25 Questions to Ask When Hiring a CPA « Keith McAslan’s Blog.

6 Things to Know Before Hiring a CFO

by Marty Koenig and Keith McAslan

Partners at CxO To Go^TM

Before hiring a financial executive to guide your company, ask these 6 questions to ensure that you don’t end up paying a whole lot of money for services that are not what you need, expect or want. Hiring an on demand CFO does not have to be a confusing experience. Instead, it can be the most empowered decision you ever make for your company.

1. How do I know if I need a CFO?
   

   Many small companies have a bookkeeper, accountant or CPA. Their roles are important, but very limited in scope compared to the experience of a CFO. Bookkeepers and accountants function mostly in the day-to-day work of keeping up with your records and taxes. Even a controller is often seen as a “number cruncher” that spends a lot of time with their nose in spreadsheets and doing reports. A CFO is very different and provides far greater value to small businesses.

   Here are some examples of why a small company might need a CFO:

• Rapid company growth has stretched the capabilities of your current accounting staff to the limit, but you still cannot afford a full time senior financial executive.
• You are planning a major expansion and can benefit from adding an outsourced CFO and trusted advisor to your management team.
• You need assistance in dealing with bankers, lenders or outside investors.
• Your company is in a crisis, experiencing financial or other difficulties and requires strong financial leadership that cannot be provided by your current accounting staff.
• You need specialized financial expertise not available internally, and could use the help of an experienced CFO to mentor and coach them to do better at what they do.
• You are planning an exit from your company with a merger, acquisition, or sale and want to gain maximum value and sale price in the future.
• Your CFO leaves unexpectedly and your company has no one internally with the skills and experience to take over. Until you complete the search for a replacement, CxO To Go can provide the financial expertise to keep your business running smoothly.
• You need a periodic financial advisor to keep your company on track, someone that is dedicated to your company as it grows.
• You are a new start up company and want professional advice to begin your financial management correctly.

1. What questions should I ask a CFO to be sure he/she has the experience and personality traits to help me?
   

   Throughout your conversation, determine if the CFO is a people person, not just a number-cruncher. His/her people need to like him and trust him, and he/she needs to inspire everyone around him. Some accountants and professionals do not enjoy working with a lot of people and collaborating for success. These types will never be successful CFOs.

   Ask them about breadth and depth of knowledge and experience. While knowledge of your particular industry fine, a big part of his/her ability to add value to your firm will be his experiences in and around a multiple of industries. He will possess the unique ability to understand and lead several, if not all, of the disciplines of the company with great focus and precision. He needs to have significant experience helping companies obtain clarity, maximize cash, improve profits, and optimize their resources from a multi-disciplinary perspective.

   Ask them to give you examples where they have had to be diplomatic and persuasive. The CFO holds all of the confidential and valuable information to the business model and plans for growth. He needs to carefully and professionally work with others around him without being abrasive but using persuasive communication to engender buy-in and loyalty. These are sometimes rare traits, but a great CFO needs them desperately.

   Ask them if they are open to new opportunities and flexible. If he/she always says no before hearing you out, then he will never succeed as the CFO. In the broad and deep context of all of his experience and strategy for the company, he/she should be able to filter through opportunities and help the company implement the ones that best position the company to achieve its objectives and improve its competitive advantages in the market.

   Ask them if they are a Strategist and Visionary. He/she must always think ahead. Reporting on the past is an important function he/she oversees, but his/her value will come from his foresight and ability to strategically guide the company as a whole, not as individual parts.

   Ask them about their professional designations and education. A professional accounting designation is good, but not required for a superstar, senior executive CFO. Having a graduate degree with 25+ years experience is key. An MBA with less than 25 years experience does not begin to cover the accounting, process, and operating knowledge needed to steer a company’s finances.

   Ask them how hands on they are. The job of a small business CFO is very different from one at a big company. The latter is much more of a hands-off role focused on investor relations, deal making (financing, M & A), governance, reporting and other back office matters. In stark contrast, the small business CFO is much more hands-on and integrated into the day-to-day of the business.

   You want a CFO that is not shy. The CFO is the CEO’s most trusted advisor. If a CFO doesn’t tell you he/she is planning to ask you tough questions that nobody else will, then you won’t get the best experience and value. A good CFO is good at asking questions that force those around him to think through and understand things they are about to undertake. A good CFO keeps asking questions until he/she gets his/her mind around the issue and fully understands it – and is confident that those around him/her fully understand it as well. The discipline to keep after it until initiatives and actions are understood and are sound is the hallmark of a good CFO. It takes much humility and tact to accomplish this, but organizations soon learn to completely think through things before they bring them to you.

