In the lifecycle of a growing business there may be nothing more commonly overlooked than financial leadership.
In today’s fast paced world of the overnight entrepreneur, sales is the game, and marketing is the vehicle. But unless your business is all pre-pay, cash flow can be a huge limiting factor in successfully managing the growth of your organization. During periods of rapid growth, especially in a business that are capital intensive, all the sales in the world will not take your business to the next level, and if you aren’t careful it can actually put you out of business.
The external environment is tougher than ever before. With several years of stagnation coupled with nearly half a decade of frozen credit, proper capitalization is becoming more and more rare. These circumstances have brought a new need to the surface. That being the requirement for strong, creative financial leaders that can do more with less.
That is why there may be no position more critical and perhaps more misunderstood in the growing organization than the CFO.
Although there are many, some of the common CFO misconceptions that I have heard are as follows.
- They are nothing more than a glorified accountant/bookkeeper
- They are only there to thwart expense and keep a company spend thrifty.
- They just do the work that the CEO doesn’t care to.
While in the case of some businesses the “CFO” may certainly have some mundane tasks; The fact is that the CFO in any forward thinking organization is far from just a bookkeeper.
And as an FYI, it is every employees responsibility to spend wisely, and many times the CFO is there to do much of what the CEO cannot do. (Sometimes due to lack of time, and other times lack of know how)
So as the worlds CEOs and CMOs are taking the market by storm driving customers to the door, behind them (the successful ones at least) you will find a CFO that is making it all possible. Nevertheless, the average employee often has no idea what the CFO does, therefore making the position not only under appreciated, but undervalued.
Now that we have unofficially debunked the myths, let’s discuss what is at the core of financial leadership and answer an important question.
Why must an organization, especially a growing one, have a great CFO? Let’s take a closer look.
- Capability: The ideal CFO can tell you based upon your current capital structure exactly what the organization is capable of. This is key to moving an organization forward so it doesn’t get out over its skis.
- Planning: They can analyze the current mix of business and provide the sales and strategist with the foresight required to properly plan for growth. A plan that cannot be funded is also referred to as a pipe dream.
- Alignment: In the case of companies that have substantial growth and capital requirement the talented CFO can align the company’s cash resources to the plan.
- Communication: Both internal to other leadership as well as external to banks, investors, and partners, the CFO can instill confidence with key stakeholders internal and external to the business to drive things forward.
- Execution: A strategy is ultimately only as good as how it is executed. Without the right financial leadership you can sell yourself out of business. To execute Finance must be lock step with everyone else.
- Focus: Unless you are in the business of financial services, finance is not in itself the business. Being able to focus on what it is you do and know the money is taken care of. That is priceless!
When a company has strong financial leadership it is rarely noticed or appreciated by the working majority, however when that leadership is missing it exposes everyone from top to bottom. For an organization to achieve its goals, it requires careful planning and extraordinary execution. Neither is even remotely possible without a highly capable CFO.
By most standards Finance may never be seen as the sexy part of the business, but if you try to grow a business without great financial leadership you will quickly realize it may just be the most important part.
