CFO Hiring Guide: How and When to Hire a CFO

Written by Cameron McCool    |    Published: April 24, 2024

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when to hire a cfo

Need to hire a CFO? Bringing on a Chief Financial Officer (CFO) is a pivotal decision that can make or break your business’s shot at long-term success. But it can be hard to know when, exactly, to bring on a CFO, let alone which one you should hire.

Use this CFO hiring guide to learn when to hire a CFO for your company and find the right CFO services provider for your needs.

If you need some help with this process, book a call with a Hiline advisor. We’d be happy to learn about your business objectives, discuss how we can help, and point you in the right direction if Hiline isn’t the best fit for your needs.

What Does a CFO Do?

A CFO or Chief Financial Officer is a senior executive who holds the top financial spot in an organization, meaning they are responsible for managing the company’s financial activities. CFOs are generally in charge of financial planning, analyzing a company’s economic weaknesses and strengths, tracking the company’s cash flow, and working on the strategic directions the organization should take. 

When Should a Business Hire a CFO?

Every business will have a different answer to this question; when to hire a CFO depends on who you ask. Companies of all sizes face difficult business decisions related to supply chains, work environments, and digital transformation. The following are good indicators of when to bring on a CFO.

Rapid Growth

When a young company goes through this type of growth, there are many arguments about whether a CFO is necessary. Some may argue that this financial expert can help satisfy the company’s needs and bring a deeper and more strategic financial perspective to help the company prepare for the future. In contrast, others believe it is an unnecessary expense.

Consequently, when a company is in the earlier stages of its lifecycle, a CFO will usually not be a top priority. However, if the business continues to grow, a CFO will be pivotal in helping the company expand and reach its financial potential. 

Complex Decisions

CFOs can perform what-if analysis to determine the most profitable supply chain. With more companies looking at a hybrid work environment, CFOs can evaluate the costs associated with different work policies to find a solution that balances employee requests with employer profitability. No matter the size, businesses face an increasingly complex landscape.

Recent market changes have forced companies to expedite their digital transformation. This acceleration requires money to invest in technology and training. 

CFOs can help budget and forecast to highlight the risk associated with different transformational roadmaps. Through data analysis, CFOs can identify options that minimize risk.

Economic Uncertainty

CFOs also help establish financial strategies as economic conditions change. CFOs can outline the implications of acquiring more debt when the cost of capital increases. They can also suggest ways to hedge inflation and where to invest existing profits.

As money tightens, investors scrutinize potential investments more closely. They look for sound financial planning and forecasting. They want to ensure their dollars will be spent judiciously. CFOs can help startups secure funding through well-prepared financials.

When organizations grow, their financial responsibilities increase. CFOs can develop processes and policies to ensure that company guidelines are maintained. They can monitor the financial activities to ensure compliance with applicable regulations.

What Should I Look for When Hiring a CFO?

Although a company may know when to hire a CFO, they may not know exactly what they are looking for in terms of the ideal CFO candidate. However, while each company will have its own unique needs when it comes to this role, in general, some of the most common qualifications a successful CFO should possess include the following:

  • The ability to be a leader
  • A good understanding of the company’s industry, not just the financial aspects
  • Reliability
  • Great communication skills
  • A significant range of financial knowledge, including strategy and innovation skills, problem-solving skills, and risk management skills
  • A good fit in the company’s culture
  • Forward-thinking

However, as mentioned above, while a CFO can help your company reach new goals and provide numerous benefits, a full-time CFO may not be the best option, especially for start-ups. Fortunately, fractional CFOs may be the answer.

6 Signs It’s Time to Hire a CFO

If you think it’s time to bring in a CFO but are unsure if the company is ready to commit entirely to this decision, a fractional CFO may be a great alternative. Consider the following indicators of why outsourcing a fractional CFO may be the ideal solution.

1. Poor Cash Flow

Businesses that struggle with cash flow may have a slow collection process. This could be due to delayed invoicing or customers making late payments.

CFOs can evaluate processes to determine where improvements are necessary. They can also look at expenses. Sometimes, cash flow falls short because expenses go unchecked. 

If profits start shrinking, cash can become tight. CFOs can look at what is increasing production costs. 

If your business sells finished goods, CFOs can look at price increases from suppliers and map a strategy to lower costs. They can evaluate end-to-end processes to identify ways to improve profitability.

2. Rapid Growth

Fast-growing companies need someone to oversee their finances. Business owners don’t have time to monitor expenditures or profitability. They’re focused on hiring people, selling products, and satisfying customers. CFOs can keep an eye on profitability.

Financial executives can help budget for expenses and forecast sales. They can develop strategies to maximize growth and minimize risk. With professionals monitoring their finances, businesses can keep expenditures from spiraling out of control and ensure sales remain profitable.

