CPA, Bookkeeper or CFO

CPA, Bookkeeper, CFO: Who Do You Need on Your Financial Team

When pivoting or simply running your business, every decision has a financial impact. Even if you understand that conceptually, you probably do not have the time, mental space or nerve to deal with the financial stuff. Wouldn’t it be great to have a competent professional to take care of it?

But how do you know who to hire? A CPA? A bookkeeper? A CFO? There is much confusion among business owners about what each person does. Let’s start with who does what

Certified Public Accountant (CPA)

CPAs are accountants that have met state licensing requirements and passed the CPA exam. All CPAs are accountants but NOT all accountants are CPAs. CPAs typically audit businesses, do tax reporting and planning and advocate for clients in front of the IRS. Business owners should hire a CPA to:

§ Advise on the appropriate business structure

§ Suggest the best tax strategy given their business and personal circumstances

§ Report taxes to federal, state and local agencies

Bookkeeper

Bookkeepers categorize each financial transaction in the accounting system. At the end of each month, they make sure what’s in the accounting system reflects reality and reconciles to your bank and credit card statements.

Hire a bookkeeper when managing numbers becomes too time consuming and complicated to track on a spreadsheet. Though it’s tempting to have your admin manage the books, it’s not the best idea since this role requires some knowledge of accounting.

Bookkeepers also handle tasks like:

§ Bank deposits & petty cash management

§ Invoicing

§ Collecting customer payments

§ Paying bills

§ Processing payroll

§ Presenting financial statements to management or the CFO

Chief Financial Officer (CFO)

CFOs manage all accounting and financial aspects of a business. They must rely on bookkeepers for accurate processing and entry of financial information.  The true value of a CFO comes in our ability to do financial analysis that brings value and drives the business forward. 

CFOs are responsible for:

§ Cash Flow and Expense Management – By monitoring and projecting cash flow regularly, a CFO predicts when the business will run out of money and helps business owners take action to avoid that situation. Usually the first way to increase cash flow is to reduce expenses, but that’s not always the optimal solution.

§ Accessing Capital – Sometimes a business needs additional funding to sustain itself, grow or scale. A CFO can help the business secure funding and investment by connecting you to potential bankers, creditors and investors. They prepare the financial statements and reports that bankers, creditors and investors need to invest in the business and decide what the right mix of funding is to support the business.

§ Budgets and Forecasts – A CFO manages the budget process. After the business owner sets the goals for the future, the CFO finds out how each area of the business (marketing, sales, production, etc.) will work towards that goal. With all those inputs, the budget is created. As time passes, the CFO tracks how the business performed compared to the budget and explains any differences between budgeted and actual numbers.

§ Measuring Performance – CFOs monitor the health of a business by tracking key performance metrics over time. By looking at the metrics on a regular basis, the CFO can tell when the business is not doing well and in what area (marketing, sales, production, etc).

§ Investment Decisions – A CFO advises the owner on how to invest the company’s money (in people, technology, property, trademarks, etc.) taking into consideration the risks and strength of the business’s cash flow. 

§ Ongoing Accounting Oversight – A CFO oversees the bookkeeper and reviews the books for accuracy and completeness. He/she also analyzes the financial information recorded by the bookkeeper and regularly reports on the business’s financial health (e.g. cash flow, profitability, credibility) to the owner or leadership team.

The Case for a CFO

As a small business, you may think you’re not big enough to need a CFO or you may think a CFO wouldn’t understand small business issues. The title alone may make you think a CFO would be too expensive. But it doesn’t have to be.

Look for a fractional CFO, also referred to as a part-time CFO, outsourced CFO or virtual CFO. This person will manage things on a quarterly, monthly or bi-weekly basis. They provide the expertise needed to make key business decisions, but at a fraction of the cost.

Depending on your business size, needs and scope of work, you can engage a CFO for a monthly investment of $1,500 to $15,000 or more.

When to Use a CFO

Here are a couple of scenarios that call for a CFO.

Consider you’ve been in business for more than 2 years and you’re ready to expand your services, hire a new employee and reach a new revenue goal. You may be wondering: 

§ How much sales do we need to hit the revenue goal or profit margin?

§ How much should we charge for the new services?

§ What are the best ways to ensure the company’s success in the future?

§ What’s the financial impact of operating in different business models?

§ Can I afford to hire more people and still pay myself what I deserve?

Consider you’ve been in business for 10 years and the economy is in a downturn. You may be wondering: 

§ When will I run out of cash and how can I prevent it from happening?

§ How can I leverage my company’s assets to generate more cash and survive the downturn?

§ What resources can I use to access additional capital and what’s the best way to fund the business (grants, credit cards, loans, crowdfunding, equity)?

Consider you’ve been in business for 20 years and you’re ready to sell. You may be wondering:

§ What’s the value of my business?

§ What financial stuff do I need to clean up to look attractive to a buyer?

§ Who will field financial questions from the CPA, bankers and attorneys involved in the process, advise me during due diligence and transition all the financial info to the new owner?

Make a Choice That Fits

If any of these scenarios resonated with you, it’s time for a fractional CFO. This person will answer all of these questions and more. Don’t expect a CPA or bookkeeper to have these answers, that’s not what they do.

Everyone has their skillset and purpose. If you want to make critical decisions for your business whether in good times or bad, have a fractional CFO on your executive team. 

Interested in learning more about how the Art of Money Matters’ fractional CFO services can help your business survive and thrive, book a FREE consultation today!

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