When Should You Hire a CFO?

Summary: When you first start a company, you may naturally end up filling the role of CFO, but as time goes on, you’ll need to hire someone whose primary focus is financial planning and analysis. Click through to learn about how you can better pinpoint and identify that touchpoint. 

When the financials of your company start expanding beyond basic accounting, you may find yourself in need of assistance when it comes to planning or analyzing your finances.

If that’s the case for you, it may help you to turn to someone who has a thorough understanding of the following: 

• Financial strategy and forecasting — This entails the analysis of both current and previous financials as well as the creation of strategic investments and the reallocation of funds. 
• Management — This is all about the supervision of a company’s finance and accounting departments while also ensuring that proper accounting procedures and policies are not only put in place but also adhered to with total accuracy. 
• Reporting — This step focuses on making sure all financial reports are accurate, in compliance and completed on time. 
• Treasury — This pertains to dedicating time toward the analysis of your company’s financial standing and charting the best course of action when it comes to resources, debt and equity. 
• Transactions — This prioritizes the process of monitoring payroll as well as accounts payable and receivable, which essentially zeroes in on ensuring that accounts are paid promptly. 

What is a CFO?

A chief financial officer is a business’s financial leader who’s equipped with the roles of studying the marketplace and planning a course of action. CFOs also analyze ledgers, staff and cash flow while calculating an accurate return on investment regarding the output. 

Ultimately, you won’t want to miss the chance to catapult your company in a forward motion. Generally speaking, once your firm begins to make at least $50 million in annual revenue, a great rule of thumb is to hire a dedicated CFO. 

What is a controller?

So, start by taking a step back. Maybe you could start by hiring a controller if your annual revenue is somewhere between $1 million and $10 million. A controller is an individual who is equipped with the responsibility of handling the oversight of accounting while managing bookkeeping duties and accounting teams alike, in addition to essentially acting as a de facto CFO for you. 

Furthermore, a controller oversees activities pertaining to business accounting while ensuring that money flows in and out of the business both smoothly and legally. Controllers are also equipped with the duty of monitoring internal spending and managing cash as well as equity.

A controller manages the processes of payroll and taxes, as well as financial reporting, while assisting in the creation of operational budgets. 

Hiring a controller vs. an outsourced CFO

Another possibility is to hire either a part-time controller or an outsourced CFO. As your business grows and continues to evolve, your company will need a certain set of financial skills and talents beyond the abilities that most bookkeepers or controllers can offer on their own.

In addition, you’ll likely also want to have an in-depth understanding of your firm’s financial health as well as a holistic view of how your business can operate even more profitably. These often take the skills of a CFO. 

Whether you hire an in-house or contracted CFO, the chief financial officer should be able to mitigate the majority of, if not all, business risks, figure out the ways in which your team is underperforming, identify the reasons as to why margins are suffering and where any potential pitfalls are located.

The CFO should be able to determine the specific cost structure of every new piece of business as well as what your company needs to charge in order to make money on the work being completed. 

What does a CFO do?

You’d expect your CFO to advise you on the right steps for your company. Not only is a CFO a strategist and a catalyst, but CFOs play the role of steward and operator as well. CFOs are people who prioritize, focus on and tend to the core responsibilities of the finance function. 

The primary duties of a CFO may include the following:

• Analyzing data.
• Fundraising.
• Managing financial risks.
• Planning and reporting finances.
• Recordkeeping.
• Reporting to stakeholders.

CFOs take previous data and use it to inform their internal positioning. Additionally, CFOs create road maps for financial growth that they can then use as guides during the decision-making process. From there, the goal is to yield positive outcomes for the overall development of the business as a whole. 

How to determine if it’s time to hire a CFO

Knowing when the right time to hire a CFO is will fully depend on the financials of your business, your company’s competition, the overall market, the experience levels of your employees and your team’s financial skills, as well as any and all growth expectations. 

Here are some guiding questions worth asking yourself: 

• Without the help of a CFO, will you be able to progress beyond a Series A financing? 
• Is it possible for you to manage corporate tax compliance as well as sustain revenues over $10 million per year? 
• Would the assistance of an accountant help with your workflow or make it easier to increase your bandwidth? 
• Do you have the know-how to successfully model future planning based on previous data? 
• Are you familiar with bottom lines, cash flows, losses and profits? 

While you do have access to financial data, this doesn’t necessarily mean that you’ll know how to use or apply the information for the purpose of driving growth. It may be wise for you to reach out to a CFO service and partner with an outsourced CFO. Alternatively, you could try a headcount. 

For instance, if there are 10 people in your company and you operate a straightforward business, then it’s possible that you do not need to hire a full-time CFO. However, if you are approaching anywhere from 40 to 50 full-time employees, matters may start to become more complex, meaning you might want to consider incorporating a CFO into the mix. 

At the end of the day, how confident are you that your finances are being handled in the most productive manner? Your ability to secure funding or any additional future investments may depend on how your company’s financial condition is perceived. Depending on your situation, you may benefit from the help of a CFO. 

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