Important tips and strategies to use when hiring your precast manufacturing firm’s first chief financial officer.
By Bridget McCrea
There comes a time for every precast manufacturing firm when leaders sit down and ask if they need a chief financial officer.
Until that day, company finances are typically managed internally by one or more owners or managers and then handed off to an outside accountant at tax time. Whatever previous financial management approach was used, it’s now time to hire a full-blown CFO to take over the duties.
This is a big decision for any small-to-midsize organization. And if the firm’s upper management and ownership ranks were intentionally kept thin, the move to hire a CFO could inflict a mix of cultural and organizational challenges.
“All manufacturing firms have a lifecycle that starts off with just the owner and his or her family members, progresses to a small pool of trusted employees, and then expands from there as the company grows,” said Jean Cook, a business coach with the Corporate Performance Group in Tulsa, Okla. In the early stages, founders are typically involved in all aspects of the business and know every financial detail related to that entity. When that responsibility becomes overwhelming, when the numbers grow to unmanageable levels or when things start to slip through the cracks, it’s time to consider hiring a CFO.
Another good indication is when just knowing the numbers isn’t good enough to propel the company to the next level. Remember that good financial management goes beyond just examining profit and loss statements, Cook cautions. In today’s data-rich business world, being able to interpret those numbers and use them to make actionable, forward-looking decisions is a vital skill.
“When you get to the point where your company can no longer effectively recognize and capitalize on opportunities, it’s time to go beyond the outsourced accountant and bring in someone who can bridge that gap,” Cook said.
What’s a CFO?
Titles can sometimes cause confusion as to who’s doing what within a firm. According to the website Investopia, a CFO typically handles a few core duties, including:
- Controllership duties: These responsibilities make up the backward-looking part of a CFO’s job. Controllership duties hold the CFO responsible for presenting and reporting the accurate and timely historical financial information of the company he or she works for. Every stakeholder in the company – including shareholders, analysts, creditors, employees and other members of management – relies on the accuracy and timeliness of this information. It is imperative that the information reported by the CFO is accurate because many decisions are based on it.
- Treasury duties: The CFO must also decide how to invest the company’s money, taking into consideration risk and liquidity. In addition, the CFO oversees the capital structure of the company, determining the best mix of debt, equity and internal financing. Addressing the issues surrounding capital structure is one of the most important duties of a CFO.
- Economic strategy and forecasting: A CFO must be able to identify and report what areas of a company are most efficient and how the organization can capitalize on this information. For example, the CFO of an auto manufacturer must be able to pinpoint which models are making the most money and how this information can best be used to improve the company. This aspect of a CFO’s duties also includes economic forecasting and modeling – or, in other words, trying to predict the best way to ensure the company’s success in the future.
At Western Precast Concrete Inc. in El Paso, Texas, Leo Feuerstein handles the duties outlined above and more. As operations manager and secretary-treasurer, Feuerstein spends about 90% of his time at work managing the budget. Once a precaster hits a certain threshold in sales, he said the related tax obligations really should be addressed and managed by someone other than the company’s owner(s).
“This isn’t something you can manage as a hobby,” he said. “You really have to be on it on a full-time basis.”
In addition to taxes, Feuerstein is also charged with making sure all of the firm’s accounts receivable are up to date. This is a particularly important task in today’s business world where, “if you don’t collect your money in a timely manner, then you can’t pay your bills in a timely manner,” Feuerstein said.
“These and other money-related responsibilities fall under the auspices of a CFO, and will come to his or her table when there’s a problem.”
A good CFO will also help a precast company better manage its own savings and resources – a particularly important point for a growing enterprise. The company that has managed to accumulate $1 million in financial assets, for example, should be maintaining multiple bank accounts, namely because the Federal Deposit Insurance Corp. only insures accounts up to $250,000. These and other financial considerations can easily slip through the cracks when CFOs wear many different hats and juggle various responsibilities outside of just finance.
Specific to precast manufacturing, a good CFO can provide valuable, money-saving guidance on how to invest in assets like equipment, vehicles, land and even people. The precaster operating a 20-year-old batch plant that has to be shut down four times a year for sizable repairs should consider a new batch plant in order to gain efficiencies, improve productivity and take advantage of the IRS’s accelerated depreciation allowance. This allows companies to write off up to 50% of their total investment during the equipment’s first year in operation.
