The Role of Chief Financial Officer in Family Businesses

Family businesses are often the backbone of the economy. Many of the world’s most well-known and successful businesses are owned by families. They create jobs, generate revenue, and aid developing nations in various ways. 

According to a study from the Conference Board of Canada in 2019, family-owned firms are an important source of income and growth in Canada, accounting for half of the country’s private-sector GDP and employing about 7 million people.

Unfortunately, family-owned businesses face specific problems that can be difficult to overcome without professional assistance amidst their core competence and worldwide economic significance.

 Succession planning, big investment decisions, profit appropriation, and leadership selections are issues that can generate rifts between family members if not handled effectively.

Role of CFO in Family Business

Family businesses face the challenge of meeting financial needs as they grow and evolve into second and third generations; this is more difficult than ever when more family members have stakes. 

Hiring a Chief Financial Officer is one way to help meet these needs. The CFO will be needed for the following tasks:

Strategic Planning and Decision Making

Having a chief financial officer can make all the difference in family businesses.

A CFO is someone who has been specifically trained in business planning and can help you assess your company’s financial situation and determine whether you have what it takes to achieve your long-term goals.

Working with a CFO will help you sketch out strategic plans to get you where you want to go and help you make your family business a success.

The CFO considers the company’s financial resources and the various methods for providing shareholder liquidity (dividend policies, stock redemptions, and stock repurchases, among others) while ensuring that enough money is available to ensure the business’s long-term growth.

Succession Planning

When a family-owned business doesn’t have a succession plan in place, it can be in big trouble if something unexpected happens to the CEO or other corporate leaders. For example, if the CEO suddenly retires and there’s no one to take over, the company could collapse.

That’s why it’s important for a CFO, who has significant industry expertise as a leader and manager, to advise the firm owner on the need for succession planning.

 It could mean the difference between business success and bankruptcy as it will help ensure its future viability and protect the family’s wealth.

Stable and Effective Internal Financial Processes

For family-owned businesses to thrive in a competitive market environment, it’s crucial to have solid financial processes in place.

A CFO helps create a financial discipline within your company and keeps track of your finances, including cash flow, banking, and bill payments.

They also help keep your business records up-to-date and accurate, making it easier to pass an audit or inspection. Family businesses need to keep formal financial documents. 

The CFO invests the company’s excess liquid resources in the most profitable manner possible.

With a well-trained CFO, you can rest assured that your finances are in good hands.

Regulations Concerning Taxation and Compliance

When it comes to running a family business, there are many things to consider.

One of the most important is ensuring that you’re compliant with all tax and compliance regulations. This is where a qualified CFO can be a huge help.

The CFO works with auditors and chartered accountants to build a system for maintaining internal records. They’ll also ensure that you have all the information you need to meet your tax obligations.

External Relations Management

Family-owned businesses that do not have a lot of managerial-level resources might need a CFO to manage their relations with vendors, bankers, auditors, and other external stakeholders and funding sources.

In addition to this, CFOs with their extensive networks in the financial world can help small-scale family companies scout for new investors.

Bottom Line

In conclusion, as a family-owned company, it is essential to ensure that your finances are in good order, and having a CFO can be of great help. 

The CFO helps you streamline your financial processes and ensure that you take suitable risks. Having a CFO onboard also enables you to make more informed business decisions.

Today, many companies are offering CFO services on an outsourcing basis. This makes it easier to get a full-time CFO at reduced costs. Also, the job of a CFO is getting more complex with increasing regulations and compliance aspects. 

Hence, having an outsourced CFO can be beneficial as it gives you access to a wide range of knowledge and expertise.

Do you also run a non-profit organization? You can check our article “Not-for-Profits and the CFO.”