Do businesses need a CPA and a CFO?



Businesses need a CPA and a CFO – more than likely aren’t the same person.

There are different qualities that make an excellent CPA and there is other qualities that make an outstanding CFO (Chief Financial Officer). There is some overlap but there are some significant differences.

Unless a CPA firm is doing a company audit, they probably don’t ask you probing questions about your business or the data in your financial statements. Like “why is your gross margin moving up and down significantly each month?” What is the job description of that new person you hired? A CFO will dig into the story behind the numbers, the CPA not so much.

There is a difference in the job description between the two and in how they look at things. Let’s take a look at a comparison between them:

Compiles financial statements from client-provided data Plans, considers and decides how financial transactions will be booked to reach stated objectives and strategies of the business.
Works with historical data – keeps score after the fact. Plans, forecasts, budgets and projects the future financial performance of the company, in light of the company’s objectives, strategies and capacity to perform. Diligently looks for any trends that will impact company objectives.
Delivers financials weeks or months after the close of the accounting period (month, quarter, or year) Focuses on a fast (within days) and consistent month-end closing of process. Generally has daily or weekly real-time numbers and indicators of performance or trouble and how they will impact the company plan and communicates this to management – action oriented.
Compiles financial statements in accordance with statutes and practices consistent with the type of business – GAAP compliance. Generates reports that analyze results in the context of the company’s objectives, strategies, and owners’ intent for the business. Establishes key indicators that provide early warning for management of trouble ahead.
Compiles financial statements that can be relied upon by 3rd parties, such as banks, creditors and investors. Works to maximize the value of the business to the owners, including investors, while remaining within loan covenants, creditor requirements, etc.
Assumes you (the owner or CEO) are going to read and understand the financial statements as delivered. Makes certain you and the management team understand the financials, the trends, drivers and the issues they identify. Reads them to you, if necessary. Helps develop the stories behind the numbers.
Does what he’s hired to do — generally Taxes and Audits — including mid-year tax planning, quarterly estimates, etc. Does what he’s hired to do — help you strategize, plan and operate your business to maximum financial results and build a sustainable business. The CFO helps you co-pilot your business!

In reviewing the above, it’s probably obvious why your CPA probably can’t be your CFO. He’s not in the game. In most cases, he does not have the perspective by which to help you plan, forecast or monitor financial performance. Because you haven’t invited him in (and paid him for this). CPA’s are valuable for what you pay them to do — they really are. CPA firms can be hired to fill the role of a part-time CFO, but normally this is not their expertise. The CFO role is what Franklin Business Works specializing in. Here is good article “How much not having a CFO costing you?”

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