How are a CFO and a CPA different?
Something I hear from prospects, colleagues, people at networking events is “Why do I need a CFO, my CPA looks at my numbers at the end of the year”. While having your CPA look over your numbers at year end is good, there will come a time when this will no longer be the best method to manage your company’s growth.
When companies reach annual revenues of between $1 million and $20 million, they have a need, at minimum, for an outsourced or part-time CFO. The expertise, experience and the ability to help make informed long-term and day-to-day decisions
CFO’s for large public companies are often CPA’s. The reason for this is that CPA’s are licensed to sign audited financial statements of public companies. So if you are not a public company, it is not necessary for your CFO to hold a CPA. It is important for your CFO to have significant knowledge of accounting and taxes, but they do not need to have a CPA license.
The typical CPA spends a majority of their time on accounting issues, reviewing historical numbers, and performing monetary and financial statement audits. A good CFO will focus on broader business issues and strategizing for future events. Both a CPA and CFO serve important functions, but one looks back and the other looks to the future.
This from Focus CFO: “While a CPA will usually spend 90% of their time on accounting and 10% on broader matters, with a CFO it is the opposite – 10% on accounting and 90% on business matters.”
When I look at this statement this is what comes to mind: A CFO doesn’t need to hold a CPA, a CFO can delegate the accounting to a CPA.
Well if a CFO delegates to a CPA, what does that leave the CFO to do?
CFO’s are generally responsible for overseeing a company’s finance activities, IT activities, HR activities and is a strategic partner and business adviser. CFO’s will spend time on revenue strategies, profitability and cash flow. A CPA would focus on accounting issues, closing the books, and taxes.
If your company doesn’t have a CFO, but works with a CPA, ask yourself these questions:
- Does your CPA help your business increase revenue?
- Does your CPA increase cash flow?
- Does your CPA work with your sales and marketing teams to improve current and future success?
- How does your CPA help you raise capital to fund growth?
- What does your CPA do to improve the short and long term strategic planning for your company?
- Does your CPA incorporate business analytics to make better decisions about current and future business issues?
Being a CFO requires a wide range of skills that require much more than having a CPA. As your business grows, you’ll find that your business has new needs that can’t be fulfilled by a CPA reviewing your numbers at year end.
If you ask yourself “What does a CFO do?” The simple answer: A CFO Adds Value.