Introduction
Special shoutout to the Secret CFO who’s inspired me to write a brief series on being a SMB & Lower Middle Market CFO. After more than a decade in a mix of founder-led, privately held investor-owned, and PE-backed businesses across a variety of industries, it’s time to share some lessons I’ve learned.
Common Questions About the CFO Role
Oftentimes I’m asked, “What does a CFO really do?” or “You’re just an accountant, right?”. These questions are especially prevalent in the lower middle market where many businesses have never had a CFO or had a jumped-up Controller. I’m not knocking either scenario – both are readily found in the SMB/LMM space, but it stresses a key question: What’s the difference between a CFO and a Controller? And why do I need a CFO?
The Controller: Focusing on the Past
Controllers spend most of their time focusing on the past. When you think about it, accounting activities are focused on things that have already happened: recording revenue for a sale, accruing an expense incurred, processing invoices, or billing clients for work performed. All of these feed into the financial statements, which are a record of activity up to a given date. For example, the Q2 financial statements will display the revenues and associated expenses for the current year, with a comparison to the same period for the prior years.
The Limitation of a Backward-Looking Approach
That’s great, but it’s all backward-looking. Even variance analysis typically performed by accounting departments (budget vs actual, actual vs plan, etc.) are focused on things that have already happened. This is critical and important, and it does nothing to strategize where you are going or what obstacles may lie ahead.
Hierarchy of the CFO role
The CFO: Operating in the Future
On the other hand, CFOs operate in the future and are responsible for vital relationships and synthesis of business-critical information across silos. CFOs are the right-hand of the CEO when it comes to developing long-term strategy and analyzing the risks & rewards of various decisions.
Creating and Aligning Around a Vision
Once a vision is created, CFOs will work with sales & marketing, operations, R&D, and other groups to create alignment around the goals and objectives outlined by the CEO/ownership. The operating budget is only a single piece and reflects goals for the existing operations within certain product lines, cost centers, or existing operational organizations. It’s a roadmap for what already exists.
Beyond the Operating Budget
Beyond the existing revenue-generation activities, CFOs must be concerned with capital allocation (new investment vs. maintenance CAPEX vs. shareholder returns), treasury management, risk & legal, insurance, and oftentimes HR & IT strategies. All of these areas must be woven together under the CFO’s guidance to effectively achieve the goals of the organization. A true CFO has a far more complex & dynamic role than a Controller. A CFO is focused on the overall organization and its future.
Upcoming Posts
In other posts, I’ll dive into how I allocate my time, build effective relationships internally & externally, and partner with other C-suite team members to positively impact performance
Author
Nathan Lawless is a financial leader with extensive experience in national and international multi-billion-dollar companies, as well as a decade of serving as a CFO and board member for small and midsize businesses. He is a partner in the Florida CFO Group and is a frequent consultant to Accelebron. Nathan focuses on aligning sales, operations, and support with strategic plans to drive growth and profitability. His approach brings the strategic planning and analysis of large companies to the SMB space. You can find Nathan on his LinkedIn page, or on his Bio page.