We’re frequently asked by the leaders of growing businesses what the difference is between a Chief Financial Officer (CFO) and a Finance Director (FD). While both positions are responsible for financial management – the clue is in the name – the CFO plays a more strategic role in helping the company make and understand the impacts of long-term financial decisions.

It’s a position with a wide range of responsibilities. Obviously, every company is different and will have their own needs and methods, but a CFO could be responsible for acquisitions, growth plans, new site developments, funding, internationalization, and pricing strategies. An FD on the other hand would typically focus more on the day-to-day financial operations of a company, such as managing accounts payable and receivable, payroll, and bookkeeping.

While not all companies need a CFO, those that do should consider several key factors when making their first appointment.

1. Financial leadership and management experience. A successful candidate should have a proven track record of managing budgets, forecasting, financial reporting, and risk management. Experience in mergers and acquisitions (M&A) and dealing with external funding parties (such as private equity funds like us), can be particularly valuable as it requires specific expertise.
2. Independent, strategic thinking. A CFO should be able to analyse financial data and provide insights that help shape the company's future direction. They should have a forward-looking perspective and be able to identify opportunities and risks for the business. And they should know when to say ‘yes’ and when to say ‘no’ to other senior leaders.
3. Communication skills. More critical than many think. A CFO needs to inform and persuade a range of stakeholders, including shareholders, board members, senior executives and, sometimes, clients. They must be able to translate complex financial data into easy-to-understand language and build relationships with stakeholders.
4. Leadership. The ability to manage a team is crucial. A CFO should be able to provide guidance, motivation, and support to their team and, crucially, work collaboratively with other departments to achieve the company's overall objectives.
5. Cultural fit. As a senior member of the management team, the CFO will play a key role in shaping the company's culture and values. They need to be aligned with the company's mission, vision, and values, and able and willing to contribute to a positive and inclusive workplace culture.

We know that hiring a new CFO can be daunting. We also know that a strong and effective management team is key to unlocking the full potential of a business. That’s why we work so closely with the leadership teams of the companies we back, to help them identify and recruit top talent helping them achieve long-term success and sustainable growth.

If you would like discuss any of the issues raised here, please contact Matthew Owen.