What to look for in a CFO
Hiring a Chief Financial Officer (CFO) is a pivotal decision. It's an exciting hire for your business and can do wonders for your finance team, but it's easier said than done. This hire proves especially difficult for a small or medium-sized business with a small budget or hiring the role for the first time.
No worries, this article aims to help you identify a great CFO candidate to make sound financial business decisions, follow through on all expectations of internal and external stakeholders, and will help improve your bottom-line financials.
Before you hire a CFO, let’s cover what a CFO does. A CFO is not just a member of the board of directors and responsible for leading the business's finance team. The role can be so much more—let’s explore that.
The role of the CFO
The role of a CFO is to monitor, optimize, and strategize a business’s financial health. A company's financial planning was much simpler before the 21st century. There was typically a single person (the leader of the finance function) that made strategic decisions, oversaw the accounting, and did the company’s taxes.
However, a combination of modern technology and a rapidly evolving business landscape demands a broader skill set from a CFO today. Today, they often need extensive experience working in a corporate setting and have a fantastic knowledge of financial SaaS tools to be able to drive the business into the future and cope with growth demand.
A CFO is responsible for the complete financial management of a business which includes:
- Managing the finance team
- Ensuring adherence to the regulatory framework
- Financial risk management
- Financial data management
- Overseeing investor relations
- Ensuring the accuracy of financial statements
- Overseeing and approving spends over a certain amount
- Process optimization & implement cost-saving initiatives
- Spend operations
A CFO uses data to analyze the company's financial position and provide insights to the CEO and other C-suite executives for strategic decision-making. For example, a CFO may choose to look at a business’s business travel processes, pinpoint where they can be more efficient, and find a travel solution that saves the business time and money.
What skills should you look for in a CFO?
Even though CFOs oversee the company's financial reporting, they need much more than just accounting skills—they also have a range of strategic business functions to perform. CFOs need a mix of the following technical and soft skills.
1. Ability to strategize
A CFO must monitor and aim to improve the business's financial health over time. While a CFO may not be directly involved with budgeting or forecasting, it's their job to guide these processes in a way that helps the company move closer to its goals.
In addition to internal financial data, a CFO must also use big data and industry knowledge as part of the financial planning process. While it's good to look at metrics like business ROI and profitability, external data can help establish benchmarks and identify trends.
A CFO must be able to consolidate all of this information and formulate a strategy that will help your business achieve its financial goals.
2. Inclusive leadership skills
A CFO is the highest corporate position for someone working in corporate finance. They're responsible for building, managing, and leading the finance team towards achieving the company's short and long-term financial goals.
As a leader, your CFO must also be able to develop meaningful relationships with their team. It's crucial that a CFO can cultivate and maintain an inclusive culture while empowering employees to unlock their full potential. This is why leadership skills are essential for your next CFO.
3. Extensive financial knowledge
It goes without saying that a CFO needs an excellent grasp of financial concepts. However, it’s not necessary for a good CFO to come from a finance background. Finance leaders often come from various backgrounds like accounting, risk management, and business administration.
CFOs typically have a master's degree in finance or similar or a professional certification like a CPA.
4. Excellent communication skills
Communication is a key leadership skill that helps set clear priorities, uphold staff morale. Good communication ensures all members of the team strive toward the company's mission and vision.
For a CFO, though, being a good communicator can come in handy in even more ways. A CFO, especially in a small business, may need to publish and explain the particulars of the financial reports to stakeholders. As a senior-level finance executive, a CFO may also need to represent your business at industry forums or panels. Lastly, a CFO may need to answer questions from shareholders at AGMs or during interviews.
Lastly, you’ll want your CFO to be comfortable with digital communications. This doesn’t necessarily need to be the tools you’re using in-house, but given today’s climate, they’ll need to be comfortable leading a team from home and be open to remote work.
5. Rapid problem-solving skills
Businesses in a high-growth phase face new challenges every step of the way. For instance, a startup that's currently ROI negative and facing a cash crunch will require a CFO's expertise to manage cash flow and leverage them back to safe grounds.
Your CFO will need to coordinate with your COO to ensure that the lack of cash doesn't result in halting operations.
On the contrary, larger enterprises have a different set of challenges to tackle. A mature company with excess cash (think companies like Apple, Alphabet, and Microsoft) will need a CFO's insight on whether a buyback would make financial sense and how it will impact the company’s balance sheet—for example.
A CFO faces a broad range of challenges from both internal and external factors. Quickly solving problems and making decisions is key to keeping your business’s financial position in order.
Is it time to add a CFO to your management team?
A CFO can be a strategic partner to help your business evaluate both the day-to-day and major financial challenges. A successful CFO typically has all the skills mentioned above, but some may be better at one skill than others. What’s crystal clear is they’ll need to wear many hats.
Be sure to look at your new CFO's work experience to gain a deeper insight into how they were able to add value to the previous employer's business with business acumen and financial expertise.
Lastly, don’t forget to factor ethics into the equation. Though often overlooked, ethical integrity is just as important as your CFO’s financial chops. Be sure to get solid references for your candidate before you proceed with interviewing them. Happy hiring!