This week’s “Ask the Mompreneur” features an interview with Certified Public Accountant Larry A. Clark, a contract Chief Financial Officer and Controller based in Matthews, North Carolina.
Ask the Mompreneur:
What’s the difference between a Chief Financial Officer (CFO) and an accountant?
Larry A. Clark:
An accountant or bookkeeper may process the day to day transactions of your business, such as entering and paying bills, invoicing customers, calculating payroll, etc. However, you likely need professional expertise in review and interpretation of financial statements, making sure all accounts are balanced, budgeting and forecasting, and setting up internal controls. That’s where a CFO or Controller comes in.
A CFO can be your financial eyes and ears, and also coordinate communication between your executive team, your accounting department and outside financial partners, such as banks, insurance companies, investors and auditors. He or she can also be vital in ensuring that your bookkeeping system accurately reflects the realities of your particular business and industry. They should ensure that all bank and credit card accounts are properly reconciled monthly, and that loan payments are recorded correctly.
Ask the Mompreneur:
I think a lot of small and medium size businesses would benefit from that skill set, but don’t know how to afford it.
Larry A. Clark:
What many entrepreneurs don’t realize is that you can bring that experience into your company without hiring someone full-time. You can contract with a part-time CFO at a fraction of the cost of a salaried employee.
Many CPA firms, as well as specialized fractional CFO firms, offer these services to clients by the hour, on a monthly or weekly retainer fee basis, or through an annual contract. Some entrepreneurs prefer to actually hire the CFO part-time on the company's payroll, as they feel it provides a closer bond with the executive team.
Ask the Mompreneur:
So how would that work?
Larry A. Clark:
Every company will be unique in their specific needs, but just to give you an idea, part-time CFOs can assist in preparation of sales and use tax, property tax, and other tax filings (such as state machinery taxes, excise taxes, etc.). They have experience and strength in preparing and monitoring budgets, cash flow forecasting, and can sit down with your executive team to explain the trends evident in your financial statements, helping you with decision making regarding future income, expenditures and business direction.
Accountability and measurement of financial results are crucial not only to determine past results and profitability, but forecasting future growth potential. It is critical to know which business units or areas are most and least profitable, how assets can best be allocated and whether cash flow is sufficient to carry out your strategic business plan. A good CFO will also benefit you in the preparation of that strategic plan, and whether you are aiming too high or too low based on things such as sales trends, credit lines, payroll, and needed investments of capital.
The biggest advantage of using your CPA as a part-time CFO is that the CPA can know and understand your accounting system, procedures and bookkeeping style, as well as ensure the correctness of entries and balances prior to beginning prep work for your income tax returns. This is the case whether your company is a sole proprietorship, corporation or partnership. Fractional CFO firms also provide such assistance and you can often find a fit specific to your industry, although with this route you will usually need a separate CPA firm to handle the income tax returns.
Jennie Wong, Ph.D. is an executive coach, author of “Ask the Mompreneur,” and founder of the social shopping startup CartCentric.com. Email your entrepreneurship questions to TheJennieWong@gmail.com. Guest bloggers welcome.
