One thing all SME Managing Director’s must do for business growth – coach your Financial Controller into a great CFO.
The problem: The transition from Financial Controller to Chief Financial Officer is not a natural progression, nor is there anyone in your team who can coach them on what or how they should be doing – you are essentially setting them up to fail and worse, you are limiting how effective they can be to your business growth.
As a Managing Director, your Financial Controller has served you incredibly well:
- They consistently provide reliable and timely information.
- Your payables and receivables have been kept under control and as you have grown.
- They have started to manage a team of accountants.
- Your month-end reporting is timely and accurate with key insights being frequently provided.
- They go beyond the usual requirements and look to add value back into the business with analysis and recommendations.
In line with the continued growth of your business, you need even more information and data across the business to take your reporting (and your business) to the next level. It’s time for your Financial Controller to provide insights across the business relating to what is going to happen, not just what has happened and get very strategic about implementing the objectives.
The role of the modern CFO.
Think about your business. Most areas are broken into verticals. At a minimum you have a sales and marketing team, an operations team and a finance team. You probably even have a dashboard for each.
For example, your CRM will be your sales team dashboard. While the CFO will also oversee the finance team, they have been aggregating information from across the entire business every month. They are in fact the only person in your organisation other than the Managing Director that regularly looks at all elements of the business. As a result, they are in the unique position to stretch horizontally across your business and ensure all the elements are working together as they should. The other alternative is for the MD to do it and you don’t have time. The CFO will understand based on the sales generated the deliverables required and the finance needed to ensure your business is profitable, repeatable and scalable.
To achieve this a CFO needs to:
- Oversee Strategy. Many argue this is the single biggest difference between a Financial Controller and a CFO. There are two parts to strategy. Establishing the strategy and implementing it. In the words of Sun Tzu, “Strategy without tactics is the longest path to victory, but tactics without strategy is the noise before defeat”.
For example, as your operations grow you may need new systems to improve efficiency or outsource elements to increase profitability. Your CFO is skilled at running strategy sessions building the Business Plan that comes from it. They can then monitor and manage the implementation of the strategies ensuring they are completed in a timely and cost effective manner.
- Ensure the accuracy of a cash flow forecast model that stretches months into the future. For the model to work it accounts for all elements of the business and the Balance Sheet as well as the P&L. Many people call this a 3 way forecast and without one and the discipline of doing one every month is unlikely you will get the type of funding, amount of funding or even the interest rate you could otherwise. Finance organisations know that a good cash flow forecast effectively helps de-risk the loan and the repayments.
- Manage the company’s dashboard. While the team managers will look at a level of detail appropriate to them, the CFO needs to provide the MD a daily and weekly dashboard of lead and lag indicators. The key here is the MD need to only look at the measures and metrics to enable them to have a proactive discussion with the manager in question. Not to spend their time finding out the information. The more proactive the discussions, the better business growth.
- Understand and manage business risk. There are many risks a company, staff, competitors, suppliers, the economy. While many strategies are growth focussed, some are risk mitigation focussed. These also need to be incorporated into the Business Plan.
Financial Controller Coaching and Mentoring
If you don’t have a strong Financial Controller, then a part-time CFO could be the answer as they can add that layer of strategy and forward-looking capability for a fraction of the cost of a full time CFO. However, only hire an exceptional part-time CFO if you go down this path as an average one will simply not help you and your business grow. At the same time, they can build the capability the finance and accounting team.
Where you have a great Financial Controller, an exceptional part-time CFO can both coach and mentor your Financial Controller, into a formidable force that can evolve your business to the next level.
Read more about CFO Coaching & Mentoring.
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