The chief financial officer (CFO) is responsible for keeping, analyzing, and reporting on all money-related matters for a business. The CFO is also a strategic partner to the CEO in determining which areas of the business to grow or cut to make more money.
Responsibilities of the CFO
Yes, it’s all about money, and because a business relies on money to grow, the CFO has a fundamental role in the company. Income and expenses must be accurately measured. Key performance indicators (KPIs) must be created. Money pits must be identified and filled. Growth opportunities must be seized. All this and more hangs on the belt of the CFO.
Some specific operational functions of the CFO include:
- Managing accounting, HR, investor relations, and legal/tax departments
- Overseeing the company’s transaction processing systems
- Overseeing employee benefit plans
- Supervising acquisition due diligence and negotiating acquisition
Just keep in mind that the CFO doesn’t perform these functions on their own. Controllers, accountants, bookkeepers, and even data scientists help them succeed. Delegating tasks to them and people in HR helps them keep an eye on the big picture and develop strategies for efficiency and growth.
When to hire a CFO
For a growing business, it’s common to hire a bookkeeper, accountant, or controller before hiring a full-time CFO. There’s also an opportunity to hire a CFO consultant who works on a part-time basis. It’s usually good to bring in a consultant around the $5 to $10M ARR mark.
As for when to hire someone full-time, Ken Kaufman, the founder of CFOwise, thinks this is around the $25 to $50 million mark. But revenue isn’t the only factor, he says. You must also consider your company’s “complexity, size, and pace of its financial trajectory.”
The metrics a CFO focuses on determines the strategies they propose and those strategies determine the future success of the company. Tracking dozens of metrics of easy; choosing which ones to prioritize is hard.
While different businesses require different point of focus, Ben Murray, a CFO and creator of The SaaS CFO, suggests that CFOs at SaaS companies focus on five key metrics:
- MRR / ARR
- Average Cost of Services (ACS)
- Customer Acquisition Cost (CAC)
- CAC Payback Period
- Customer Lifetime Value (LTV)
For businesses in general (both SaaS and non-SaaS), this report by PricewaterhouseCoopers shows how CFOs generate and monitor KPIs over time. It also summarizes the challenges they face and how they overcome them.
The big question
With more online tools and means of automation, the role of the CFO has changed dramatically in the past 20 years. Less time is spent on bookkeeping and reporting. More time is spent on making conclusions and recommendations with the reports provided.
How can I use all this financial insight to grow the business?
This question is the responsibility of the CEO until a CFO is brought on and it can drive them a little mad. That’s why, when asked when a CEO should make the CFO hire, Ken Kaufman said, “You could probably invoke all sorts of business-school metrics to answer this one, although a better measure might be your chronic insomnia.”