Ultimate Guide: When, Why and How Do I Hire a CFO?


cfo analysing financial report

What is a CFO?

The term chief financial officer (CFO) refers to a senior executive responsible for managing the long-term financial health of a company. The CFO’s general role includes tracking cash flow and financial planning as well as analyzing the company’s financial strengths and weaknesses and suggesting a course of action to remedy any problems. They are highly qualified individuals and work closely with other C-level executives to help you achieve your company’s long-term financial goals.

“The CFO needs to have a ‘big picture’ mentality, and be able to both implement long-term strategy while overseeing day to day elements of company finances.”

CFOs provide a valuable service, so let’s look at what their general skill-set should look like, beyond just their qualifications on paper.

  • On the ground problem solving: A good CFO faces a number of decisions on a daily and weekly basis – big and small. They should be up to the task of analyzing the information and data at hand, and crafting a solution that will benefit your company in the long run.

  • Data Analysis and Big Data: Your CFO should manage, organize and interpret all the raw financial data that is presented to them. By interpreting long-term trends and identifying any potential sticking points, they should be able to steer the company in the right direction.

  • Finance and Accounting: It goes without saying that your CFO should be skilled at high-level finance and accounting functions. Make sure to check those references and qualifications!

  • Management Leadership & Flexibility: These days a CFO is much more than a number cruncher. They are a key part of high-level leadership and have to be skilled at managing both hard numbers and the people behind them. They will also be asked to represent your company in meetings, and should be able to think on their feet.

  • Knowledge and use of Technology: Data capture, online functionalities and cutting-edge accounting software – these are all areas that a good CFO should be comfortable with. Not only should they be comfortable with software, automation and digitization, but they should actively encourage uptake within the company.

  • Future-Focused: Although having a good grasp of the historic performance is important, a CFO helps the leadership of the company to make decisions about the future of the company, using the historic financial information, assumptions and technology as tools.

These days, the duties and responsibility of a CFO extend beyond the nuts and bolts of setting up a spreadsheet and tracking cash in and out. Their skills should include not only strong leadership, but also supporting the company’s mission, vision, values, and culture in the long run.

cfo working on a finance report

Does my business need a CFO?

Many small business owners feel that they either do not need, or cannot afford the services of a CFO. Our argument is that you cannot afford not to use these valuable skills when looking to grow and scale a business.

As a company builds its revenue base and your focus shifts beyond just breaking even, and moves to areas of financing and forecasting, you definitely need the services and insight that a CFO brings to the table.

Cash is the lifeblood of any company, and your CFO can help your company get the most out of every Rand earned. The good CFO does the following:

  • Drive long-term financial strategy

  • Create and implement long-term financial forecasting tools

  • Think and plan strategically

  • Improve cash flow and increase profitability

  • Prepare for funding or a sale

  • Communicate with all relevant stakeholders, both inside and outside the company

These are big shoes to fill, and if you as owner and entrepreneur are involved in the day to day running of your business, it won’t be long before fulfilling the duties of a CFO becomes overwhelming. Enlisting the help of a CFO will free up your time and allow you to focus on your core skill set when looking to drive revenue and growth.

However, unless your business is in a crisis and needs to make strategic financial decisions quickly, we strongly recommend that you first consider an experienced part-time CFO, or make use of the services of an outsourced CFO.

business cfo working on a laptop

What size companies need a CFO?

Did you know that 20% of all new businesses fail in their first year? The reason for this grim outlook is often financial mismanagement and a lack of strategic long-term planning, a gap which can be filled by a CFO, no matter the size of your company.

A SME that is growing probably does not need the services of a full-time CFO on the payroll. In fact, you might not be able to afford it in any case. However, every business, no matter the stage it finds itself in, could benefit from solid financial leadership and the input that only a CFO can give. For smaller businesses, making use of outsourced CFO services is probably the best solution.

finance manager in a business meeting

When do you need to hire a CFO?

Deciding when to hire a CFO is a question of balancing up the pros and cons of a new hire. Hire too soon, and you may not be able to afford them—hire too late, and you may miss out on opportunities for growth and expansion.

No matter how small, any company can benefit from having a finance chief to help organize its finances and track its performance. Typically, however, hiring one does not become essential until your company reaches a tipping point.

That being said, there are certain times when the input of a CFO becomes particularly valuable, such as:

  • During a growth phaseIf you are lucky enough to encounter some unexpected growth in your company, the long-term financial vision of a CFO can help you capitalise on the situation while avoiding the obvious (and not so obvious) pitfalls.

  • Funding and raising capitalA good CFO can help determine how much capital you need to power your next phase of growth and if your company is in a position to take on debt.

  • Preparing for an audit: Although they are invaluable on a day to day basis, a quality CFO is particularly essential during audits. They make sure that your books are not only up to date, but that they are presented in an organized manner and in the right format, thereby avoiding holdups and penalties.

  • Implementing long term strategy: Any accountant can keep the books up to date, but a CFO is a member of the leadership team that can help guide the vision and success of your company.

Traditionally, a company would not hire a CFO until they were ready to scale and/or were generating a set yearly turnover. However, even at a lower turnover threshold, companies typically have the budget to hire a part-time CFO from an outsourced firm instead of employing somebody full-time.

small business owner in a meeting with an accountant

Does a small business need a CFO?

The short answer is yes. Any business, big or small, can benefit from the services of a CFO.