   Ask them about their technical and systems expertise. No, you don’t want your CFO troubleshooting Windows on your desktop, but you do want someone who’s sufficiently comfortable in information technology to take the lead in driving your information systems.

   Ask them about their decision making. Your CFO will be a trusted advisor. Running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

   As you probably noticed, only one of these points (the 2nd one) actually deals with accounting. Despite their accounting experience, the best CFOs go far beyond this foundation. They are capable of adding value to every aspect of the business. Judge yours accordingly and make sure you have a high impact CFO.

2. How do you bill for your services?
   

   There is no need to be afraid to talk with your CFO about how he/she bills for the work they will do with you. No one wants surprises!

   Since the CFO is a trusted advisor, they will work with you to understand your exact needs and put together a no-surprises cost. This is accomplished by assessing your needs, understanding the current state of your business, performing a gap analysis, and agreeing on specific work that will benefit your company the most. Since these are advisory services, most often they are billed on a bi-weekly or monthly fee basis.

   Sometimes a small business just needs an experienced CFO to help them with a strategic plan, business plan, financial projections, bank lending package or similar project that’s typically charged a flat fee.

4. How will you proactively communicate with me on an ongoing basis?

Unfortunately, many CFOs do a horrible job of proactively communicating with their clients on an ongoing basis. The general thinking in the financial industry is that financial work is back office number crunching.

You want to look for a CFO who will proactively communicate with you regularly so you know what’s going on in your business and you can go be the entrepreneur who focuses their time on company growth. If you are considering hiring a CFO who does not proactively communicate with his or her clients, think again. This CFO might be stuck in an old, outdated mindset that won’t serve your needs in the best possible way.

5. Can I call about any financial problem I have or just about matters you have experience with?

In today’s complex world, CFOs must keep up with a lot of changes. Solopreneur CFOs can only provide value from their own, limited experience. On the other hand, a CFO that has many other CFOs in their practice and their networks leverages the collective knowledge of hundreds or thousands of years experience. Having a massive amount of collective experience means these CFOs have seen just about everything there is to see and have been down the road many times. We like to say that the novice white water rafter cannot see the big rock just under the water six turns ahead. The CFO that collaborates with his/her partners in a larger practice can see the rock because he/she has been down that river dozens of time. And he/she can help steer you away from the rock and keep you from wrecking the boat or getting injured.

Look for a CFO who has an ongoing service program or membership program in place so that you can pay a low monthly fee and be able to call with all of your legal and financial questions without being charged hourly for the consultation. And be sure that when you call, you’ll get to schedule time to talk with your own personal CFO who you know and trust and not get passed off to one of any number of CFOs who happen to work in the office and may not know who you are or what’s important to you.

6. What happens when I am ready to retire or transition the business?

This is a critically important question to ask yourself when beginning a relationship and a question that is far too often overlooked. Many business owners have not considered their ultimate exit strategy, whether it be to sell the business to retire, transition the business to a family member or merge with another company. The CFO who has worked with you as a trusted advisor is in the best position to provide sound financial advice to prepare the company in advance to ensure the highest enterprise value upon exit.

When you ask these 6 questions before hiring an on-demand CFO you will know you are engaging a trusted advisor who will help you to make the very best decisions for your business, your employees and your family.

About Us

Part time, interim, project and virtual CFO’s are one of the cornerstones of our company. CxO To Go’s senior financial executives bring vast experience that is immediately brought to bear on the key opportunities/issues faced your company in today’s market thereby delivering high ROI. Since CxO To Go works on an interim/virtual/ part time/project basis, clients are more readily able to afford resource quality that is usually only associated with a permanent hire and/or priced beyond their ability to afford long term. Our experience is that our CFO’s quickly become trusted advisors to the client company CEO’s and/or Owners.

We have equally powerful resources in Sales, Marketing, Operations, and IT, etc. We are a one-stop shopping partner for all of your corporate needs. Ask us about our services offers in these and other areas. It is our goal to become your trusted advisor partner in all aspects of your business.

Who We Are:

At its core CxO To Go is a team of true “pros” each of whom have 25+ years providing enlightened thought leadership, creative solutions, a real ethos of trust, and ethical business practices. We are bound by a belief that the relationship with our customers is not only essential, but is our business mantra. We only do business where we have an existing trusted relationship. You don’t invite strangers into your home, so why would you invite them into your business? If you have the need and are ready, we’d like to form that kind of relationship with you.

