23. 02. 2023

What makes a good CFO?

What makes a good CFO?

An outstanding controller doesn’t necessarily make a good CFO–and if you promote them without coaching or training, they almost certainly won’t.

The first thing you should look for in a CFO is experience: not only finance experience, but also high-level operational experience. And there are several other key qualities that set a good CFO apart from a good controller, accountant, or bookkeeper. 

Read on for the full list of eight qualities we consider most important in a CFO.

1. Future Focus

Accountants, controllers, and bookkeepers are focused on record-keeping–in other words, on the past. A good CFO is focused on the future. One of the main skills they need is forecasting–using historical numbers, strategic modelling, competitor analysis, and industry trends to create a roadmap to the company’s financial goals. This is a forward-looking role that’s about actively, strategically driving progress, not just predicting or documenting it.

2. Strategic Partnership

One of the most essential qualities of a CFO is being able to act as a strategic partner, providing not only data and reporting but also advice on what actions will move the company towards its goals. This means they need a clear understanding of the whole company, from R&D to sales, vendor relationships and customer service, so they can offer insights and strategic improvements to each area of the business to maximise profitability and growth.

3. Real-World Operations Experience

Most financial professionals don’t need real-world operations experience. CFOs do. A candidate with no prior experience either as a COO or as a CFO will need mentoring in their first CFO role from someone with operations experience. Otherwise, their ability to give realistic strategic advice will be limited to cost-cutting and budgeting.

4. Significant High-Level Financial Experience

This is another area where mentoring is essential for less experienced candidates. If you’re going to promote a controller into a CFO role–or hire a CFO who was only recently promoted by their previous employer–they will need mentorship or coaching from a CFO with significant experience.

5. Advanced Modelling Skills

A CFO needs to be proficient with all the usual financial tools, like income statements, balance sheets, profit margins, cash flow, and EBITDA. However, they also need more advanced skills to support advanced strategic decision-making, like the following:

Short-term, mid-term, and long-term forecasts

Product line analysis

Contribution margin analysis

Breakeven analysis

Revenue bridge analysis

Pro forma cap table & liquidation

6. Quality Relationships

A good CFO also has a good network. When your CFO is well connected, it can significantly boost your company’s success in everything from lending and investing to vendor relationships and contracts. A poor network is often a sign of an inexperienced CFO.

7. Strong Leadership

A CFO needs to provide strong leadership for their financial team as well as guidance for the operations team. That doesn’t necessarily mean they need to be an extrovert–many finance professionals tend to be quiet, and an introvert can be a great leader. However, they do need to be able to make strategic suggestions backed by data and to carry out those strategies.

8. Experience In Your Field

While direct experience in your industry is less important than strong financial, operational and leadership skills, it definitely helps. A CFO with industry-specific experience will have more insight when comparing analytics and is likely to come with a network of industry contacts and an understanding of industry benchmarks and competitors.

The skills, experience, and character of your CFO can make or break the success of your business. When you’re hiring for a role this crucial, it’s always worth investing in expert advice and support from a specialist recruitment partner. Contact us today to discuss your needs and discover how we can help you.