Business is about relationships. You’ve probably heard that before.
Relationships work only when there is mutual benefit either constructive or destructive (like codependency). In other words, I’ve got what you need or want, and you’ve got what I need or want. Breakups occur when that give-and-take becomes unbalanced–either real or perceived.
Regard the image above. Note the ratio of windshield to mirror. Why is it that most CPA’s, (nearly all those I have run into) spend all of their efforts and my money in the rear-view mirror?
Answer: Because that is what they are trained to do.
Certified Public Accountants (CPA). According to the Oxford Dictionary accounting is “the action or process of keeping financial accounts.” And that is what the rear view mirror is for–to show you what is behind you–where you have been. (Except on those rare occasions when you are backing up and use it to see where you are going.)
Please understand, I am in no way meaning to disparage the importance of having a good CPA and the work that they do. The process of accounting has become increasing over-complicated due to the unnecessarily complicated tax code.
But to you business owners, look at the picture above again and consider, where should the greater portion of your attention be spent in driving your business–looking in the mirror or through the windshield?
Obviously, it is much more important to be sure that you are spending due time looking forward at where you are heading. This is the role of your Chief Financial Officer (CFO).
If you are sufficiently self-aware, then you will know whether you have what it takes to be the CFO of your organization. (Warning: 99% of small business owners are not. The vast majority of business coaches and training programs will have you spend a small fortune a great deal of energy trying to become, among other things, a CFO. I know, I’ve been there.)
What I find many long for is to have the basic accounting commoditized. It isn’t hard: Set up your books to record the expenses in accounts that directly translate to the 10-K, 940, 941, or the 1040 schedules. Set up payroll and it is pretty much just turning the crank each month. Pretty simple to generate and review the numbers for tax filings after that.
But that is just a small portion of the financial picture. Again, regard the image above. If the backward looking instruments constitute only 10% of the financial picture, what constitutes the rest of the forward looking picture?
The answer is Performance and Projections.
In short, the primary function of a CFO is to navigate and, in my experience, most CPA’s are not trained to navigate. To navigate means to “plan and direct the route or course…especially by using instruments or maps.” (Oxford).
What are the instruments and maps for navigating your business? We’ll go into that more next time. For now, it’s a good thing to think about over this weekend. In the mean time, if you want a good interim CFO, give Lisa Humphrey a call.