CFO Insights for Structuring an Effective Finance Function
By Marc L. Rinaldi, Partner; Kristine Pistininzi, Senior Manager and Roman Z. Matatov, Senior Manager
Given that the finance function is broad, vital and affects people, processes, technology and data across the entire enterprise, forging an effective finance team is of paramount importance for businesses in every industry and sector.
For business owners and managers structuring a new team or restructuring an existing team, there are three central goals. First, understanding the needs and requirements of the finance function specific to the organization is a must. Second, accurately identifying roles and responsibilities for team members is critical. Third, attracting top talent with appropriate experience and expertise and keeping qualified staff in these roles is essential, often requiring the development of an upskilling and retention strategy.
Achieving these goals occurs more seamlessly and successfully when benefiting from our experience advising business owners and managers over many years.
Step One: Perform a Needs Assessment
A sound first step in the process of structuring a finance team is to conduct a needs assessment. Securing an in-depth perspective of the resources available and those that will be necessary provides worthwhile definition that will guide planning. This assessment may include obtaining a clear understanding of the following:
- Strategic direction – review the business plan and assess the business’ strengths, weaknesses, opportunities and threats (SWOT analysis).
- Projected revenues and expenses as well as working capital needs – based on estimates of future headcount, transactional volume and complexity.
- Transactional and operational funding needs – and the commensurate skill levels of the financial operations (FinOps) personnel required to meet these needs.
- Information requirements – the data required by employees, executives, Board members and committees, government officials, investors, creditors and customers.
Step Two: Identify Finance Roles and Function
The results of the needs assessment will inform the development of specific recommendations on the roles and responsibilities of finance team leadership.
Typically, key roles within a finance function include:
- Chief Financial Officer (CFO) who, together with Chief Executive Officer (CEO) and Board, drives realization of the strategic vision, implements organizational structures and oversees the processes and systems associated with financial reporting, information gathering and fundraising.
- Principal or Chief Accounting Officer (CAO), or a seasoned corporate controller, responsible for all accounting operations, including overseeing technical accounting resources for drafting accounting policies and procedures, performing accounting research and leading the accounting team in executing routine transactions, including cash movements, and other finance support functions.
- Lead Financial Planning and Analysis (FP&A) Resource, responsible for annual budgeting, periodic re-forecasting, monitoring key performance indicators (KPIs), organization-wide analytical work, collaborating with department heads and overseeing the financial analyst team.
Other key responsibilities of the finance function include:
- Providing actionable and up-to-date information and data on the organization to facilitate decision-making and drive value.
- Promoting a cost-effective control environment.
- Deploying a customer-first service approach with trusted business partners and non-finance colleagues.
When identifying roles and responsibilities, it’s wise to consider the level of investment in the team, the pace of team rollout and “mix,” including the mix of in-house and outsourced or fractional team members. This process may also be useful in revealing talent gaps, designing a comprehensive finance function roadmap and aligning talent, cultural priorities, financial and reporting procedures.
Step Three: Staff Recruitment and Retention
Once team building is underway, the focus shifts to attracting finance and accounting team members with industry experience and functional expertise. Experience can be especially important for organizations in regulated industries, such as financial services, healthcare, energy, insurance, telecommunications or pharmaceuticals. Knowledgeable staff will understand industry jargon, applicable regulatory frameworks, sector-specific documents and data. Investment fund asset managers, for example, are effective because they grasp fund structures, investor and portfolio activities and distribution or redemption waterfall models.
Assuming greater significance as a business matures and grows is deep functional expertise, such as corporate controllership, treasury management or financial planning and analysis (FP&A). As a single individual rarely possesses all of these skills, managers should budget for the cost of numerous subject matter experts to fulfill these wide-ranging financial function requirements. For instance, a corporate controller may not have the requisite FP&A forecasting or financial modeling experience, while an FP&A leader may not be familiar with how to select or apply appropriate accounting guidance to yield audit-ready historical financials – guidance, such as ASC 946 Financial Services for Investment Companies, ASC 820 for Fair Value Measurement or ASC 606 for Revenue from Contracts with Customers.
The Result: Significant Value Creation Potential
When the finance team is credentialed, capable and cohesive, it serves as a foundation for greater organizational effectiveness and cost-efficiency. Not only does this promote ongoing growth and future success, but it also drives overall reputational strength, enhanced market credibility and added value for the business.
Objective Third-Party Advisory Support
Finance team talent is critical to productivity, business continuity and cost effectiveness. When it is not feasible or desirable to build a team using available in-house talent, businesses often turn to third-party advisory firms. These firms provide immediate access to a trained bench of experienced professionals with subject matter expertise in specific finance function domains, available on an ongoing or as-needed basis.
For more information please contact the partner in charge of your account or:
Marc L. Rinaldi, CPA
Financial Services Partner
646.449.6309 | [email protected]
Kristine Pistininzi, CPA
Financial Services Senior Manager
646.449.6334 | [email protected]
Roman Z. Matatov, CPA, FPAC, CGMA, CITP, CVA, CFE, CFF
914.341.7643 | [email protected]