CFOs at growth and midsize organizations retain their core financial planning and analytical responsibilities as they are increasingly taking on responsibility for a larger number of organization-wide activities. At the core, the CFO is responsible to the company’s owners and management team for all accounting and financial matters. The CFO core functions include managing risk and providing a foundation for success by establishing company-wide objectives, policies, procedures, processes, programs, and practices to assure the company of a continuously sound financial management and reporting structure. This article addresses the key core CFO responsibilities that enable growth and success.
Traditional finance skills of analysis, reporting and control are in demand outside of the finance function and the role of the CFO is broadening far beyond its technical heartland into a role that is much more “strategic” — in the broadest sense of the word. Leading CFOs are overturning outmoded perceptions of finance as “business prevention units” and repositioning the function as an enabling partner to the business. For many CFOs, the acid test is the extent to which business managers consult them for advice on key aspects of strategy. For leading CFOs, this goes beyond being an “information provider” or “aggregator presenter.” Their business understanding and analytical skills mean that this proactive, yet supporting, role is a vital part of understanding how different decisions will lead to certain outcomes.
In most portfolio companies, no executive other than the CEO plays as significant a role in the success of the venture as the CFO. Partner to the CEO and the private equity sponsor, the CFO has a uniquely challenging position, requiring exceptional technical skills, an entrepreneurial mindset and a hands-on, get-the-job-done orientation. There are a lot of factors to consider in your CFO search for a private equity portfolio company.
On average, each $1 in cost reduction can equal $5 in new revenue. In an economic environment where sales are flat and customers resist price increases, cost reduction becomes the primary way to improve the company’s bottom line and increase shareholder value. Companies have traditionally viewed cost reduction as a one-time annual exercise. For CFOs to drive meaningful improvements in a company’s financial and operational efficiencies, cost reduction should be an ongoing process. Typically the major barrier to continuous cost reduction is not from suppliers; instead, the internal resistance to change by employees is often the primary reason companies can lose out on valuable cost reduction opportunities. This is why the ability to see these opportunities is a good skill to look for in your CFO search.
The CFO plays a critical role in the success of any private equity (PE) portfolio company. A CFO with the right technical skills, entrepreneurial mindset and leadership capabilities can translate into significant additional value for the PE sponsors; conversely, a CFO without the operational discipline or sense of urgency can be a significant impediment to the company’s ability to reach financial targets and achieve desired returns.
In most private equity (PE) portfolio companies, no executive other than the CEO plays as significant a role in the success of the venture as the CFO. Partner to the CEO and the PE sponsor, the CFO has a uniquely challenging position, requiring exceptional technical skills, an entrepreneurial mindset and a hands-on, get-the-job- done orientation. This article presents critical factors for CFO success in a portfolio company.
The role of the CFO has rapidly changed in the past decade, propelled by M&A activity, quickly shifting economic sands, and heightened regulatory scrutiny. What was once considered a number-crunching role has morphed into a critical post, essential to the trajectory of the business. For CFOs at middle market companies, their job duties have expanded even more rapidly than most, given the growth in the sector.
Today’s increasingly unpredictable economic conditions create business challenges that must be managed. These same conditions can also create business opportunities for companies who have the internal processes and disciplines that enable them to respond quickly and more intelligently than less-prepared competitors. CFOs are increasingly playing a more strategic role in applying financial modeling and analysis to assess and plan for potential risks and opportunities. However many small to middle-market companies lack the financial skills, disciplines and processes to conduct adequate financial planning and analysis.
The following is from the Bank of America 2012 CFO Outlook – Spring Update
Who participated and how results were gathered
From February 16 through March 14, 2012, Granite Research Consulting completed 251
interviews with financial executives from U.S. companies with annual revenues
between $25 million and $2 billion. Participants are referred to as CFOs throughout the report since two-thirds of those surveyed have C-suite titles and most are CFOs.
I have recently heard a commercial banker state to me “a great CFO is worth his weight in gold.” Thinking about this statement, the average CFO weighs maybe 200lbs, at the current $1,650 per ounce this statement can be interpreted as a great CFO is worth approximately $5,000,000 – which I believe in many situations is very conservative. However, the truth around this statement seems to be sorely missed in many companies to the detriment of the owners, investors, commercial bankers as well as its employees, customers and suppliers.
In most portfolio companies, no executive other than the CEO plays as significant a role in the success of the venture as the CFO. Partner to the CEO and the private equity sponsor, the CFO has a uniquely challenging position, requiring exceptional technical skills, an entrepreneurial mindset and a hands-on, get-the-job-done orientation.