Need for a CFO depends on stage of firm’s growth

The CFO is the chief financial officer of your company. The question is: Do you really need one?
The answer: Maybe.

By Gary Williams
Brigham Young University DeseretNews

Financial professionals come with various levels of expertise, education and certification, and they demand various amounts of compensation. Their titles vary from bookkeeper, junior and senior accountant and accounting supervisor or manager to controller and CFO. Education and certifications include associate degree in business, B.S. in accounting or finance, certified management accountant (CMA) and certified public accountant (CPA). Wages and salaries can begin at a few dollars an hour for a professional at the early stages and rise to more than $150,000 per year plus benefits for an experienced CFO.
Following is a suggested road map for each stage of business growth and the requisite financial professional.

• Stage 1:

Founding of company. Find a competent CFO or controller to assist in setting up and organizing the books, selecting accounting software and establishing the processes and principles of financial operation. Don’t hire the individual; instead, leverage their expertise by retaining them as a consultant or adviser. A few stock options might keep this professional available for periodic advice while your firm is growing.

• Stage 2:

Proof of concept/market introduction. Sales are minimal, so maintaining control of costs is critical. A part-time bookkeeper will be sufficient.

• Stage 3:

Early growth. Now is the time to hire a full-time bookkeeper or accountant if your growth is fast-paced. Your role as CEO is to make sure that the employee is following the guidelines set up earlier by the CFO. Periodic reviews of accounting functions and financial statements by the CFO who helped during Stage 1 will be helpful in this formative period.

• Stage 4: Growth.

For some companies, when the number of employees approaches 50 or sales exceed $1 million, a controller may be needed. This individual is trained to not only maintain the books, but also to protect company assets. It may be time to begin independent year-end audits and an upgrade of your accounting system. Your outside auditor will be expecting someone with the capability of a controller within your firm.

• Stage 5:

Market expansion. Sales are a few million dollars, employees number 100-plus and a liquidation event (IPO, merger, etc.) is a possibility. It is time to hire a CFO, a professional who accounts for historical transactions, but more importantly, helps shape future financial decisions.

Regardless of the stage, your financial lead fills a key role where trust and ethics are paramount. Prior employer reference checks, background checks, accounting firm input and extensive interviewing are all components of finding the best fit for your company.

As a CEO, you need to exercise thorough due diligence in the candidate selection process at all stages of growth. Hiring the right professional at the right time will not only match salary expenditures with the company’s financial resources, but will also help insure that you are not "running out of control."

Gary Williams is affiliated with the BYU Center for Entrepreneurship. He can be contacted via e-mail at [email protected].

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