CXO To Go LLC is a national company with thousands of combined years experience. We help small and mid-sized businesses achieve excellence in every aspect of their business. We have hundreds of executives around the country with outstanding experience creating on point solutions to all types of business challenges.

CxO To Go conducted a survey concerning the potential impact H1N1 could have on companies. Of those surveyed, 72% have not undertaken any financial modeling to see what may happen if disaster strikes. We certainly hope it does not get bad, or small businesses especially may be in for trouble. Over 75% of the respondents were senior executives, business owners or presidents of companies with less than 60 employees, and with annual sales less than $10 million. We also received some great comments both on the survey and from various LinkedIn groups. Companies of this size are the backbone of our country and therefore more highly affected when too many employees, customers, clients, and suppliers fall ill for any reason.

Large organizations can absorb the temporary loss of some number of their people, but it may devastate a small business. Small business owners who have 4-5 people out with the flu (regardless of the type of flu) 15% to 50% of your work force is out.

We were surprised that the majority of our survey participants, 67%, felt that H1N1 will have no or very little impact on their company. Only 11% felt that this virus would have a significant impact on their business. We wonder if people would answer differently if we had asked, “What would happen to your company if a 2-foot snowfall arrived for several days next Tuesday night.

Business owners need to consider what happens when an unplanned catastrophic event occurs. In our survey, 28% felt that they should prepare for a H1N1 outbreak, and almost 40% of the respondents felt that their company was prepared.

Each person carrying H1N1 will typically infect 10% of their co-workers, because of their close working environment. Small companies are more at risk trying to protect their human capital. For example, we have heard about a small software development company where every one of their team came down with a nasty flu, which shut down the company for over a week. The end result was that the company shortly went out of business.

Each season we have the flu, and the H1N1 is an extremely aggressive type of influenza. People generally feel that it will not affect them, if they do not know anyone who has contracted the virus. Yet, if they know a co-worker, family member, or friend who has missed weeks of work, they then believe that this new flu will have a major affect on their lives.

As with any abrupt change in your company’s daily operation, executives should know in advance what to do. Our survey shows that 17% have done some modeling to understand the impact H1N1 would have on their business. More shocking to us, only 11% of the companies have done any financial impact modeling to understand what the virus could do to their business finances and cash flow.

We received many comments in our survey. One comment said they had to cancel their business appointments, because they had to stay at home with a sick child. What if most of your sales people or fulfillment people were out for a time? If you are just guessing at the answer, what if you are way off? Wouldn’t you want to really know?

One respondent said that 25-50% of their clients were off work or recovering. If 25-50% of your clients could not pay their bills for an extra 30-60 days, what impact would that have on your company’s cash flow? By how much? You don’t know? A seat of the pants response will not give an Owner/CEO the insight needed for decision-making.

Preparedness is the sign of a strong management team. Some companies are taking steps to become Dr. Mom and teach their employees how to maintain a clean and safe environment. Anyone traveling the country or around the world will be more at risk. The smaller your organization, the more influence H1N1 or any type of flu will have on your organization.

In a year from now, we may say that the H1N1 scare is just like the Y2K scare at the turn of the century. One person commented that H1N1 is just FUD (fear, uncertainty and doubt) and that they will not be doing anything to prepare for what they believe is a non-event. To ensure that Y2K wasn’t a problem, companies spent years preparing for the worst and it didn’t happen. If they had not prepared for the worst, and did nothing, what would have happened? For an attack from such a virulent flu, you can prepare now and continue to refine your company’s plans each year to ensure your success. Will you be the 10% that are prepared? We hope so.

Helpful reference links for small businesses:

http://www.flu.gov/professional/business/smallbiz.pdf

http://chamberpost.typepad.com/files/smallbusinessh1n1guidever2.pdf

For a complete copy of the CxO To Go “H1N1 Impact Survey for Business”, click here.

Thank you Tracy Houston of Board Resource Services www.linkedin.com/in/tracyehouston for sharing this with me this morning. I see more dynamic equilibrium these days with the CEO and the CFO. When I perform in the part-time CFO role, my customers expect me to help them move towards the unity in duality described below.

By PHILIP TULIMIERI And MOSHE BANAI

The chief executive as visionary leader is a thing of the past. It’s time to make room at the top for co-equals: leadership by the CEO and the chief financial officer—with equal authority and accountability.