3. Need Capital

Finding the best source of business capital takes time. Should a company look for investors or consider a loan? How much will be needed, and what will be the repayment terms? Answers to these questions impact an organization’s financial health. A CFO can help answer them before a contract is signed. 

Experienced CFOs can help businesses locate potential funding sources. They ensure that all financial documents are accurate and can help organize materials when presenting to potential investors. They can demonstrate how the investment capital will be spent to deliver maximum benefit.

CFOs can also determine the best lenders if a company needs operating capital or new equipment. They can identify the risks associated with each type of loan and suggest alternatives to minimize risk. For example, a business line of credit may be an option a CFO can help secure through accurate financial information.

4. Want to Expand

Expanding into new markets or releasing a new product carries financial risks. CFOs can help assess risk and develop strategies to mitigate potential risks. They can identify alternatives and suggest contingencies should an expansion not go as planned.

Market complexities make expansion challenging. Economic constraints, environmental disasters, and global events impact every industry. Having a seasoned professional help assess potential influences ensures a data-driven decision. It enables organizations to set milestones that serve as inflection points on how to move forward.

5. Changes in Structure

Privately-held businesses that decide to go public need a CFO. Financial filings are required, and audits are conducted. CFOs help organizations that want to go public by ensuring accurate record-keeping. 

Public companies are responsible for providing their shareholders with accurate financial information. A CFO can pull together the needed reports to ensure compliance.

Due diligence should be part of any merger or acquisition efforts. That includes evaluating a company’s finances. 

Someone needs to look at a company’s assets and financial records. CFOs can analyze financial information and identify potential weaknesses before a merger or acquisition is complete.

Businesses must evaluate the tax implications if they want to change their status. Organizations may want to move from a sole proprietor to a partnership or a limited liability company (LLC) to a C corporation as they grow. 

Changes in tax status can trigger audits. Having a CFO on hand to help navigate the tax code ensures the changes in corporate status adhere to all tax laws. 

6. Lack Compliance Management

No matter the industry, organizations have regulatory requirements. More consumers are concerned with a company’s posture on environmental, social, and governance (ESG) issues. Businesses are establishing more secure supply chains. These factors require compliance management.

Maintaining compliance costs money. CFOs can assess the costs and identify ways to lower associated expenses. They can compare labor costs to technology investments to determine which provides the lowest long-term expenditures. Automating processes today may increase short-term costs but provide long-term savings.

CFO Interview Questions: What to Ask When Hiring an Outsourced CFO Provider

The market has no shortage of outsourced CFO providers. Here are a few things to ask to ensure you settle for the right CFO provider:

Do you have experience working in my industry?

CFOs handle a variety of tasks across different industries. However, it is beneficial if the prospective CFO has worked with companies in the same industry as you, as this means they have the experience to handle your type of problem.

Can I see samples of customized reports?

The last thing you want is to work with a CFO who takes a one-size-fits-all approach. Find a CFO who adjusts to different types of business and can customize reports as per the information you process.

Which reports do the board and investors want to see?

Your investors and board of directors will need to communicate with your CFO at some point. Therefore, the CFO should understand the perspective of investors or boards and communicate the information they want to see.

Are you certified and licensed?

Your CFO should be certified and licensed to work. This will give you the confidence that you’re working with a qualified company or individual. Licensing also provides peace of mind that the relevant bodies approve the CFO to carry out their duties.

Can you provide relevant references?

Don’t just take their word for it. Ask for references to call and inquire about their experience working with the outsourced CFO. This way, you can make an informed decision.

CFO vs COO: Can a COO Who’s “Good With Numbers” Do This Role?

Although the chief operating officer (COO) and the CFO are two critical executive roles in an organization, when it comes to the day-to-day operations of a company, there are specific tasks that even a COO who’s “good with numbers” can’t do.

For instance, because the COO concentrates on daily business activities and is responsible for the company’s employees and general operations management, they usually cannot focus on the company’s overall finances as much as a CFO can. 

That is why CFOs are usually responsible for:

  • Predicting and evaluating financial risks and identifying how to minimize or avoid their impact
  • Creating summaries of a company’s earnings and expenses so they can make accurate financial decisions
  • Understanding the legal regulations and using them to make financial decisions

Consequently, even if a COO is good with numbers, they often cannot handle a CFO’s specific tasks.

Get expert CFO guidance and full-service accounting support

If you need to hire a CFO, check out our CFO services and book a discovery call to learn how Hiline can help.

Unlike other accounting solutions, Hiline gives you a dedicated team of experts to handle all of the financial tasks your business needs to thrive—strategic tax planning, bookkeeping, spend management, and more.

And we can pair you with an expert CFO to deliver the strategic planning, forecasting, and year-round guidance your business needs.

Connect with a Hiline advisor to learn how we can tailor our services to fully support your business goals.

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