8 signs your company needs a CFO
The need for a CFO rarely shows up as a missing job title. It shows up as unanswered questions. When several of these signs appear together, the finance function needs to move from record-keeping to decision support.
A company’s need for a CFO cannot be read from an empty box on the organisation chart. The real sign is that management’s financial questions go unanswered. The books are kept and tax returns are filed on time, yet nobody can answer “will we have enough cash over the next two months?” with numbers. What is missing then is not bookkeeping but financial management.
If several of the signs below appear together, the company needs CFO-level support. That support can come from a full-time CFO or through a fractional CFO model.
1. The company reports a profit but cash is always tight
If the income statement shows a profit while the bank account is constantly stretched, the problem is almost certainly working capital: receivables are getting longer, inventory is growing, or payments fall due before collections. The mechanism is explained in Why do profitable companies run out of cash?
2. There is no cash plan, or only the bank balance is watched
Today’s balance shows the past. Without a plan of collections and payments for the coming weeks, a squeeze is noticed only when it arrives.
3. Monthly numbers arrive mid-month or later
If last month’s results are ready halfway through this month, they arrive too late for decisions. A fast and regular monthly close is a precondition for financial management.
4. A budget is prepared but never opened during the year
A budget prepared in January and never looked at again is a document, not a management tool. A plan that is not compared with actuals every month does not explain variances.
5. The same indicator gives different numbers to different people
If sales and accounting report different revenue figures, the problem is the definition, not the number. Without a single definition for each indicator, management meetings turn into arguments about numbers.
6. Every bank or lender asks for different information
If information for lenders is compiled from scratch for every application, there is no reporting system. Consistent information directly affects access to financing and its cost.
7. Major decisions are taken without working out their financial effect
A new branch, a new machine, more staff or a price change: if their effect on cash, profitability and financing is not calculated beforehand, the risk is noticed afterwards.
8. The finance team is always catching up
If the team spends all its time on bookkeeping, payments and filings, there is no time left for analysis and planning. That is a design problem, not a people problem.
Where to start?
Most of these signs point to the same thing: visibility. In practice the first step is usually a cash plan, the second a regular monthly close and management report, and the third an assumption-based budget. I explain the reasoning behind this order on the financial management page.
Frequently asked questions
Does a small company need a CFO?
It needs the function, not the title. A cash plan, a budget and regular reporting matter for small companies too; the function is usually covered by part-time or project-based support.
What is the difference between a CFO and a finance manager?
A finance manager runs daily finance operations: payments, collections, banking and the close. A CFO turns the information those operations produce into a decision system, and is management’s counterpart on financing, planning and risk.