The right fee for a part-time CFO
Ask FSB’s experts field the question: What’s a reasonable price for the right accounting help?
Marilyn Lane, Hollywood Transportation, Dallas, Texas
What should a small company expect to pay for a part-time CFO? We have 21 employees and average $2 million in gross revenue. I’m looking for a person to write checks, review weekly finances, prepare monthly financial reports, do taxes annually and advise in financial matters. We currently have an accountant in this position. He visits weekly and does all the above. What is an acceptable fee range for this type of position?
By Annalyn Censky, Fortune Small Business contributor
Dear Marilyn: Whoa down there! Before you hire a part-time CFO, you’ll want to consider several other options. Adding another executive-level employee to your staff might not necessarily be the best choice.
The difference between a controller and a CFO
Writing checks and doing taxes are duties typical of controllers, accountants or bookkeepers, whose jobs are based on documenting and facilitating transactions. If that’s the work you’re looking for, hire a controller or, better, train your current bookkeeper, says Bob Thompson, president and CEO of The CFO Connection, a staffing firm based in Boston.
A CFO doesn’t usually write your checks or do your taxes.
Instead, a CFO would serve as an intermediary between your bookkeepers and the executive management. In essence, he or she would help the bookkeeper and CEO speak the same language, Thompson says. A part-time CFO would mentor, train and manage your bookkeepers and set up the financials to reflect the nature of your business. For example, if you have two product lines, the CFO could set up your bookkeeping up so that you can monitor the profitability of each product line. He or she would create the basic infrastructure to ensure that your accounting system is automatically producing good, detailed financials in the best format for your company.
But once that accounting system is in place, the CFO would not often deal with day-to-day transactions.
Thompson says the CFO Connection would charge about $1,750 a month for such a service. That rate includes one full day on-site (it could be broken up into multiple days) and unlimited e-mail and telephone support.
B2B CFO, a Phoenix-based CFO placement service with 92 partners in 42 states, would charge between $1,000 and $2,000 a month for similar part-time CFO services for a company of your size, says Jerry Mills, founder.
Controllership by the hour
If, in fact, you are looking for someone to do more transactional duties, like bookkeeping, writing checks and filing your taxes, consider a controllership-by-the-hour service provided by a local CPA firm. This service could be attractive to a small business that doesn’t have a crew of full-time accountants on deck.
For your business, the cost would probably range from $4,000 to $6,000 a month for about 30 hours of work a week, says Jerry Love, president and CEO of David, Kinard & Co., an accounting firm in Abilene, Texas. Businesses on the West Coast or northeastern seaboard should expect to pay a bit more.
The advantage of this option is you’re likely to get not just one person, but the resources of an entire CPA firm at your service. You’ll know they’re credible and experienced. Plus, you don’t have to pay them benefits or add them to your payroll tax, as you would if you added another employee.
Hiring a CFO to your staff
If you’re still set on adding a part-time CFO to your staff, Love says, based on the location and type of work, you should expect to pay them between $35 and $50 an hour.
In searching for a good CFO, you could post ads in your local newspaper and online – but you’re likely to end up with a lot of unqualified applicants. Instead, Love recommends networking with local CPA firms to find an accountant who retired, or recently quit to stay home with their family. They might be up for doing part-time work, and since they formerly worked for a CPA firm, you’ll know they’re better qualified for the job. You could also network through the Texas Society of Certified Public Accountants, of which Love is a member, or other business organizations.
Whoever you hire, it’s preferable they’re a CPA, Love says. But if you can’t find someone to take the job, the next best thing is an applicant with a bachelor’s degree in accounting – as long as they have some relevant experience under their belt.
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DiggVery good question. . . but maybe think a little broader.
What she has asked for is really three different functions – writing checks and doing transactional work can be done by a bookkeeper/accountant.
Taxes should be done by a CPA.
Financial statement review, advising and planning is really where the CFO shines and adds value. Breaking up those tasks and paying the person best-suited for each will ensure that you’re paying the correct amount (not overpaying for some tasks while underpaying for others), but will also allow you to hire the best possible person for the job. Matching task to qualified resource, and not assuming “an accountant is an accountant” will ensure you pay the right price, and get the most value.
Todd Rammler
Michigan CFO Associates
“The CFOs for Small Business”
In my experience, almost every company needs the startegic advice and perspective of a CFO. The large companies have one full-time, and they bring real value to their company.
In the case of business not being big enough to justify having a full-time CFO, then contracting or outsourcing is the best option. I am intimately familar with the benefits that the right CFO for the right amount of time at the right cost can bring.
It is very common for the controller, as decribed by others in these answers, and the executive team to have a rift in communication. The two speak different languages and they see things from completely different angles. A CFO bridges the gap – they think like an entrepreneur or executive team, but they grew up in the accounting world and appreciate and know how to use that perspective to the full advantage of the company.
Mr. Jerry Love (David, Kinard & Co.) presented the best advice of those offered and paid attention to the question asked. Since Ms. Lane’s accountant is providing many services, she should engage a CPA to review the “monthly financial reports” for compliance with GAAP and review the “annual taxes” for compliance with current U.S. Treasury regulations and legal decisions affecting Texas. Not everyone is qualified. As for “advise in financial matters,” a CPA is most qualified to advise and recommend other specialized professionals.
I think that a controller is the route, but possibly keep the idea of a contract CFO for review purposes once a quarter and at year end before everything goes to the CPA. The CPA can be the check behind for the bookkeeper and/or the controller. It’s great when you can put a team with specific rolls for each person to perform in place whether they are an employee or contract. Then you have an inside view and an outside industry view.
Also, the rates in our area go from $40 (bookkeeping) to $100 (consulting) per hour depending on the work.
Your Own CFO also provides Part-time and Virtual CFO services to small businesses. We work with business owners to help improve profitability, implement planning systems and connecting their ideas and new business ventures to an improved bottom line. Other services include business health check-ups, budgets, forecasts, commission plans, partner splits and Mentoring/Coaching.
Quandary: A “CFO” vs … a “Controller”.
So what really is the roll differences between the two positions? One assists the Board of Directors and their Officers to “Make Money” while the other “Keeps The Score.” (bean stalk producers vs. bean harvest counters)
With some 35 years experience starting in public accounting as a CPA, moving on to the position of Controller and then into organizational turnarounds as the CFO … in my opinion … the latter knows how to sell and create money making opportunities … while the former acts as an insurance guard keeping the SEC, IRS and local regulatory agencies off your back.
One is offensive the other defensive and both are essential to “play the game while producing and maintaining a winning score.”
You really don’t need a CFO. You can simply hire a bookkeeper or starter accountant for this type of work.
In my view, you don’t have to look for a Chef Financial Officer. CFO is a high executive position. CFO’s doesn’t write your checks or do your taxes. What you really may do is to train your current staff to do so.
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From what you have described, your business could use some help from a part-time controller and a part-time CFO. A business in your area that offers such services should be willing to help tailor a solution to meet your needs. And, more importantly, should be able to show you the value th solution will bring.
I own just such an organization in Minnesota. I recommend you find someone local to your area.
If you want to talk more about services and ideas, I can be reached through my company. The company’s contact information is on their website.
Rick Gallagher
GuideSource
http://www.WisdomForHire.com