“This is just one example of how a CFO can provide value beyond just controlling your payables/receivables and P&L statement,” Feuerstein said. “It’s definitely something for growing precasters to consider.”
Finding the best candidates for the job
To find a good CFO, Cook suggests networking with other companies, participating in local chamber of commerce meetings and events or hiring a recruiter to sift through potential CFOs. Online social networking sites like LinkedIn, which is geared to professionals, is another potential source of candidates.
David Lewis, president and CEO of OperationsInc, an HR outsourcing and consulting firm in Norwalk, Conn., said precasters would do well finding a CFO who is already familiar with their industry.
“One of the biggest learning curves that companies complain about is the fact that they hired plain-vanilla finance experts who don’t actually understand their businesses,” Lewis said.
In some cases, the person who already understands your company and its customers may be easier to train than the one who has only financial knowledge.
Lewis also cautions precasters against hiring “yes men” who don’t argue with upper-level directives or suggestions.
“That defeats the purpose of having someone in the CFO position who has your back and is there to take objective looks at your business from time to time,” Lewis said. “Sometimes, the CFO has to deliver news that ownership doesn’t want to hear. Hire someone who just sits there and nods his or her head and takes direction and the objectivity will be lost.”
Rounding out your team
In finding a good CFO for your company, the best approach is to look for someone who is more than just an accountant.
“In a CFO, this means that the individual must be an all-around businessperson,” Cook said. “He or she must understand what the company does and be able to equate those activities into the financial analysis and decision-making support that the executive team needs to run the company.”
How do you find out if a person has these abilities? Cook said precasters should start by asking good questions during the recruiting and interviewing process. For example, ask about key business decisions that the person was involved with in the past. You can also give an example of a business issue or opportunity relating to your company and get their take on it. Then ask human resources, information technology, operations and sales questions to learn about their cross-functional expertise.
It’s also important that the new CFO fits well with the rest of the executive team. To get the best fit possible, Cook said precasters should include other executive team members in the interview process. But remember, Cook said, that you’re not looking for cookie cutter team members.
“The executive ranks of your company should comprise individuals who have different views and opinions, yet who can work collaboratively in the company’s best interest,” she said.
Finally, be sure to share information about your company’s culture and have numerous in-depth discussions with the candidates.
“Seek out the candidate’s thoughts on your company’s values and how these values do or don’t fit him or her,” Cook said. “This applies to recruiting for all positions at your company. If a candidate doesn’t fit the company values, they are simply not a fit, no matter how good their other credentials are.”
It’s not a one-size-fits-all exercise
Jo Clarkson, U.K. operations director for business and coaching advisory firm The Alternative Board, said it’s important to remember that taking a one-size-fits-all mindset to the task will probably not yield satisfactory results.
“CFOs come in all different shapes and sizes, and the trick is being able to clearly identify what you need and the individual who will best meet those requirements,” Clarkson said. “By developing a clear picture of this person before you start searching, your chances of finding the right candidate will be much better.”
Finally, Clarkson said precasters should also consider the cost involved. A better compensation package will generally yield a better candidate.
Bridget McCrea is a freelance writer who covers manufacturing, industry and technology. She is a winner of the Florida Magazine Association’s Gold Award for best trade-technical feature statewide.
5 Qualifications to Look for in Your New CFO
Inc. com’s “How to Hire a Chief Financial Officer,” highlights the qualifications that companies should be seeking in a CFO. They are:
- Leadership skills. At the CFO level, these skills are paramount.
- Experience in a specific industry. You may want to broaden these criteria to include hiring someone in a similar industry.
- Accounting skills. More and more CFOs are certified public accountants. One reason this qualification may be helpful to your business is due to the changing regulatory environment, both in the U.S. and globally.
- Communication and presentation skills. A CFO must have the skills to deal with a board of directors or outside investors to present complex information in a way that can be understood.
- Involvement in industry organizations. This is an important way for a CFO to benchmark your business against best practices in the industry.
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