Previously we spoke about how the CFO drives growth, and three main areas the CFO adds value: historical financial and vendor analysis, current working capital and cash management, and future budgeting and investment analysis, including acquisitions. One area in particular that we did not discuss, however, was the benefit the CFO brings to the table as an outside strategist and leader responsible for setting and implementing strategy in conjunction with other senior managers within the company. As the primary individual responsible analyzing past and current financial data, as well as budgeting for future growth, the CFO has a unique perspective on the operations of the company.
Checks and Balances and Growth
Public companies are required to have an independent board to review the operational performance of top management. The purpose of the board is to ensure that management runs the company in the best interests of shareholders (i.e. the owners of the company) rather than in their own self-interest. The separation of the board from senior management acts as a “checks and balance” on corporate governance. It is a similar concept to the idea of “checks and balance” in government, whereas major actions require board approval in a similar way that the President must sign into law any act that Congress passes (apologies to my non-US readers for the US centric description of checks and balances. Prime Minister and Parliament are equally applicable in this example).
In both public and privately held companies, there are also checks and balances below the board at the executive level designed to create good corporate governance. While logistically it is good business sense to have executives responsible for operations, finance, marketing, etc. and led by a chief executive, it also makes good business sense to ensure that the CEO or founder is not required to make decisions in isolation.
Often the role of the CFO morphs into key strategist and advisor to the CEO; perhaps this explains why in the plurality of Fortune 1000 corporations, the CEO was a former CFO. The role of the founder or CEO is often focused on managing the day to day challenges of the business, sometimes to the peril of longer term planning. In the collision industry, the CEO tends to be focused relentlessly on day to day operations, client management, new client acquisition, employee retention, recruitment and KPI management. Because the CFO tends to be once removed from the brouhaha of day to day operations, the CFO has the luxury to provide a unique service as a de facto outside advisor to the company, but one with intimate understanding of day to day challenges.
Yet despite these benefits, the CFO has traditionally been a role overlooked. However, the CFO is a role that is becoming increasingly necessary due to the increasing complexity of the industry. But for many companies the biggest concern is cost. Full time, dedicated CFOs can often cost upwards of $250,000 annually, plus benefits and bonus. For many companies this is often cost prohibitive. Read more here.
