A common challenge we discuss in our community is sound financial management. Without profitability, your organization won’t thrive. As Verne Harnish says, “Revenue is vanity, profit is sanity, and cash is king.” Most entrepreneurs don’t come up in finance, so it has to be learned. Many times,  finance is ignored, until it can’t be anymore.

Why is that?  It’s a people problem. But which people?

Gripes and complaints about the financial acumen of the topmost strategic leader are rampant. So much so, that I started to ask questions about what CEOs and owners weren’t getting from finance and asked CFOs, “Where’s the gap? What’s going on?” Here’s what I heard.

Owners that are frustrated have grown into the problem. Are you experiencing any of these challenges?

1.Convenience has become inconvenient

When you first started needing someone else to take your bank statements, AR/AP and plug them into Quickbooks, you asked “Betty” to do it. Betty was the office manager and swiss army knife of your company. She is now running HR, Finance, compliance, and is the unofficial office shrink. She also doesn’t have any formal financial training. She is wonderful and doing AR/AP and can run the default reports in whatever financial package you run.

You have a dilemma as you’ve grown. You now have the wrong person in the wrong seat with the wrong skill set. You may also be saying something like the “company has outgrown Betty.”

Whose to blame? You. Betty (or whomever your Betty is) is a lovely person and a baller when it comes to getting work done. You have been too busy or lazy to manage the growth and reset, retool, and reorganize the financial side of your business.

2. Over Titled

Perhaps you gave Betty too many promotions, and now the title and pay are wrong for the skillset you need.

Start with #1 above and then continue to promote Betty in a financial management and supervisory role until you are upside-down on pay vs. skills. There is no upside and in fact, she is now hindering the growth of the business.  The only way to move forward is remove her and start with someone new. If your “CFO” reports to your operations VP or COO, then you may have done this.

Again, this is an owner problem. Don’t do this.

3. The information/reporting you are getting isn’t right or timely.

If you’ve identified that 1 and 2 are true, then this is a given. If you don’t agree with 1 or 2, then the challenge usually isn’t the person, but the system you use. If your business has grown, then the complexity of your business has increased.

WHAT DO YOU DO?

1.Learn it, Know it, Live it

As the CEO or owner, you most likely are involved deeply in “how it’s made” or “How it’s sold” or both. Finance is not where you get your kicks; therefore, it is underfunded, undervalued, and unchecked, until something goes wrong. It may not be fun, but if you aren’t aligned and informed financially like you are in the product, service, and sales parts of your business, you are going to hit a significant stumbling block or show up to an easily avoidable financial crisis one day.

2. Assess what you need

You need to assess and get wisdom on the type and level of finance individual you and your firm need. I hear owners throw around the CFO title when what they need is a VP of finance, director, controller, or finance manager. CFO’s should be strategic, a strong communicator, effective strategist, big picture thinker, and road-show ready. A CFO is not someone who is doing the tactical day-to-day accounting functions. There are many firms now that offer strategic financial thinking as an outsourced partner while you have an internal resource doing the heavy lifting. Don’t get stuck thinking there is only one way to do finance.

3. Find a Partner, not a Guardian

I used partner on purpose. When you’re looking for a strategic financial position, you’ll want to understand the mindset.

What makes a good financial partner?

Is the person a know it all? Do they see finance and running the company as a partnership? A “How can I help you” attitude versus just saying “No, it’s not in the budget” is a vast difference. A partner mindset is better than a guard. They need to understand how it’s made and how it’s sold and what drives revenue. The B school “run it by spreadsheet” model is sound business math, but not a worthy business partner.

Most CEO/Owners constantly push the gas pedal.  A CFO is like windshield wipers rather than the brakes.  That is, a good CFO helps the CEO/Owner see clearly and know when to push the gas or brakes.

4. Invest

When the time is right, invest in finance like you would in sales and marketing. Is it time to upgrade to an enterprise-level version of your financial management software? Do you need a higher level of strategy and management on your cash, debt, forecasting, and pricing? Just like you invest in CRM and ERP, finance needs investment too.

F doesn’t have to stand for friction. Friction comes from extra time, the unknown, lack of visibility, knowledge and true partnership. If you are going to take your company to the next level, you need to assess your company’s financial needs with yourself, the team, and technology.