The 7 Habits of Small Company CFO's

Are people natural born leaders or can they be taught to lead? The answer is “yes.” A person may be a born leader but if they lead the company down the wrong path what good are they. Also, you can take all the Management classes you want but if employees don’t believe in you or follow you then are you really a leader? Just because you are high up on an org chart doesn’t mean you are a leader. A leader needs followers. True leaders need to have that natural ability to lead but it must be honed and cultivated over time to be fully utilized. What separates the executives from the rest of the employees? In my experience, I have been fortunate enough to work alongside some great executives who have taken me under their wing to help mold me into the business professional I am today. This article covers the seven traits that I feel are imperative for successful CFO’s in small to mid-sized companies.

1. An Elephant Never Forgets.

In sports, coaches always tell you that when you miss a tackle or drop a pass that you should forget the last play and only focus on the next play. That’s great on the game field but that may not be the best advice in the corporate arena. A CFO should always pull on the historical knowledge they acquired as they were coming up through the ranks. Learning from the cause and effect relationship that happens over the course of time is critically important to the maturation of an executive. Pulling on the past history of what worked, what didn’t work, and why, helps the CFO to grow and learn. Ideally, the CFO would not let the same mistakes happen twice and therefore they implement tried and true strategies and avoid the pitfalls they fell into earlier in their careers.

2. Stay Humble, Stay Hungry.

Staying hungry means that a CFO should always be looking for ways to cut expenses and to streamline processes. When companies are just starting out every dollar of revenue is hard to come by. For this reason, great scrutiny should take place on how the revenue is spent. Waste and inefficiencies can suck the cash out of the company. Stay humble. Many times the CFO may be somewhat out of the loop when it comes to the day-to-day operations of the company. They may not be the ones doing the daily journal entries and therefore many of the details may get lost in the consolidated financials they review. The employees that are further down the chain many times are the best to recognize pain points within the company. The CFO must maintain an open dialogue with these employees and welcome ideas and maybe even criticism when provided. This keeps the CFO more in tune with the needs of the company and they are able to implement strategies appropriately when necessary.

3. Take a Holistic Approach to the Business.

A successful CFO of a small to mid-size business needs to be well versed in more than just finance and accounting. The CFO of smaller companies needs to understand the relationship between all of the departments within the company. They need to have worn a number of “hats” in their career. They will need to understand how sales, operations, finance, accounting, and strategy all interact together. Many times they will need to bring this knowledge to the corporate table to help the company grow and to determine best practices.

4. Revenue is Like the Wishbone Offense.

When asked why the University of Texas Football program ran the Wishbone offense instead of throwing the ball, Coach Royal had this to say, “When you throw the ball three things can happen and two of them are bad.” What he was saying is that when the ball is thrown the pass can be completed, incomplete, or intercepted. The same can be said for revenue. Revenue can increase, stay flat, or decrease. Basically, two of the outcomes are not ideal and one is good. If a CFO is brought in to try and turn a company around they must start with this mind set. Too many times the CEO and other team members sit at the table and calculate how much revenue is needed to right the ship. They sit around saying things like, "all we need is this many more transactions per month or this many more hours of billable work per person." If it were that easy to generate revenue then why are the companies not doing it already? The truth is that revenue is very finicky and the company has very little control over when new revenue or production comes in the door. If they flip over to the expense side of the profit equation, there they can find quantifiable and immediate savings which in turn will get them closer to profitable. A company has way more control over expenses than they do over revenue generation. If expenses are reduced and revenue stays static then you are better off than before. If expenses are reduced and revenue decreases you may still be able to weather the storm. If you reduce expenses and revenue increases then you are highly profitable.

5. Roll Up Your Sleeves And Don’t Be Afraid To Get Dirty.

When it’s all said and done, just like with Harry Truman, the buck stops with the CFO of the company. Ultimately, the CFO is the one that answers to the CEO or owner when things are not going well financially. A small company CFO cannot be afraid to roll up their sleeves and dig in to the ledger. You have to find the solution when solutions don’t seem possible.

6. Beware the Low Hanging Fruit.

Many times when a company is starting out the company has a core competency or specially that they were founded on. This is their cornerstone by the company was created. When companies hit hard times or a lag in revenue growth they start looking for every revenue stream they can find. Many times these new revenue streams get them away from their core competencies. When a company gets away from its core competencies it loses it’s identity. Then the company becomes a jack-of-all-trades and a master of none. The temptation for this low hanging fruit is just a quick fix for a shortage of revenue but in the long run the company loses its identity and forgoes future long-term revenue. Be the CFO that makes the company stick to its guns. This strategy will work out better in the long run.

7. ABC- Always Be Closing.

Typically, a CFO is a non-revenue generator within a company. A small to mid-size company has no room for an employee taking a large salary and not producing any revenue. Every employee in a small company should produce revenue. If you are at the point in your career that you are on an executive team, you should have influence and clout with other business professionals and companies. A CFO can generate new business just like a New Business Director can. A successful CFO for a small company should generate revenue for their company to lessen the burden of their salary. A CFO with an aptitude to sell is somewhat hard to find but it is very necessary for a small business. Any revenue that the CFO can generate reduces the net expense for the company to employee that executive.

As you can see, being a successful CFO for a small to mid-size company has many extra layers of difficulty. Finding someone that fits all of these needs can be a very tall task to fill. At The Coffey Advisory Group, we specialize in fulfilling these needs and would love to work with your company going forward. At the Coffey Advisory Group, we get owners back to business.

#finance #consulting #accounting #operations #processimprovement #operationalefficencies #GAAP #leanoperations #strategy #CFO #COO #ChiefFinancialOfficer #ChiefOperationsOfficer #Smallbusiness #startups #midsizecompany #financialanalysis #financialstatements #cashflow #profitandloss #management #executive #balancesheet #businessvaluation #leadership #businessadvisory

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