This article compares and contrasts the responsibilities of a CFO versus a controller, accountant, or bookkeeper. Many business owners do not understand the differences between the roles and the value that a CFO can bring to the business. Also, many business owners don’t feel like they can afford a CFO, however, that’s where a part-time CFO who is involved with the business owner and management is critical. A part-time CFO can spend as little as a day or two months with the business and add value to the bottom line.
A. Financial Director Responsibilities:
1. Cash Management
Cash management includes understanding the “operating cycle” of your business (ie, the cash-to-cash cycle). To improve your “operating cycle”, it is imperative that you understand what it means, how to calculate it, and what influences it before you can improve it. Does cash expect your cash balance to be 6 months from now?” Most of the time, businesses face cash flow problems today and can’t think ahead beyond this week. Forecasting and managing cash flow cash flow provides a real sense of control over the business Implement a Cashboard-Dashboard, a 13 week cash flow forecast and review cash flow reports at least monthly The key to any business is to focus on cash not just on EBITDA and net income, as cash is king!
2. General financial sophistication
• A sounding board for the owner in making key decisions, as a trusted advisor
• Fewer cash flow surprises using a Cashboard-Dashboard and 13-week cash flow forecast
• Better trained accounting staff
• Better documentation and controls
• Fewer surprises related to the payment of taxes and effective communication with the CPA for taxes
• Alternatives, recommendations and solutions to the company’s problems
3. Budget
The ongoing process of developing, implementing, and reviewing the budget and its associated variances from actual results. The CFO helps correlate the operations and financial results of the business so that the management team understands the financial impact of the decisions they make.
4. Compliance
The ongoing process of complying with bank, investor agreements, tax versus administration reporting work papers, insurance, corporate minutes.
5. Financial supervision and management
Analyze and review monthly profit and loss, balance sheet and cash flows with the board and management team. Look at the story behind the numbers, not just the numbers. Drive towards data-driven decision making. Monitor key business metrics through a dashboard that gives you vital statistics in the areas needed to monitor working capital. For example, each month a report is produced that shows information such as accounts receivable aging, days receivable, inventory levels by category, inventory turnover, and days payable. These statistics should be examined and compared month to month to determine if the problem is getting better or worse. Associated and trend analysis and decision making is a key function of the CFO. Immediate action must be taken when the numbers show a trend that will be bad for the company.
Supervise the activities, work and quality of the Comptroller/Accountant/Bookkeeper. Management of working capital and treasury. Oversight of CPA relationship, business attorney relationship.
Planning and forecasting of working capital. A simple Cashboard-Dashboard report will focus management on the right areas and help drive the business towards stronger cash performance.
Review financial reports before submitting them to investors or any other outside parties.
6. Key relationships
Track and analyze key financial ratios against industry standard benchmarks. Put plans in motion to exceed certain industry ratios, or make decisions to not meet certain, meet others, and exceed others.
7. Profitability
Gross margin analysis by product line, product, or customer is critical for small businesses. Migrate so that internal systems provide information to manage the gross margins of product lines and products.
8. Processes and Systems
Design, implement and maintain accounting processes and procedures. Processes, documented or not, exist in every business. It is the way in which people perform the work necessary to produce products or services. In most small businesses, the underlying processes for getting work done are rarely fully documented or reviewed (ie, the system). The development of efficient and effective systems and processes generally reduces costs and/or improves productivity. In businesses where there is a planned exit or merger or sale of the company, documented processes are critical for the buyer to get more value from the business, and the investor/buyer does not have to do these things themselves.
This goes beyond the financial area of the company to operations, sales, marketing, technology, human resources and all areas of the company. The more documented these process areas are, the greater the value of the company.
9. Internal controls
Structure, work and flows of authority. Theft prevention, cash tracking, accounting processes that limit access. Internal control procedures reduce process variation, leading to more predictable results. The focus is on the effectiveness and efficiency of operations, the reliability of financial reports, and compliance with laws and regulations.
10. Strategic Planning
As a company grows toward an exit/liquidation event, a strategic planning process is essential. This is not so much a document, but rather an ongoing process to analyze and describe strategic objectives and tactical implementation. The parts of the strategic plan include: SWOT analysis (Strengths, Weaknesses, Opportunities and Threats), ideal client profile, competitive analysis, short and long term action plans. The CFO guides the business through preparing an exit strategy to maximize the value of the business.
11. Corporate Credit and Collection
Establish and improve the credit situation of companies. Separate personal and business credit reports so business credit stands on its own by following the seven steps to building business credit success.
12. Audits
Oversee external accounting and other audits as required.
13. Information Systems
Supervise the continuous improvement of the internal operations of the information systems. Well-documented IT systems, software and hardware asset tracking are key factors when a buyer completes IT M&A due diligence for a company that wants to be sold.
14. Financing
Lead the business in developing an effective capital structure by securing debt financing on attractive terms, managing relationships with lenders and ensuring compliance with debt terms.
B. Controller/Accountant/Bookkeeper Responsibilities:
1. Main responsibilities
The main responsibilities of the Comptroller/Accountant/Bookkeeper are to maintain and operate the books and records of the company. Prepare, control, balance and verify multiple accounts using standard accounting methods. Enter daily/weekly/monthly financial transactions into QuickBooks or other accounting software. Keep ledgers that record the status of various accounts and make sure all accounts are in balance. Prepare financial statements. Verify the accuracy of computerized accounting and record-keeping systems.
*Bill to pay
*Accounts receivable
*Bill payment
*Payroll and Check Registers
*Bank reconciliation
*Financial statements
*Custom reports
*Payroll services
* Preparation of payroll checks
*Payroll tax returns
*Monthly, quarterly and annual payroll reports
*Federal, state and local tax reports and filings
* Accurate and timely data entry
*Inventory tracking
*Available for telephone consultations
*Validate test scales
*Invoice reconciliation
* Interface with vendors as needed
2. Standard Operating Procedures (SOP)
Under the guidance of the CFO, document the accounting and bookkeeping standard operating procedures manual. Help the CFO create complete accounting process documentation, review improvements, and update the process to increase streamlined accounting/accounting processes.
3. Compliance
Maintain best accounting and bookkeeping practices in accordance with generally accepted accounting principles (GAAP).
C. Conclusion:
There is a significant strategic and tactical difference between the value that a CFO brings to the executive leadership of a company and the Controller, Accountant or Bookkeeper. The key is for the CEO/business owner/entrepreneur to schedule an initial meeting with a CFO, access the business need, and determine a plan of action to drive the business to the next level of sales and profits. As mentioned in the introduction, most small businesses cannot afford a full-time CFO, so a part-time or virtual CFO is the ideal arrangement. The key is to find an experienced CFO who can be the CEO/Business Owner/Entrepreneur’s trusted advisor and provide financial, operational and business insights.