Do small businesses know what a CFO is, and by inference do they realise that what functions could be performed if they had one?
The Chief Financial Officer (CFO) is defined as the corporate officer with responsibility to Manage the Financial Risks of the corporation. Specifically they hold responsibility for Financial Planning, Record Keeping and for Financial Reporting to management. Large companies have highly skilled and qualified people to hold this position but who takes these responsibilities in an SME (Small to Medium Sized Enterprise)?
The answer usually is that the owner or general manager takes on these responsibilities by default, so that “CFO” becomes just one of the many hats that he or she wears. Is this their area of expertise? No; they are generally there because of their expertise in the business’s main field of endeavour.
So is it true that SME’s don’t need to manage their financial risks; that they don’t need expertise in their financial planning, record keeping and financial reporting? Again the clear answer is “no”, they simple can’t afford that expertise on their scale.
I suggest that the obvious answer to that is that the expertise of a CFO can be shared amongst a number of SME’s. One way to achieve this is where a group of SME’s form a buying group or an old styled co-operative, where these larger costs can be shared over the group. The other way is for a business enterprise to employ the high level expertise, but on a part time basis.
There is a growing trend in business today to find ways to fill these gaps that appear in the market, and these days there are a number of accounting firms and some specialist CFO firms that are providing this “internal” financial expertise from an external source.
There is growing demand for CFO’s in two distinct areas. The first is this role on a part time basis, to ensure systems and procedures are in place and effective. They can also take on a supervisory role to ensure that the accounting functions can be performed well but with a more junior level of staff, resulting in ongoing cost savings. Further, they can assist management or owners to understand their financial reports, and have sufficient faith in them to make defining business decisions.
The second role for CFO’s is on a peak time basis; that is where businesses are going through significant change and require the CFO’s level of expertise full time, but for a short time. Such periods of massive change would include original set-up of systems and procedures, significant market expansion, purchasing of another business or the sale of a part of the existing business.
There is no reason for the skills and expertise of the CFO to be the exclusive or privileged domain of the large corporation. In this time of innovation it is time for SME’s, with their advantage of agility, to also gain, perhaps even more-so than the sluggish corporates, from the benefits of high level financial management.
