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It's an
unfortunate fact that very few small businesses are willing to allocate the
necessary resources to the finance function in their firms. This emanates from
a lack of understanding of the function of a CFO, and his/her contribution to
the success of the company. I will touch on only two of the responsibilities of
a CFO, and why they are critical to the vitality of any business.
The CFO's responsibilities are rooted in the functions of "control" and
"treasury". The control function has its basis in the budgeting process. The
budget represents the quantification of the goals and missions of the company
as manifested by the resources required to attain those goals and the expected
financial benefit. The budget becomes the scorecard by which the company as a
whole, and its various departments individually, are measured. The CFO must
ensure that appropriate systems are in place to measure the attainment of
corporate and departmental goals.
There are two facets to the treasury
function, the first being the identification and procurement of financial
resources available to the company. Among others, these sources include angels,
venture capitalists, stockholders, and banks. A crucial aspect of this activity
involves ongoing communication with these financial sources. Investors and
debtholders must be kept apprized of the goals and performance of the company
in order to keep these channels open. They must understand how the pursuit of
these goals impacts the risks and returns on their investments. An uninformed
investment community will not be a ready source of funds and, in fact, may not
be supportive of management's efforts, which can be disastrous.
The
second aspect of the treasury function is the allocation of those resources
within the context of the budget. The CFO must work closely with all functions
to ensure that they have the necessary tools to measure their performance, and
that corporate resources are used efficiently. This relationship furthers their
understanding of what is feasible within the corporate context and what is not.
At the same time, the CFO brings important information back to the CEO about
the financial resources required to enable departments to achieve their
initiatives.
While the specific responsibilities of the CFO will vary
between large and small companies, public and closely held, the principals of
control and treasury transgress all boundaries. |
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Ron
Fitz, CPA, MBA, President of CFO, Inc., functions as the Chief Financial
Officer on a part-time basis for small manufacturing and high technology
companies.
CFO, Inc.
777 Middle Road, #21
Portsmouth, NH 03801
Phone:
Tel: (603) 4227300 Fax: (603) 422-0739
[email protected]
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