Organizing the Finance and Accounting Function

Today we have a guest blog from David Lightfoot:

The finance and accounting function in a business is ‘mission critical’ but it is rarely the owner/operator’s first priority or, sometimes, even something they understand. As a business grows in size and complexity, finance and accounting become more critical and the necessary functions grouped in this area grow in complexity.

The outside CPA is independent of the client company and is mostly concerned with tax compliance and the review or audit of financial statements. Some CPAs can provide good business advice but this is the exception rather than the rule.

Both the Controller and Chief Financial Officer (CFO) are not independent. The difference between a Controller and a CFO is that the Controller’s duties typically end at the financial statements. The CFO’s role is to ensure the integrity of those statements via a robust system of internal controls but that is only the beginning.

The CFO is the financial partner of the CEO. The CFO is involved in strategy and asking the hard questions. Questions such as, “Should we be in this business? Should we be doing it this way? Does this branch/store/subsidiary make sense within the context of our overall strategy?”

The other way I like to think about it is this: The Controller looks backwards. S/he has the responsibility for historical financial statements. The CFO looks forward. The CFO has the responsibly (with the CEO) for the future; for where the business is going.

When should a company hire a CFO? As ever, it depends on the circumstances, such as the complexity of the treasury function and the amount of capital the company needs. But usually, the best idea is to outsource the CFO function to a consultant until the business needs a full-time CFO. Most businesses under $50 million in revenue and under 200 employees will not need a full-time CFO. If a consultant CFO is used, when the business needs the consultant CFO two full days per week on a regular basis, it is time to hire a full-time CFO.

Ask yourself:

• Do I have my accounting and finance functions properly organized?
• Do I need a CFO?
• Do I need a full-time CFO?

David Lightfoot

   

      David Lightfoot has over 35 years of accounting, finance and operational experience as Controller, Chief Financial Officer or Vice President of Finance for small and medium-sized businesses. He also has operations experience and has worked as a CEO, giving him a broad business perspective.

      Mr. Lightfoot is currently a Partner with B2B CFO, the world’s largest provider of CFO services. David’s clients range from start-ups to $50M in annual revenue. He specializes in professional services, real estate/construction, software and healthcare.