Monday, November 29, 2021

How a CFO can add value

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Introduction

A CFO is a term used to describe a senior Finance Professional, its originally a USA phrase which was used to describe the role known as a Finance Director in the UK.  Basically, the most senior executive in the organisation in charge of the Finance function.   Increasingly this role is gaining ground in the UK where it means the level above an FD.  Larger companies now tend to recruit CFO’s rather than FD’s.

Why would a business recruit a CFO?

There really is no substitute for experience and it stands to reason that the more experienced and senior a finance professional is the more value they can add to a business.

An FD may never had seen a situation before or handled a fund-raising exercise, whilst these are likely to be much more familiar to a CFO.

A candidate gradually progresses in their career as an accountant, so CFO’s are more likely to be more mature and with more experience with different companies and roles.  Often having 20 years or more experience.

Why much does a CFO earn?

In London its typical for a CFO to earn in the range £125K-£195K plus benefits, so in order to be able to justify such a remuneration package, an organisation needs to be at least Medium sized or have access to significant funding.

Larger companies pay in the region of £175K-£350K

Outside of London earnings are still impressive but more likely to be in the £95K-£140K range.

What attracts a CFO?

An experienced CFO is likely to be careful about any new role and can be expected to be selective to ensure the role is right for them, both in terms of chemistry, remuneration and something that interested the candidate and offers them sufficient of a challenge.  In short, any new role has to “float their boat”

From a candidates point of a view, to be interesting a role needs to offer: -

  • The right chemistry within the senior team and broader organisation.
  • The right package in terms of base salary and Long-Term incentives in the form of share incentives.
  • A sector and or product with the right potential for growth, if its in the tech space, does it have for example the potential to be a Unicorn?
  • Location

What sort of difference can a good CFO make?

A big difference is the answer, helping an organisation to make the right choices and decisions can have very significant long-term benefits, recruiting good quality people into an organisation.

Understanding what needs to be done to drive a business forward themselves, rather than following the instructions of a CEO or MD.  Here are some good examples of what a good CFO can add:-

  • Digging into a P&L and identifying what contracts are making money and which need to be renegotiated or discarded.
  • Mergers and Acquisitions more often than not fail to add value, so being able to spot real opportunities and to avoid unsuitable deals.
  • Also being able to recognise success and spot opportunities to improve.
  • The ability to lead and drive a team to achieve goals.

Does the benefit offset the cost?

Definitely!  But for this to be clear, the business concerned needs to be off sufficient scale for the actions and decisions of the CFO to make an impact.  Increasing profitability by 1% makes a big difference to a £100m business, but its less relative to the remuneration package of a CFO if the turnover is £5m.

A good CFO will bring in quality people and replace or manage out under-performing team members and incremental improvements will be felt all around an organisation by these sorts of positive changes.

Where to find a good CFO?

If you are based in the UK, then one of the leaders in the senior finance recruitment space are FD Capital Recruitment, their main office is on Great Portland Street, and they specialise in FD’s and CFO roles, on part-time CFO, interim CFO and full time CFO basis.

They cover the whole of the UK and have candidates from a wide range of backgrounds and sectors.  Their Unique Selling Proposition is that they are a network of Finance professionals and recruiters working together to find the ideal candidates for their clients, typically candidates are only put forward if they are known or have previously worked with their team.

Conclusion

A CFO may appear to be an expensive resource, but they can more than add enough value to cover their costs.

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