Why You Need a CFO, not Just an Accountant

January is named after the Roman God Janus.  Janus is depicted with two faces, one pointing forward and the other back and is symbolic of the process of change — gazing backward at the recent past while staring intently into the new improved future.

As I meet with CEOs I frequently invoke the image of Janus to help them understand the role of finance in an organization.  It also must be capable of looking forward and backward at the same time.  For many accountants trained in record keeping, they’ve got the looking back part of the job nailed.  However, rarely do we find accountants who are both accurate in their perceptions and descriptions of past performance and have the rarer ability to look forward and assist meaningfully with financial strategy.

This ability to do both is the key factor for success for any CFO.  You may call them controller, Vice President of Finance, or CFO, but as CEO, you should ask yourself whether you have both in your senior-most financial leader.

A timely measure of the CFO’s ability to do both is how well they assist you in connecting your current performance to your strategy to your forward-looking operating plan.  The last few months of the year are the time when many organizations are reflecting on past performance and developing their next year’s operating plan or budget.  A critical component of any budgeting cycle is how well it connects to your overall strategic plan.  The CFO should be the person ensuring linkage, otherwise, he or she is simply an accountant.

To put it simply, this virtuous planning cycle should begin with refreshing your overall strategy and identifying the 5-6 most critical factors you must achieve in the next period to move effectively toward achieving your strategic priorities.  Larry Bossidy, a mentor of mine from my Honeywell days, often said,

“Every company has a half a dozen or so critical issues which if left unaddressed will keep the business from reaching its full potential.”

Once these critical success factors are defined, you can build a proper operating plan or budget around it.  Creating a budget without linkage to these critical success factors means you’re sending your team off to execute against a plan without real direction.  What a waste of time.  Remember that your budget should be just ‘year one’ of your strategic plan and not simply a rolled-up budget of what individuals on your team want to accomplish, which we see frequently.

Keep in mind these principles work even for startups, but the cycles should be compressed.  A one-year cycle may well be a 3 or 6-month cycle.

There are other differences between an accountant and a CFO as well.

• Accountants often report based on tax or GAAP without regard to how the information could be better presented internally for decision-making purposes.
• Accountants often aren’t the best communicators or don’t understand interpersonal dynamics

If you’re feeling a little like you, as a business leader, need to understand more about the nature of an accountant versus a CFO, here are a couple of brief articles describing the difference.

Why You Need a CFO, Not Just an Accountant, by Benjamin Osei Mireku.

The Difference between a CFO and a Controller

Or, if you are entering a planning cycle, I strongly recommend you read Bossidy’s book, “Execution: The Discipline of Getting Things Done.”  Many of the principles he discusses are also summarized in this article in Strategy & Business.