The Right Time for a CFO

We’re often asked, “At what revenue level should a company consider a CFO?”. The truth? Revenue is not the appropriate trigger. The need for a seasoned CFO is a function of two variables: business complexity and financial implications. It’s best conveyed through a two-axis chart with business complexity on the x, financial implications on the y. The greater your business complexity and the higher the financial implications of your decisions the more valuable and necessary financial guidance becomes. If you are in the upper right quadrant, you need a CFO.

Signs that your business is growing in complexity

The most common symptom is unpredicted cash-flow shortages. Decisions are made based on bank cash balances. This works, for a while. Then, payroll or a vendor payment is at risk. The cash is coming, but the timing is off. Or, an investment is made when cash reserves were high, only to discover that an alternative investment was better, but it’s too late. This is a result of a lack of planning and/or too short a planning horizon. Also, as business grows in complexity, so does the number of constituents. Investors, banks, employees, vendors or a Board of Directors will require a clear long-term view. The need to provide forwarding looking financials and a correlating strategy to internal and external parties is even more important.

Signs that the financial implications are high

In this matter, no one size fits all. A good rule of thumb, if the financial implications of a decision are more than two months of the average monthly bank balance, the stakes are getting high. Qualitative measures are relevant as well. If the decisions cause anxiety, among the owners or the employees, then it’s getting big enough. In accounting, the term “materiality” is used to define the cut level of financial importance. Determine your materiality level, and once you cross it, it’s time for a CFO.

Benefits

With the help of Rolando Locci Consultants, our clients possess clarity and a level of mastery that is rare and invaluable, making them proficient leaders and more competitive in their industry. We tailor our practice to the size and needs of each client. After taking the time to get to know you and your business, we will customize the most effective suite of services to address your keys areas. If you think you are ready, or will be soon, let’s take the first step towards building a relationship.