The Strategic Importance of the CFO in Owner-Managed Businesses

The role of the CFO in owner-managed businesses has being gradually evolving over the years. It used to be that the role of a CFO in a typical mid-sized manufacturer was more of what we would associate today with a controller’s role. He or she would ensure that the people and systems were in place to handle accounting functions such as general ledger, accounts payable, accounts receivable, budgeting, tax compliance and generating financial statements. The old school CFO would make sure that proper controls were in place and make every effort to preserve company assets.

That Was Then…

Generally speaking, if you owned a mid–sized manufacturing concern twenty or thirty years ago and your CFO competently fulfilled the functions detailed above, you’d be pretty happy with the job he or she was doing.

This is Now

However, if you happen to own or run a small or medium sized business today, you probably need a very different type of individual in the CFO chair. Not only do you need someone who’s able to oversee the finance and accounting function, you need a strategic partner who can help you analyze your business’s strengths, weaknesses, opportunities and threats (SWOT) and assist in putting together a strategic plan that will proactively deal with your company’s threats and capitalize on its opportunities.

More than Just Finance

CFOs should be much more than the guardians of the finance and accounting function within an organization. A good CFO has as great an impact on a company’s success as a vice president of sales or a vice president of operations. Especially today, when medium sized businesses need to keep up with ever changing technology, expanding or contracting markets and a turbulent capital market environment. The chief financial officer’s biggest contribution to a company’s success is not the backward looking function of overseeing the company’s accounting. The CFO’s prime functions should be forward focused, acting as a key strategic and tactical advisor to the CEO and the rest of the executive team.

Five Strategic Components

The strategic components of the CFO’s position should include:

1. Help develop the overall strategic plan including the organization’s capacity to deal with the risks associated with pursuing strategic objectives.
2. Translate the strategic plan into quantifiable metrics and financial projections.
3. Play an ongoing role in the critical evaluation of the execution of the strategic plan.
4. Assist operational executives in projecting the real time financial impact of their decisions.
5. Periodic reporting to the board and other stakeholders on current and projected realizations of strategic objectives.

A Unique Resource

By virtue of their training, past business experience and position as a company’s functional head of finance, the CFO has a unique perspective of his or her company’s place in its business environment and relationship to the various sources of financing. They can play an invaluable role in helping a business owner lay out a strategic plan for the company and help in the ongoing evaluation and execution of that plan.