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Welcome to Advisory Board, a weekly department in which a panel of experts—made up of entrepreneurs and professionals—answer questions you have about how to run your business better.

This week, a reader asks:

“My business is growing at a healthy rate, with several million dollars in annual revenue. So far, I’ve used an external bookkeeper. Is it time to hire a controller or CFO to manage the company’s money?”

Here’s what the experts have to say.

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“It’s a significant leap to move from external bookkeeper to controller, and even bigger to bring on a CFO, which is much more of a strategic partner role. You’re really looking at adding a new team member to assist (guide, lead, collaborate) in the firm’s financial management going forward. Here are four considerations on whether to add and at what level:

  1. Financial management task complexity: if your business model is relatively simple and is expected to stay that way (e.g. a limited number of cost centres, supply chain & purchase issues, product/service offers, channel matters, governance & compliance, and capex decision requirements) there’s less need to make an early move.
  2. Strategy: If the coming growth path means possible significant shifts (product/service adds; channels change; workforce mix; alliance/acquisition) adding a solid caliber new player could be very important.
  3. Senior team development: Are you building a serious top team to drive the business from here? Go for a capable CFO or someone who can grow into the role to suit and complement your own capacities.
  4. Self-assessment: How many business metrics and issues do you personally want to continue to keep your eye on? Are some fresh eyes needed? Are you truly ready to delegate key elements of financial/resource management to a trusted lieutenant?

“My suggestion: Scope out your needs and expectations carefully with an eye to the next stage of the company’s maturation. Hire for financial and management/business generalist skills. Hire someone smarter than you are. Plan for smooth integration into the firm. I’d opt for a solid CFO-level choice.”
—Einar Westerlund‎, director, project development, Queen’s School of Business, Kingston, Ont.

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“You only need internal fiscal management if you can justify the time and expense. Theoretically, an hourly external consultant should be doing just as good a job as someone you bring inside, provided you give him or her a good window into the business and what your goals are going forward so he or she can work with you to ensure the finances are supporting the business appropriately.”
Kelsey Ramsden, business guide and founder, SparkPlay Inc., London, Ont.

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“Ask yourself: ‘What’s not working the way it should with my existing financial arrangements?’ You might be happy with the status quo at the current volume of sales. If so, ask: ‘Based on the continued growth of the business, what are the limitations in my existing financial arrangements that will prevent the finance functions (and therefore the business) from operating at the optimal level going forward?’ Depending on your personal skill set, you might not be able to answer one or both of these questions. Unfortunately, we don’t know what we don’t know. If you can’t answer both questions, I would recommend you sit down with a financially oriented business advisor and explore this. If you can answer them, then you’re a step closer to recognizing the action you will need to take.”
—Michael Koff, owner, Michael Koff & Associates, CPAs, Markham, ON

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“A rule of thumb for a lean and smart business is to hire once you need it, and not before. At this point you should consider a full-time finance person who is in the office daily. I have found that staff and customers both appreciate face time, and it can expedite issues and allow you to collaborate more often.

“This role doesn’t have to be a CFO unless you have complicated financial contracts or legal negotiations on the regular. Consider keeping a smart bank representative close to your business, hiring an in-house bookkeeper, and retaining an external accountant and a financial consultant to manage the profits.”
—Christine Faulhaber, president and CEO, Faulhaber Communications, Toronto

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“If strategically managing your company’s financial health is important, you should consider hiring internal resources to spearhead your financial strategy. An internal controller or CFO can help with financial strategy and growth capital requirements, as well as managing operational financial health such as receivables and payables.”
Phoebe Fung, proprietor, Vin Room and VR Wine, Calgary

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“When BOWEN jumped to $6 million in revenue, managing cash flow for growth became critical. Our CA firm and our bank suggested it was time to bring more skilled power to the table. You need to consider your long-term plan. If you continue this kind of growth, you should get the right folks at your side to help you manage and sustain your capacity.”
Shannon Bowen-Smed, president & CEO, BOWEN, Calgary

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Do you have a question you’d like answered? Email us and we’ll put it to the experts. Have any advice to add to this list? Share your thoughts using the comments section below.

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