What To Look For In A CFO

When looking for a chief financial officer (CFO), there are a lot of factors to take into consideration. As a chief executive officer (CEO) of an outsourced accounting company that employs seven talented CFOs, I’ve learned what to look for in bringing on a CFO either part time or full time.

In my opinion, the three most important aspects to look for in a CFO are the following:

1. Are they a good culture fit? Will they get along with the CEO or business owner, and do their personalities match up? Most business owners spend a decent amount of time with their CFO, and ideally, you are not spending time with someone you don’t get along with.

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2. Do they have the proper experience to guide the accounting and financial decisions of the business, and will they do it with a forward-thinking, strategic mindset? Whereas industry expertise is important, it’s also important to have the proper experience if a company is considering a merger or acquisition or raising capital funds, for example. The experience of the CFO has to be based on the company’s future goals and not simply what happened historically.

3. Lastly, logistics are definitely something to take into consideration. It’s often a preference to have an on-site CFO. Driving over 45 minutes to the office each day is OK for some people, but others simply want a short commute. If on-site isn’t necessary and a company is OK with a remote CFO, then their technological capabilities and ability to work independently are something to strongly consider.

One may wonder why I didn’t mention software experience. Although basic knowledge of the company’s enterprise resource planning (ERP) system is somewhat important, it shouldn’t be a driving factor. A strong controller or accounting manager should be the one who closes the books and ensures the CFO has reliable financials. A CFO should be a part of the decision to switch ERP systems, but this should be focused more on the output and forward-looking goals of the organization. If a CFO is spending more than a few hours a month in the accounting software, one might wonder how strong the team below them is.

Another main consideration when hiring a CFO is determining whether the position should be part time or full time. In order to make a decision about part time or full time, a good rule of thumb is if a CFO is needed more than 30 hours a week, then it’s best to hire full-time. If a CFO is needed only a day a month, a few days a week or anything in between, it’s best to have a part-time CFO.

If a company is hiring a part-time CFO outside of a professional services organization, basically a one-person shop, there is some risk there. First, make sure that the CFO isn’t eager to find a full-time job and unable to commit long-term. Second, be prepared to have someone at the leadership level maintain good checks and balances around the CFO. The CEO becomes the manager of the CFO. Lastly, doing a thorough background check is crucial. Fraud is more prevalent these days than ever before, and the CFO or accounting team can be a culprit. By hiring a firm instead of a lone soldier, the risk is substantially reduced, if not completely eliminated.

One additional advantage of going through a firm for a part-time CFO is the resources that the firm has. Likely it has lower-level (and less expensive!) bookkeepers and controllers so that the CFO is only doing the work they are most qualified to do. Often with accounting, a company will hire one person and expect them to handle three roles. Having a CFO doing bookkeeping never makes sense more than a few hours a month, and relying on a bookkeeper to be your CFO or controller will also never make sense, even if a small amount of that role is required. If a bookkeeper were capable of doing forecasting, financials, analytics and other roles that a controller or CFO is good at, they wouldn’t have the “bookkeeper” title.

However, as long as due diligence is completed and the three things above are done, then finding a stand-alone CFO can sometimes cost a little less. Often, by outsourcing, you are paying a premium not to have to worry about the quality, reliability and management of a part-time CFO. Definitely keep in mind, however, that if a company is looking for a full-time CFO on an ongoing, permanent basis, using an outsourced firm will not make sense.