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What Would I Do With a Personal CFO - Part 1

The Personal CFO for Entrepreneurs. What does that mean? Well, we view the work we do with entrepreneur families as that of a Personal CFO. OK but what does that really mean?

First, let’s start with what a chief financial officer (CFO) does for a business. Business CFO responsibilities generally fall into two categories:

1. The financial "plumbing" of the organization.

First, the CFO must design the finance and accounting function so that financial data "flows" efficiently. Then the CFO needs to hire the right people to do the work of capturing and recording data appropriately. The nuts and bolts of that work may be delegated to a controller in larger organizations (and in turn delegated to other positions responsible for accounts receivable, accounts payable, etc.), but pairing good process with good people is the CFO's job.

Got to make sure there are no backups, no weak points (meaning strong data integrity), and that the data goes where it is supposed to go.

The result of all that activity should be that management always has a clear view of the financial condition of the business.

2. Leadership and financial strategy that supports business objectives.

Let's take financial strategy first, and the three major financial statements are a good guide for what's required. There's the profit and loss statement (P&L), where strategy might involve analyzing rates of return and risk associated with competing new product proposals; the balance sheet, where strategy requires managing short-term financing (working capital, lines of credit) and long-term financing (credit facilities; equity capital) needs; and the cash flow statement, with short-term (treasury function and cash management) and long-term (capital expenditures and other investments) planning considerations. Of course, these areas overlap, and the skill of the CFO is in integrating these strategies in a way that best supports key business objectives.

Leadership may be the most difficult and underrated aspect of the CFO role. Difficult because most CFOs are "numbers people" who like to analyze, who like technical work. But leadership requires a different skill set. Articulating a way forward and getting a team of people to push in that direction is not easy; setting standards and defining acceptable behaviors amidst the daily uncertainty of business – not easy. These things are not easy because they involve people. And people are complicated. Furthermore, leadership is difficult because good leadership traits are not always obvious and easy to measure.

But the difference between a good CFO leader and a poor CFO leader can be enormous. Just consider the CFO who oversees a finance operation with shoddy and weak data capture and who routinely bends the rules (or worse) to make the figures say what the CFO wants: that kind of anything goes, low integrity behavior doesn't just erode the finance function - it will permeate the entire organization.

So that’s the business CFO. It’s worth asking - do you have a CFO, and if you cannot justify hiring someone into that role, would an outsourced CFO provide necessary support? And whether you have a CFO or not, the responsibilities outlined above need to be addressed in some way, even on a small scale…how is that happening in your business?

In our next post we’ll use this business CFO discussion as a springboard to understanding the Personal CFO.

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