Every business hires bookkeepers and accountants in order to manage the day to day record-keeping and financial aspects of a thriving company. However, there comes a point where you have to think outside the box, and implement long-term, sound financial strategies that go beyond counting dollars and cents. It’s at this point that you need a CFO. A CFO is a strategic and long-term thinker who advises on a managerial level, and can guide your company to lasting financial success.

"Many people think that financials are only about tracking income and expenditure. While it is essential to keep accurate records, this is much more at stake when building a growing company."

The problem that many SME face is that, while CFOs can add value to any team, they are expensive resources and the cost/benefit analysis just does not add up. However, with outsourced and remote services available, that has changed. SME now have the ability to access top-level expertise through outsourcing, without placing a burden on their fixed expenses and cash-flow.

cfo on a business call

Why Should I Hire a CFO?

Even if your business is still growing, or just looking to run lean during these uncertain times, the value of strong leadership and good financial advice should never be underestimated.

In the past, a CFO was one step above an accountant. However, times have changed, and a CFO’s role has grown. Now they are still responsible for overseeing accounting and the bottom line, but are also expected to have a holistic view of the business – especially when considering the future They are responsible for preparing the organization that is “future-fit” for business whilst improving cash flow and profitability.

A lot of growing companies make the mistake of thinking they don’t need a CFO until they are ready to scale or are looking to sell. But there is a great deal of value that a CFO can bring to the table long before this point. Many financial experts would argue that a CFO’s most important duty is to identify business risks and mitigate them, which is something that a company of any size benefits from. They also, as the popular saying goes, work on the business, not in the business, meaning that they concentrate on high-level issues such fundraising, forecasting and yearly budgets.

If you do not feel that your business is ready for a full time CFO, we recommend that you consider outsourcing this role

hiring meeting with a cfo

How to find a good CFO?

Once you have decided that hiring a CFO is in the best interest of your company, you will need to start your job search for the most suitable candidates. You will also have to decide whether or not your CFO will be outsourced, full-time, or part-time. Working with a recruitment agency is a possibility, although word of mouth or hiring internally is also an option when filling this position.

If you want to search for a CFO yourself, your personal and industry connections are a great place to start. Don’t be afraid to contact people you know who might be suitable candidates, as they would probably be willing to refer you, should they not be interested in the position themselves. Utilizing your professional network is a great way to find a CFO who both fits into your company’s culture and can get the job done.

If you don’t have a wide network of business connections, or if none of your contacts lead to a new hire, try looking online. Websites like LinkedIn or dedicated recruiting sites are a great way to find qualified candidates in need of a job.

Keep in mind that you are looking for a strong leader who understands the value of making strategic and meaningful investment decisions, and will fit into your company culture. Take the time to select the best candidate for the job – one who has the right set of both soft and hard skills.

Next, be specific about the qualifications and relevant experience you are looking for. A new hire can be expensive, both in terms or a financial outlay and time and resources spent on training. Take the time to ensure that you are getting the right person not only for the job, but for your team and your vision for the future of your company.

business financial meeting

Should I outsource my CFO Position?

A virtual CFO or outsourced CFO fulfills all the tasks of a normal CFO, without being permanently employed in a brick and mortar office. A good CFO is responsible for your company’s current and future finances, and they are key in predicting and driving future growth potential. They should advise you on structuring your capital, determining the best mix of debt, equity, and internal financing. A virtual CFO brings all this to the table, without some of the disadvantages of a full-time employee.

Here are some of the benefits of engaging the services of an outsourced CFO as opposed to hiring somebody full-time:

  1. An outsourced CFO is cheaper than a full-time CFO, as there are no extra costs such as overtime or benefits tied to their services. This allows your growing company to receive excellent financial guidance that you can afford, at a time when you need it most, whilst keeping cash-flow friendly.

  2. You decide when you use their services. Most companies that outsource their CFO services offer hourly packages, which gives you greater flexibility and control over your expenses. Most of them are also willing to negotiate terms and hours that suit you.

  3. A virtual CFO works with a variety of clients and in a number of fields, whereas a full-time CFO works only with one company. This means that a virtual CFO will have a depth of experience and diverse knowledge that they can then apply to your benefit.

  4. They are professional and highly adaptable. Virtual CFO’s who work with a number of businesses in a variety of settings are able to adapt quickly to a new environment. Because of this adaptability, the necessary financial expertise is funneled into your business almost immediately.

  5. Replacing an outsourced CFO is easy. Should you find that your CFO is not a good fit, for any reason, they are easier to replace than a full-time employee. Not only is there no personal awkwardness, but the company that you outsourced to should have a roster of experts that they can offer as a more suitable replacement.

  6. They already work remotely. If your company has had to restructure lately in order to comply with Covid-19 safety protocols, with many people working from home, rest assured that you are hiring somebody who knows how to fit into a virtual team.

The true value of a virtual or outsourced CFO should not be counted only in potential monthly savings, but in the dedicated expertise that will allow your business to continue to grow, thrive, and eventually scale to help realise the impact of your vision. The value of a CFO is invaluable when looking to take your business to the next level, and the flexibility of a virtual CFO makes this the logical choice for your growing business.

Outsourcing the CFO function of your business can significantly contribute to the financial and strategic success of your startup, without adding to your payroll burden. As an expert in providing outsourced CFO services, OCFO is ready to help your firm achieve its financial goals in the new year. Reach out to us today!

Share This Post

Have any questions? Let's chat.

We love meeting founders and executives! Jump on a call with our team to answer any questions you may have.

Optimized by Optimole