In any company, finances are one of the most important factors. Your company may not grow or may be forced to shut down if your finances are not in shape. Many businesses lack the expertise and time needed to keep their finances in tip-top shape. In these cases, hiring a CFO can tremendously help. 

The Chief Financial Officer's (CFO) primary task is to improve a company's financial performance, including reporting, liquidity, and return on investment.

Hiring a CFO is a big decision. Your company can greatly benefit from their direction, but they come at a price. Here are the top four questions to consider while deciding whether or not to hire a CFO. 

WHY DO I NEED A CFO? 

1.  Save time

In many respects, having an excellent chief financial officer will save you time. The time that you previously spent on company finances can be shifted to other areas of your business. You can rely on your CFO to keep your finances running smoothly. 

1. Generate more revenue 

Companies with a competitive finance department are more valuable when it comes time to sell. On a more day-to-day basis, you will be better equipped to predict cash needs and keep your cost of capital low as your company grows. 

1. Strengthened internal controls

A robust internal control system will raise the value of your firm, provide for better asset protection, and ensure that your company can be audited if necessary (whether a financial or IRS audit).

1. Better strategic decisions

Even though accounting is generally referred to as the "language" of business, some CEOs place a low priority on accounting, finance, and reporting. Hiring a CFO allows your company to make better strategic financial decisions that help you expand and increase profit. 

1. Higher exit value 

You will probably want to sell your company at some point. Whether you sell the whole company, buy out a portion, or sell to a partner, hiring a CFO will make your company more valuable. The CFO will get your company in tip-top shape so when the time to sell comes, you get the highest offer. 

WHEN DOES A BUSINESS NEED A CFO?

No one is better positioned inside a firm than the CFO to bring structure to a complex process and ensure long-term financial success. The CFO applies their financial experience in a strategic leadership capacity to help the organization and its stakeholders achieve financial success.

A CFO can help: 

1. During a period of rapid expansion

Rapid expansion is a critical indicator that a CFO is required. Expansion of automated systems and increased cash and financing are needed for growth. As the financial side becomes more complex, a CFO is highly qualified to handle rapid revenue growth. They will interpret investments and technology, as well as the terms of capital acquisition.

1. Create new products, markets, or services

The future is more unsure than it has ever been. Change and the ability to adapt are required to stay relevant thanks to disruptive technology, evolving market dynamics, and new leadership paradigms. A CFO acts as a sort of change expert to keep your company competitive. 

The CFO helps identify new prospects and transform the company's goods and markets, capitalization and planning for future growth, and creation and successful communication of the company's growth story.

1. Your financials are not where you want them to be

The CFO can generate more profit by controlling expenses, increasing productivity, and reviewing pricing options. Employees within the company might make better decisions throughout the firm if profitability visibility is improved. The CFO can keep the CEO, board, and investors updated about historical and current financial reports as the head of the financial departments.

1. Make tax preparation more simple 

A company must generate and present accurate financial statements and meet its tax obligations to maintain its integrity. Tax preparation can be difficult, especially if you do not have much experience. If that is the case, appointing a CFO would make tax prep a breeze. 

1. Promote future cash flow visibility

If your money is not growing and you need someone to manage your company's finances, appointing a CFO may be the best solution. They create specific investment strategies and take asset classes into account so your company can thrive. 

1. Take your company public 

Deciding to go public requires meticulous financial planning. To ensure future success, whoever is in charge of your firm's finances must be able to set your company up for the best possible IPO. A chief financial officer's knowledge might be invaluable when your company is ready to take this next step.

1. Navigate an audit 

Whether you are audited by the government or internally, hiring a CFO can assist you throughout the process. They will use their knowledge to double-check that your company's finances are in order before the process begins, perhaps preventing complications.

1. Complete a merger or acquisition

A merger or acquisition might drastically alter your company's financial situation. A CFO can help your company adapt to these rapid changes and keep your finances on track during the process.

DOES MY BUSINESS ACTUALLY NEED A CFO?

Many businesses do not require a CFO. They have other capable employees in the finance department, like the finance director or a skilled accountant, that can manage the finances. If you are the owner or CEO of a privately held, moderately successful small to mid-sized company, you are unlikely to require the services of a full-time CFO.

You may require an interim, fractional, or part-time CFO, depending on the problems your company is facing. In that case, a permanent, full-time CFO may not be the best decision for your company. Many of the significant tasks performed by a CFO can be completed by the firm owner or CEO in this type of business.

You may want to consider postponing your search until your company truly needs the guidance of a CFO. Hiring a CFO may be necessary only when you receive large funding rounds, often Series B and later, and M&A – explore an acquisition, or decide between selling the company and keeping independent.

Even then, using outside advisors to iron out the details can help your internal financial leader advance to the position of CFO.

HOW DO YOU HIRE A CFO? 

Every company approaches the search for a new CFO differently. If your company decides to hire a CFO, follow these four tips to help you recruit someone and find the best fit for your company.

1. Use an executive search agency

You can save time and money by using an executive search agency in your search for a CFO. Delegating these responsibilities to qualified specialists saves time so you do not have to contact people in your network or assess candidates. You can devote more time to helping your company develop and thrive by delegating the search process to someone else.

1. Make use of your contacts

If you are searching on your own, start with your industry connections. Do not hesitate to reach out to anyone you know who could be interested in the job. Even if they do not want to be your CFO, they could know someone who does. Using your professional network to find a CFO who fits your company's culture and can get the job done is the best way to get the ball rolling. 

1. Keep a close eye on the job market

Keeping up with industry news will help you find a chief financial officer who is highly qualified to work for your firm. When a company lays off employees, that is the perfect opportunity to find someone who meets your qualifications.

1. Think about all of your alternatives

If your hunt for a new CFO has proven futile, or you are unsure whether your firm requires another full-time executive, it is time to consider your choices. Is a full-time CFO essential for your company? Consider how much work you'll need the chief financial officer to complete and whether hiring someone full-time is worth it. Look for part-time candidates or an outside firm if you don't need a full-time professional.

Bottom Line

Here at Equify Financial, we understand how much you value your company. Our financial advisors are here to help you make sound financial decisions, including whether or not you should hire a CFO. 

We also offer financing options to suit your business needs. Our financing experts will work with you to establish your business’ financial goals, develop a plan of action, and create custom financing options. We will present all offers in a comfortable atmosphere that minimizes the possibility of being turned off by negative information about the current lending climate or rates.

We are here to help with any needs that may arise! Contact us today to discuss how we can support your company’s financial goals.