The Role of the Middle Market CFO

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, it is the CFO at the middle market company who serves as the sounding board for the CEO, working in tandem with the chief executive officer to advise on the next step, whether it be a strategic acquisition or capital raising initiative. This visionary role means that CFOs are clearly much more than stereotypical bean counters. CFOs of middle market companies need an integrated approach to business and a broad understanding of the entire value chain. That approach requires the CFO to work closely with the CEO and other corporate managers in the company.

The wide-ranging CFO duties are critical to deal with the maneuverings common in a complex and rapidly changing business environment. Communication between the CEO and CFO is essential when making large-scale and sensitive business moves. CEOs tend to be positive by nature and CFOs tend to be more skeptical. It’s the CFO’s role to ground thinking in reality, pointing out the terrain along the way. It’s a back and forth relationship that demands that both parties respect one another.

If it’s not private equity offers, going public, or acquiring a competitor, it’s the response to an economic downturn that tests the CFO’s mettle and place on the executive team. Whether CFOs place the blame on the tough business climate or credit the growth opportunities of today’s marketplace, it’s apparent that the changes in the position have pushed the role to the forefront of the C-suite. Smaller companies may be much more entrepreneurial and driven. But when they get to a certain stage and want to really grow the company, they get smart and realize they need a CFO who’s a solid business person.

And while the economic downturn did place constraints on business, the days of significant cost cutting measures and downsizing initiatives may be over. Businesses are beginning to look to the future and contemplating acquisition and growth. Companies realize that a key component for successful growth is a CFO who can become a strategic partner and true member of the executive team.

Middle market CFOs are also dealing with the global reach of their companies and the need for an ever-increasing international presence. Middle market companies are dealing with multistate locations, foreign transactions, and international offices.

Now, more than ever, middle market companies need collaborative CFOs — executives who truly understand how the business works and what financial strategies best support it. What skills do these CFOs have, and what do they focus on? Here’s a short but by no means inclusive list. They:

  • Create demand forecasts that match the cadence of product development, based on first-hand reports from operations and customers
  • Know the market well enough to imagine multiple versions of the future, and to prepare for change in several directions
  • Understand when to override the budget and spend more in response to a growth opportunity, and also when to pull back and seek ways to recycle or divest discarded assets
  • Have a sense of where the company can go and where it can’t, and create cash flows around that trajectory
  • Act as finance coaches, counseling other departments on how to find the money they need, through working capital tweaks, budget shifts, or other means
  • Above all, they spend far less time in their offices than they once did

Finally, the best CFOs today are proactive. They jump on special projects, model scenarios no one else is considering, look for solutions before problems arise, and forge strong relationships both up and down the corporate ladder. Being a successful CFO at a fast-growing company means that owning the big picture isn’t an option – it’s an imperative.

Harvest CFO Consulting provides highly-skilled CFOs who bring the above skill sets and more to middle market companies.

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