During my years as an auditor and now as a chief financial officer, I've had the opportunity to work with CFOs from various sized businesses and industries. Most business owners are not CPAs or accountants, so occasionally a less-than-ideal person has come to occupy the key accounting position in a company. This can have obvious repercussions leading to poor financial reporting, inability to strategically plan the direction of the company, or embezzlement.
Below is a list that can be considered when evaluating your current CFO or when recruiting a new CFO:
Your CFO has a personality similar to a rock or other inanimate object. Accountants are envisioned as the person you would not want to sit next to at a company function. While it may be true that the accounting profession attracts people who are introverted (prefer spending quality time with a tax return versus another person), the people who are best suited for the CFO role are able to interact effectively with others in the organization. The CFO is also the company's representative with outside investors, banks, sureties and vendors. The ability to establish a rapport with people is a critical skill.
Your CFO is a bully. While this may appear to contradict the previous item, I've encountered CFOs who interact with people in this manner. It is typically framed with the understanding that they are the accounting expert and everyone else is a mere mortal. Some of these bullies are exceptional accountants with every number neatly reconciled. They may even carry a copy of their general ledger in their wallet versus family photos. Unfortunately, the majority of these domineering types make the worst accountants. They operate in an outwardly aggressive or unapproachable manner to deflect attention away from their own inadequacies. In the worse cases, this type of behavior is indicative of someone who is a great risk to the company of embezzling. The personnel reporting to this person are afraid to question their decisions or work. This results in a situation where the CFO is free to operate without being questioned by his coworkers.
Your CFO has already learned everything. The CFO is a position that must to be committed to continuous learning. While most of the focus is in areas directly related accounting, learning more about the operational side of the company is as important. When starting in a new industry the real challenge to a CFO is learning the business, not the accounting for the business. Having someone who also keeps up with current events is a bonus since it provides additional breakroom topics besides the captivating article they recently read on the Alternative Minimum Tax.
Your CFO has a credit score of below 750. When hiring a CFO, request a current copy of their credit report. This information allows you to evaluate how the person manages their own finances. This can not only be an indicator of how well they will handle the company's finances, but can also serve as a red flag for potential embezzlement. Do you really want someone in charge of the money at your company who can't manage to pay their own bills on time? Or that carries more credit card debt than the median income of a family of four? A CFO who is overextended financially is more likely to feel the pressure to commit fraud.
Your CFO has a criminal record. Com-panies are foolish not to conduct a full criminal background check prior to hiring accounting personnel. Checking references is great, but we all know people will only list references who will have good comments to say about them. Very seldom do people list their former cell mates or parole officers. You may also want to investigate further anyone who completes the question on your job application, "Have you ever been convicted of a felony?" with the response, "Never convicted, always acquitted on appeal."
Your CFO generally stays at a job less than 24 months. In my prior life as an auditor a large number of my clients were casinos. There was a subset of casino CFOs that reminded me more of carnival workers than CPAs (moving town to town after each show). They typically worked at a casino a year or two and then moved onto another casino, many times in a different state for what they would frame as a better opportunity. A resume that shows a history of working at jobs only a couple of years at a time can be indicative of someone who does not have the skills to perform the job and tends to move on before the problems they create completely develop. I audited one CFO at three different casinos in two states. At each one, problems were consistently found.
Your CFO is a pushover. While a company does not want a bully as a CFO, conversely a pushover can be just as dangerous. A CFO must be willing to clearly state their opinion even if it is opposed to the owner's or others in management. They also must feel comfortable refusing to do things they feel are unethical or illegal even when their jobs are at risk. A CFO who is a pushover is adding very little value to the company since they are merely executing orders from above. If this is the case I would recommend outsourcing your accounting to Bangladesh.
Your CFO works a lot of overtime and never takes vacations. There are times when it is necessary for people to work overtime and maybe skip a planned vacation. But when it becomes normal year after year it points to other issues. Sometimes it is due to understaffing of the accounting department of the company. Other times it is because the CFO has no life outside of work or has problems delegating. But every once and awhile it is because the CFO does not want to be absent from work because they are afraid others may see what they are doing. And by doing I don't mean bank reconciliations, but maybe some wire transfers to a Cayman Islands account or making payments on that house in Belize that the company is buying them.
Your CFO does not take responsibility. The CFO is responsible for everything that happens or does not happen with the accounting department and the finances of the company. While the CFO may not be involved in every transaction flowing through the accounting department, they are responsible for setting up the procedures and internal controls to ensure they are properly executed. A person who takes responsibility when things go wrong and moves forward to solve the issue is the person you want on your team. Not the individual who insists it was Betty's fault in accounts payable and that they knew nothing about it.
Your CFO is taller than 5 feet, 5 inches. OK, forget this one, there is small chance this is personal bias.
Kevin Stroupe is a vice president and the chief financial officer of Clark & Sullivan Construction. Contact him at KStroupe@clarksullivan.com or call 355-8500.
