It has been my experience that business owners seem a little confused between a CFO and a CPA. When they ask what I do and I tell them I am in a partnership that provides CFO services on an as needed basis to business owners, they often respond that they already have a CPA.
So what’s the difference between a CPA and a CFO? Perhaps the best explanation I have heard is that CPAs (and bookkeepers) look through the rear view mirror. They look where the organization has been. What were the sales? What were the expenses? What did the business sell? What did the business buy? They prepare taxes, perform audits, maybe perform bookkeeping services or prepare payroll. Their focus is on the past.
CFOs on the other hand look through the windshield. They come along side the business owner to translate the vision, goals and objectives into a financial game plan and then work with the owner to accomplish the plan. Like the owners, the CFO is focused on the where the business is going. They deal with the financial implications of anticipated events such as the future purchase of equipment, inventory fluctuations, and projected cash flow requirements. They focus on the future.
Every business owner should have a CPA on his or her team of advisors. If they don’t have one, I will help them find one. But, CPAs usually have limited contact with the business owner, – generally only at tax time. Rarely does the CPA conduct a monthly or even quarterly review of the financial position of the company and provide recommendations for improving operations. Due to the nature of the work of the CPA, they are required to be independent, which precludes them from making such recommendations. The CPA is an outsider.
The CFO works closely with the business owner and should be a member of the management and financial team. B2B CFO partners strive to become a trusted advisor and actively participate in discussions that have financial implications. For example, the CFO works closely with the accounting staff to monitor cash flow and working capital planning. He or she will identify and teach the staff on how to monitor key performance metrics. The CFO designs systems and processes to ensure the integrity of financial information and they design the system of internal controls to ensure physical and financial security. The CFO is an insider.
Monitoring historical financial information is important as it provides a record of the accomplishments of the company. But, charting a course for the growth of the company requires a different perspective – that of the CFO.