virtual CFOs is the fact that they usually have their own support team of accountants, consultants, and planners. This is because most organizations they work with do not have a full-fledged finance department to assist them in realizing their vision for the business.
Where to find a CFO?
Now that we know how important the role of a CFO is, the next question we must ask ourselves is – Where do you find a CFO? Fortunately, there are multiple ways you can shortlist CFO candidates. We have listed a few of these options below:
Hire an executive search firm
This significantly saves your time and efforts. Instead of spending your time contacting people in your network or vetting candidates, you pass this work off to a team of qualified professionals. The staff at an executive search firm already has a thorough knowledge of the industry and may already know candidates who are qualified for your position. Once you give them a detailed description of what you need in a CFO, they can search through the CFO community and find the best candidate for you. Their expertise allows them to interview and select the best person for the job.
CFO Bridge also provides executive search services for corporates. We leverage our industry networks and deep understanding of businesses to find the right CFO for you and even vet them to make sure they are fit to join your organization.
Learn more about CFO Bridge’s executive search services
Use your connections
If you want to search for a Chief Financial Officer yourself, your industry connections are a great place to start. Don’t be afraid to contact people you know who might be interested in the position. Even if they aren’t interested in being your CFO, they might know someone who is.
Try networking online if you don’t have a wide network of first-hand contacts or none of your contacts lead to a new hire. Websites like LinkedIn are a great way to post your requirements and find qualified candidates needing a job.
Keep an eye on industry news
Keeping track of industry news can help you find a chief financial officer that is well qualified to work with your company. If a company is going through layoffs, there might be someone in need of a job who fits the requirements of your position.
Apart from this, Virtual CFO service is another way to meet your CFO requirements. In this model, a part-time CFO joins your organization on a virtual basis, helping you overcome financial hurdles by utilizing their skills. If required, they can also bring in their own team of finance experts to assist them with their requirements, making it even easier for you to get started.
A virtual CFO is a proven solution to close the gap for small to midsize businesses that have grown to the point that they need a CFO but do not yet have the revenue to invest in a full-time CFO.
When should you hire a CFO?
Well, that’s a good question! There is no one answer for all regarding when to hire a CFO. Hiring a CFO depends on how your company is doing at the moment. If your company is experiencing rapid growth and facing financial blockages that are limiting you, you should consider hiring a CFO to help you ease these challenges.
Here are some of the situations which can be an indicator of the need for a CFO in your organization:
Your company has experienced a lot of growth in a short time.
If your business has just had a sharp increase in revenue, your financial situation will change drastically. Similarly, if your business just acquired a lot of new employees in a short period, someone needs to make budget adjustments to ensure everyone gets their paychecks. A CFO can guide your company through such transition periods and other challenges to prevent finances from getting out of control.
Your company is going public.
Taking the leap to become a publicly-traded company requires systematic financial planning. Whoever is in charge of your company’s finances must be able to set your business up for the best possible IPO to ensure success in the future. Having the expertise of a chief financial officer on board can be a huge benefit when your business is taking this big step forward.
You’re acquiring or merging with another company.
A collaboration or an acquisition will surely impact your company’s finances. A merger or acquisition will require the oversight of a CFO to get a grip on these foundational changes and keep your company’s finances on track.
Your business is going through an audit.
Whether the government is auditing your business or you’re going through an audit for any other purpose, hiring a CFO can help you throughout this process. They will be able to use their experience to determine if your business’ finances are in order before the audit starts, which could keep problems from arising in the future or at the least manage the damage when they do arise.
Working with your finances has become too much for you to handle alone.
If you don’t have a lot of experience dealing with corporate finance, it won’t be long before fulfilling the duties of a CFO becomes overwhelming for you. At that point in time, don’t try to handle too many roles simultaneously. Hiring a Chief Financial Officer will alleviate your workload and give you more time to work on projects that better utilize your skillset.
Challenges Faced while hiring a CFO
Hiring a CFO is not easy. Business owners face multiple challenges in finding their exact requirements and generating leads for hires. Some challenges can continue to trouble business owners long after hiring a CFO. Being aware of these challenges beforehand and preparing your organization can save you a lot of stress later.
- When you are trying to hire a CFO for your business, you are searching for a well-experienced CFO with skills particular to your industry. But often, you have to settle for a CFO with little to no experience in your sector. These CFOs naturally take time to take control of the finance department, so you should maintain a buffer period in your growth strategy, allowing them the time to learn more about the industry.
- CFOs can be difficult to negotiate with when it comes to salaries. With the high demand for CFOs and their seniority within an organization, they usually have one of the highest packages. As a business owner, you need to ensure you are not going overboard on your budget just getting a CFO of your choice. Always negotiate and look for other benefits you can provide your CFOs that do not hurt your cash flow.
Hiring a CFO for a Startup and SMEs
Firstly, let’s establish our definition for startups and SMEs. Startups are companies in the first stages of their operation and funding. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand. SMEs (Small and mid-sized enterprises) are businesses that have a proven business model, consistent revenue, valuable assets, and a number of employees but are much smaller than their larger competitors.
It is clear that every growing business will need a CFO at some point in time, and the reasons for hiring that CFO can be different for every business. Hiring a CFO for startups and SMEs isn’t easy. Matching the high salary requirement for CFOs and providing them with a qualified team of experts to assist them in their plans is always a challenge for smaller organizations. But that does not have to limit you!
This is where CFO Bridge comes to your rescue. We have an entire team of CFOs and financial consultants ready to start working on your business. Each of our CFOs has over 20 years of industry experience and has previously worked at some renowned organizations across India. Our goal is to enable SMEs and startups in their growth journey by providing high-quality financial governance in an ROI-positive way.
CFO Bridge provides a plug-and-play solution where our CFOs can start working with your team in a matter of days. That’s not all! With a deep network of industry professionals, you actually get the expertise of all 50+ CFOs (in the form of brainstorming sessions) instead of the one you would hire full-time. Our unique delivery methodology (Panchsheel) ensures that our services are pushing you in the right direction. Our aim is to give you the guidance and push you to grow so that one day your business can hire a full-time CFO and a dedicated finance department.
Need help hiring your next CFO? CFO Bridge is India’s largest virtual CFO service provider. Having helped over 400 businesses on their journey to growth, we have the workforce, skills, and expertise to help your business overcome all kinds of financial hurdles.
Contact CFO Bridge today! We would love to discuss your goals and strategize a way to take your business to the next level.