Is Timing Everything?

Many middle market companies struggle with finding the right time to retain the services and expertise of a chief financial officer. Not only is timing important, but so is justification for the expense. The best indicator that a company is ready to make the move is when growing pains first present themselves. When executive leaders are being stretched too thin, it is probably time to engage a Strategic CFO. But, timing isn’t everything.

Strategic CFOs Benefit the Company

The most obvious reason to engage a CFO is to enhance your leadership team and develop a plan for a sustainable future. The right CFO will add a strategic financial function to the organization. Not only will he/she have experience in raising capital, but also at managing banking relationships – an integral part of managing growth. A CFO will also provide financial assessments and improve your overall accounting function and annual audits. Companies of all sizes deserve the benefit of having the sound internal controls that a CFO will provide!

And, they don’t stop there.

One of the Strategic CFO’s primary goals is to provide business intelligence. They will serve as your objective business and financial advisor by mitigating risk and providing invaluable business navigation and guidance. Whether dealing with mergers and acquisitions, equity/debt negotiations, or liquidations, the Strategic CFO will steer your company through all financial situations. 

Strategic CFOs Benefit Stakeholders

The Strategic CFO provides existing stakeholders with an assurance that the company’s finances are in good hands. CFOs provide independent assessments and assistance through transitions, all the while serving as a consistent financial advisor – providing a sense of comfort to stakeholders with interests in the company’s success. 
Stakeholders want to invest in a company whose position is to ensure sustainable competitive advantage in the long run. That is exactly what the Strategic CFO aims to do.

Build it and they will come. 

CFOs also provide the company with credibility in the eyes of prospective stakeholders. Private equity firms, strategic buyers, capital providers and suppliers will all benefit from the experience a CFO brings to the table. A company with the sound leadership a CFO provides will attract potential stakeholders. 

“Strategy” is the Key Word

According to businessdictionary.com, the word strategy means:

1. A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.
2. The art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for generalship or leading an army. 

These definitions sum up the role of a Strategic CFO perfectly. 

By: John Ball

​In a previous post (Businesses Need More Than A CFO), I contrasted the Strategic CFO with the traditional CFO. All businesses need the services of both. Traditional CFOs (or controllers) perform important accounting functions such as monthly closings and financial statement publications, payroll, customer billing and collections, and accounts payable. They may also be tasked to prepare budgets, forecasts and financial analysis projects for the CEO and leadership staff. All companies have this function in place now to varying degrees. 

Of the 100+ small and medium-sized businesses (SMBs) I’ve worked with, many of the CEOs expect their CFO/Controller to perform only these basic financial functions. They are unaware that a Strategic CFO with a comprehensive corporate perspective can, among other vital contributions:

• create and execute business strategy,
• maintain and communicate critical up-to–the-minute forecasts to make better decisions,
• anticipate the need for and raise capital to support growth and profitability,
• negotiate major contracts, and
• assist the CEO with acquisitions and divestitures.
• And if the CEO is aware of the value, most think they cannot afford such a position.

For those business leaders, I have good news. Usually a SMB can add this important missing team member at a cost less than their current expense for the finance/accounting function. Not to mention the more important offsetting revenue, profit, and cash growth that accompanies a successful, experienced Strategic CFO.

While the position of controller/accountant is a full-time job, that of the Strategic CFO usually is not. How often during the year must an SMB prepare its business plan, access the capital market for growth funds, or pursue a strategic acquisition or divestiture? A fractional/part-time/consulting CFO is capable of monitoring business and financial operations continuously and responding immediately when decisions and action is required. This is a continuous but not a full-time task.

For those SMBs without a fractional, strategic CFO, may I suggest they consider it…it just makes dollars and sense.



John Ball is a co-founder and the Managing Partner of SeatonHill Partners, LLC. SeatonHill provides mid-market companies with affordable financial executive leadership from their offices in Fort Worth and Dallas. For more information, visit www.SeatonHill.com

There is no litmus test as to what it takes to be a strategic CFO, but to parody a famous U. S. Supreme Court observation – “I can’t define what a strategic CFO is, but I know one when I see one.”

Most individuals holding the top financial position in a company have these general responsibilities and duties included in their job description:

Overall financial responsibility of the organization with specific responsibility for accounting, treasury, financial planning and analysis, financial risk, financial controls, and financial reporting. An integral part of the performance of these duties is accuracy, relevance, and timeliness of information.

However, these responsibilities are merely “table stakes” for the exceptional CFO. Finance chiefs are members of a leadership team who together are responsible to successfully address a broad range of business imperatives.

To address these issues, the CFO must first be a business leader driven to serve the company’s customers in the context of obeying the law, meeting shareholder requirements for enterprise value, and social responsibilities. They know that sales and marketing, manufacturing, and the other functional specialties, including their own, are merely one way to serve these vital and sometimes competing demands. A strategic CFO thinks and acts from a total corporate perspective… just like a successful CEO.

The difference between and a strategic CFO and a traditional one is indicated in the following examples:

• A traditional CFO will first calculate the cost of opening an office in China; a strategic CFO will first coalesce with other leadership members to determine if a China office should be considered along with other available options.
• A traditional CFO denies the credit application of a new customer; a strategic CFO devises creative terms that enable the sale with minimum risk to the business.
• A traditional CFO will point out that a Product Development project is over budget; a strategic CFO will advise whether to close the project down or invest more heavily.

A traditional CFO publishes a 25-page book of data and graphs to the leadership team each month; a strategic CFO presents a brief overview of the results and the best outlook for the future with insights and recommendations the leadership team can rely on to stay on course with its mission.

A strategic CFO is a business leader with a financial background.
​
John Ball is a co-founder and the Managing Partner of SeatonHill Partners, LLC. SeatonHill provides mid-market companies with affordable financial executive leadership from their offices in Fort Worth and Dallas. For more information, visit www.SeatonHill.com