10 Things to Expect from Your VP of Finance

January 14, 2020
by: Lance Osborne
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The career path to owner-manager typically follows one of three arcs. They have a background in sales, they have a background in operations/engineering, or they were born into the business. The path almost no owner-manager follows to owning their own business is finance and accounting.

And since pretty much all businesses start out as small businesses, the perspective on finance and accounting of an owner-manager of a medium to large business is often shaped by their experience in running a much smaller business.

Back in those days, an owner-manager’s treasury and cash management function consisted of calling customers on overdue invoices, writing cheques to suppliers every month and calling their bank branch manager every so often to see how much money was in the bank.

You didn’t need anything in the way of management reporting because it was all in your head; you knew how much you spent, how much you sold and you had a pretty good idea of how much money you were making (or not), one month to the next.

As to the actual function of accounting, debits and credits, payroll remittances, taxes and so forth, your brother-in-law accountant did your books every month or you had a part-time bookkeeper come in to deal with it. As far as you were concerned, if your banker and the CRA were happy with your accounting function, so were you.

Now That You’ve Built a Better Mousetrap…

Let’s take a look at how a small company can evolve into a large company. The owner-manager builds the proverbial better mousetrap and orders from satisfied customers are flowing in. The owner-manager increases production capacity, hires new staff, refines and expands their product offerings. Year over year growth is consistently in the range of 20%–25%.

The owner-manager keeps most of the management team that they started out with and has hired some new management talent to help keep up with the growth. Among those hires, they brought on a CPA as full-time Controller to replace their part-time bookkeeper.

After about five years, the company has grown 150% and the Controller resigns so it’s time to look for a replacement. The owner-manager decides to upgrade the position. After all, the company is much larger and more complex than it was five years ago, and the management team is consequently much more sophisticated than it was then with most of the immediate reports to the owner-manager carrying the title of Vice President.

So, the owner-manager decides it’s time to hire a VP of Finance. They meet a number of what seem to be qualified candidates and hire one to head up the finance and accounting function.

Fast forward one or two years and the owner-manager is having second thoughts about their VP Finance. A lot of the issues they were hoping the VP Finance would address are still intact and acting as a brake on the company’s growth and profitability. Systems haven’t been streamlined, promised management dashboards are still just promises, collections and cash management are still a headache, etc.

Not All VPs of Finance Are Created Equal

This scenario is a lot more common than you might think. Many owner-managers assume that if someone has a CPA and has experience running the finance department of a decent-sized company, they’ll be qualified to be the VP Finance of their company. That’s not necessarily so. Owner-managers typically don’t have enough nuts and bolts understanding of what to demand of a VP Finance to really drill down and uncover just how qualified/capable/appropriate the people they’re interviewing for the VP Finance slot actually are. Just because someone seems to have done a credible job for someone else as a VP Finance, it doesn’t mean they’ll do a good job for you. And not just because your job will present a whole new suite of issues for that person to address. It’s entirely possible that this person succeeded or is succeeding as VP Finance because their boss hasn’t been demanding that much of them.

CFO Competencies Checklist

In order to inspect what you expect from your VP Finance, it would be useful to have a checklist of all things you can reasonably expect from this position. VP Finance responsibilities vary from one company to another, but here are 10 baseline competencies and deliverables that you can measure your VP Finance against.

  1. Strategy
    Provides financial input on the company’s strategy and obtains the financial resources necessary to execute on the strategy. Coordinates the long-range plans of the company, assesses the financial requirements implicit in these plans, and develops alternative ways in which financial requirements can be satisfied.
  2. Management Dashboards
    Translates the company’s operational metrics into measures of performance using tools like balanced scorecards, dashboards and financial statement ratio analysis. Provides executive team with dashboards and KPIs that provide timely and actionable information on performance.
  3. Information Technology
    Ensures that the company has appropriate IT systems in place, including ERP software that integrates various business functions into one complete system to streamline processes and information across the entire organization.
  4. Budgeting
    Oversees the budget process, collecting the inputs, and comparing the company’s actual performance with estimates.
  5. Cash Management
    Has a complete understanding and control of the cash flow position throughout the company.
  6. Financial Governance
    Is proactive in creating / improving internal processes and management controls that enhance shareholder value and ensure the financial viability of the company.
  7. Risk Management
    Understands of all the company’s liabilities including legal contracts and statutory & tax obligations, as well as hidden liabilities in the form of contingencies, leases and loan covenants. Provides insurance coverage as required and ensures the maintenance of appropriate financial records.
  8. Expenditure Oversight and Control
    Approves all agreements concerning financial obligations, such as contracts for raw materials, IT assets, and services, real estate, contracts, leases and other actions requiring a commitment of financial resources.
  9. Financing
    Administers banking arrangements and loan agreements and maintains adequate sources of capital for the company’s current borrowings from commercial banks and other lending institutions. Invests the company’s funds, sets up foreign exchange hedges as required and administers incentive plans.
  10. Management
    Oversees IT and HR as well as the accounting function. In many owner-managed businesses, the VP Finance supervises and support these functions, hiring and training as necessary, implementing appropriate polices and procedures and methods for automating document generation and control. Develops and mentors an accounting staff with strong accounting, reporting, financial analysis and compliance capabilities.

All this assumes that the duties and responsibilities of the Controller’s role are adequately taken care of. If you have a VP Finance in place and you’re still having issues with accounts receivable, or if it takes a month to close the books, you can be pretty sure that your VP Finance’s performance on the 10 competencies listed above will leave something to be desired.

If you think you may be in the market for top financial talent in the next few months, call me direct or email me, for a no obligation consultation.

(416) 567-7782 lance@osbornefinancialsearch.com

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