CFOs have long labored in the shadows of their bosses, responsible mainly for such duties as overseeing the corporate treasury and attempting to rein in the excesses of their chief executives in the pursuit of growth. But distinctions between the two positions are blurring. We see changes afoot in corporate structures and society at large that already are driving a kind of merger of the two jobs.

At the start of this decade, billions of dollars were lost in a series of corporate scandals marked by fiscal mismanagement, fraud and outright greed on the parts of CEOs, CFOs and other senior executives. The public and legal backlash gave rise to new thinking about the ways companies should be organized, managed and governed, placing greater emphasis on accountability, regulation and transparency. New regulations were passed, including the Sarbanes-Oxley Act, which thrust the CFO into the forefront of the boardroom and helped create a new balance of power between CEO and CFO.

Optimist and Realist

As a result, the two positions, while maintaining distinct duties, have come to be seen as necessary counterforces in a company’s power structure: one, the eternal optimist pushing ahead at full speed; the other, the realist, urging caution and remaining wary of risk. The two must function as a team, addressing needs for both growth and responsibility.

Other forces elevating the importance of CFOs include globalization and offshoring, which have created a complex, and sometimes ill-defined, web of responsibilities atop corporations. There is also the decline in the role of chief operating officers, a trend that started when computers arrived and businesses began to apply IT to manufacturing, back office and logistics.

From the outside, meanwhile, pressure from governments, media and a globally connected community of consumers, shareholders and activists, are all pushing corporate leadership to operate with greater transparency, adherence to moral and ethical principles and accountability to stakeholders.

The top job has simply become too large, too complex and too demanding for one person. Thus, businesses are encouraging more of a consensus model of management in general. Younger employees are quite comfortable sharing roles, working in teams and nonhierarchical environments. They understand the concepts of teamwork and consensus management.

Critics may argue that two strong-willed people won’t be able to share such power, and that inevitable differences on strategy, growth and other issues will make timely decision-making impossible. But this argument fails to acknowledge the fundamental changes taking place in corporate management, or the principles of mutual respect and corporate pluralism on which young managers are being raised. A CEO-CFO partnership will provide the engine for this new-millennium corporation, and serve as a starting point for the new corporate model of ethical behavior, sustainability and true stakeholder value.

Continuous Communication

Equal sharing of responsibility for strategy and growth will require continuous communication between the two executives. Decisions made in partnership gain from additional perspective and expertise. Joint leadership can also draw on more energy to see a plan to its successful conclusion.

There is always the possibility of irreconcilable disagreements. But at many organizations with co-chairs or "co-leaders," appeals are made to a higher or independent authority who can break a deadlock. In a public company, a dispute can be put to a vote by the board or a subcommittee, which also can act as an arbitrator.

The concept of the "buck stops here," that one person shoulders the responsibility, and reaps most of the rewards, is fast becoming an anachronism.

–Dr. Tulimieri is a professor of management at the Zicklin School of Business, Baruch College, City University of New York, and a principal at the Capital Group, Pompton Plains, N.J. Dr. Banai is a professor of management at Baruch’s Zicklin School of Business. They can reached at reports@wsj.com.

Unlock capital, transform your bottom line and safeguard your future in uncertain times.

Tough times sometimes call for creative solutions. Mick McLoughlin, Global Head of Restructuring at KPMG and partner in the U.K. firm, says: “As the economy slows,[having more cash] could give businesses a competitive edge, so they may not have to do all the usual things firms do when they fear recession −slash R&D spend, trim marketing budgets, lay off staff. In tough times, companies that generate cash are well placed to acquire at bargain prices.” In fact, there are simple steps that produce simple gains. Take a look at eight factors to consider as you focus on cash.
Lead like Warren Buffett. Good cash management can uncover hidden process inefficiencies across the business, but if you don’t get buy-in from every department, you will only find out about problems when they become too obvious −and expensive −to ignore. Warren Buffett’s businesses generate cash because he has made this drive part of their corporate culture. And remember, how well you manage cash is partly driven by the caliber of information at your disposal.
Think like a private equity firm. Typically, private equity firms spend the first 100 days of an acquisition estimating how much cash they can generate without hurting the business −a strategy designed to improve working capital to grow the business’s value on a three to five year plan by tightening up on receivables or extending payment terms.
Choose your technology wisely. Treasury information systems help businesses draw on and study a wider range of data to forecast more accurately, improve financial reporting and make better decisions. But usability is key. If the system is so complex that your staff has to be reminded, cajoled and threatened to use it, you just waste money.
Learn the art of cash forecasting. Many companies turn to cash forecasting, but it is not a precise science because no company’s future can be foretold. Cash forecasting is more like a subtle art. But you can reduce the margin of error by making sure the appropriate stakeholders are engaged and held accountable for reviewing the accuracy of their inputs and documenting their assumptions.
Encourage brutal honesty. Cash forecasting correctly is hard enough. If staff feel obliged to manipulate data to fit head office preconceptions, it becomes impossible. Most staff members under-forecast, believing this to be cautious and appropriate, but if you’re too conservative you may fail to meet demand.
Supply chains can’t take all the strain. If you want to squeeze more cash out of your supply chain, don’t dictate terms and conditions to suppliers – instead, work with them. Putting the pressure on your suppliers could ultimately backfire by jeopardizing quality and production standards.
Less paper, more technology. Make the shift to electronic payments −they speed delivery of money and, by paying promptly and electronically, you should be able to negotiate lower prices with suppliers. In 2000, one U.K. business found it was missing the chance to bill for U.S. $2.75 million of sales a day because it was posting proofs of delivery to clients. It soon switched to electronic versions.
Stick with it. Cash flow management isn’t a short- term fix for firms at risk; it can be the discipline that drives the growing value of a business.

