Choosing the right CFO can be one of the most important decisions for your company. A good CFO will form the backbone of your organisation, allowing you to be constantly updated on company performance so the CEO to make informed strategic decisions about the future direction of the company. A good CFO is effectively the backstop CEO.
Having undertaken many engagements where we were required to hire a CFO on behalf of a client, these are the critical traits and characteristics that we would tend to look for in a CFO.
At Nash Advisory, we understand what a business needs to be successful, and we can give you expert business strategy advice to help you get there.
1. Exceptional attention to detail
To be a good fit for a CFO role, a candidate should love getting into the detail and understanding every element about a particular number, for example — what makes up the final stock balance figure.
This obviously depends upon the size of the organisation. For a small business (less than $10 million in turnover), a CFO should know or understand where every figure on a P&L or Balance Sheet comes from or how it was calculated.
For a large company (more than $100 million in turnover), this is obviously not possible. However, there will be systems and other finance staff that can inform them of this. The critical aspect is that they must own the financial accounts and hence understand every detail relating to them.
2. Spreadsheet expert
It almost goes without saying based on how prolific spreadsheets are in the business world today, but if your CFO doesn't know their way around spreadsheets, then they are not the right person for the role. They should, at a minimum, be able analyse data through the use pivot tables and formulas like lookups, Sumif or index matches. Ideally they are able to build a 3 way financial model in excel for budgeting purposes.
3. Anticipate future opportunities and potential hurdles
Modelling and forecasting potential opportunities and hurdles for the company is critical. For example, there may be an opportunity to acquire a new customer, but there could be short terms costs which could outweigh the revenue generated from the new customer. Therefore the cash position may be negative for a period of time.
This type of analysis must be built into forecasts. The other critical role of the CFO is cash level forecasting. The CFO should have a clear view of the 90 day cash position, but also what the cash position looks like over a 12 to 24 month time horizon, taking into account one-off payments like tax, dividends, and M&A activity.
4. Tech savvy
Often, the IT department reports into the CFO. Having a CFO who is tech savvy can be a real advantage for a company and CEO. Companies are now constantly looking at ways to introduce efficiency through systems and software that can automate processes. A CFO that is not only willing to embrace, but drive efficiency (and willing to take on the responsibility for leading it) will be a huge asset to a company.
5. Xero, Recon, or MYOB experience
For the CFO to execute their role effectively, they will need strong experience using one or more of the accounting software platforms. These software systems are used in almost every organisation. They must be confident in being able to navigate the system, process transactions, and make changes as and when required. They should also be able to produce reliable reports quickly.
Whatever system the company uses, the CFO should be confident enough to learn the fundamentals of the software platform quickly. Even if they are unfamiliar with the platform your business uses, there is no excuse for not being able to learn it.
6. They must have an opinion
It's no good having your second most senior employee of the company providing direction if they are not willing or strong enough to have an opinion. This is especially true if the CEO has a particularly strong personality. Debate in companies is healthy and should be encouraged. Having a CFO that can voice an opinion is important to ensure that all ideas are heard, issues are worked through and resolved, and the strategic direction of the company is properly thought out and tested.
7. CA or CPA not a prerequisite
This may sound a little counter intuitive, but some of the best CFOs are not a qualified CA or CPA. So long as they have the training and experience in various finance functions throughout their career, then people without the formal CA or CPA should not be overlooked.
8. All-rounder, willing to participate in the wider company
A good CFO is willing to roll up their sleeves and do what is needed to benefit the company. You don’t want someone in the role with the attitude of 'that is not in my position description'. They need to be an all-rounder with the ability to cover areas of HR, IT, logistics, health, safety and environment.