− David Tolson and Chris Younger Managing Directors, CapitalValue in Denver
Source: Excerpts from CapitalEyes Newsletter and  KPMG Advisory’s Agenda magazine.

Q:

I own a small manufacturer, around  $5M in sales. We do all accounting functions in-house on our accounting system except payroll which I have a service for. Our accountants are used only to do our tax returns at year end. The nagging question is: is there something else they could be doing for me? Apparently they have plenty of work to keep themselves busy year-round. But what are they doing that I should be tapping into?

Obviously, I could just ask but I want to go in with some prior knowledge before I do that.
1) What is your accountant doing for you besides taxes?
2) How often are you meeting with them?
3) Do they have direct access to your accounting system?

Whatever insights you could offer would be greatly appreciated.
John

A:

John, this is a great question. I find that many small/mid businesses use very little financial help in ways the can cause their business to grow successfully. I also find that CPAs see the world through tax glasses, which limits their perspective. Every day companies get great value from broader financial expertise. The part-time, contract CFO model is affordable for any size company. I have several $1M – $5M revenue businesses I work with regularly.

Most companies do not rely on their CPA to be proactive in providing strategic, senior level executive experience in management accounting, business, leadership and financial matters. Here’s why: Most CPAs in CPA firms have never been a senior executive CFO or divisional controller at any company. That’s quite different than having a CPA license with tax experience and an accounting degree.

I have seen hundreds of times where companies from $500K to $10M have used their CPA as their only trusted financial advisor for years. The company’s books are mostly setup with tax basis accounting methods, which is useful mostly for the tax people and not very useful to provide the CEO with management level information and decision-making.

I have to spend weeks and months working with the CPA and accountant to clean up the books and move them away from tax basis accounting to methods useful for tracking and running the business. When was the last time your CPA asked you to sit in your office and walk through the monthly financial reports with you, looking for problem areas and problem solving together? How often do you see your actual CPA, especially between the months of January and April? How many times have you been turned down for loans or lines of credit, and you weren’t really sure why? If the lender sees tax basis financial reports, what they can see is limited to, well, tax information. It requires extra work to glean business information from that.

The word “accountant” is so very general because there are so many different functions in accounting and financial management. Many people call these functions their “accountant”: CPA, Controller, Tax Preparer, Accounting Director, Staff Accountant, Bookkeeper, Data Entry Clerk, etc.  Some even call their CFO their accountant.

Independent CPAs and CPA firms need to maintain a certain distance from the day-to-day operations of their clients (thank Enron, MCI, etc.). There is a small percentage of CPAs and CPA firms that engage at a peer level with the CEO on a regular weekly, bi-weekly or monthly basis to perform financial management activities. But a true CFO offers these valuable activities including:
•    Producing timely and accurate financial reports
•    Cash flow analysis and planning
•    Profit improvement
•    Strategic planning
•    Increasing Sales
•    Funding and compliance
•    Exit strategies
•    Working capital and treasury management
•    Overseeing the accounting staff, CPA relationship, business lawyer relationship and
•    Financial modeling and what-if scenarios to make good business decisions

Most small businesses are not exposed to these things, or don’t know how to address problems in these areas. How can you tell if you need help? Call me. 303.995.4523

I hope this helps you get an idea of how the role of an affordable, part-time, contract CFO helps a company like yours grow and succeed.
Best wishes for a successful 2009!