February 5, 2009 CFO:  Bookkeeper or Financial Leader?
Introductions <ul><li>Moderator:  </li></ul><ul><ul><li>Joel F. Smith, President & CEO, J. F. Smith & Associates </li></ul...
“ Maybe it’s time for you to hire a Controller or a CFO.” <ul><li>Tom Hess </li></ul>
The Skill Sets <ul><li>Entrepreneurs who experience significant growth in their business may eventually hear this advice. ...
<ul><li>A bookkeeper performs basic financial record keeping and can create simple financial reports.  A bookkeeper does t...
<ul><li>Moving up to a controller adds more power to your financial management.  In fact, a good controller can often pay ...
<ul><li>Some businesses eventually need a Chief Financial Officer.  A CFO does the following tasks: </li></ul><ul><li>Perf...
How can my small business  afford these skills? <ul><li>To explain some proven affordable strategies to have the right ski...
The Challenge:  Balancing the Needs in Finance <ul><li>The Problem:  Start-ups, early-stage and emerging growth companies ...
Alternatives <ul><li>Hire full-time employees for each role – unaffordable and unnecessary </li></ul><ul><li>Hire part-tim...
Benefits of Outsourcing <ul><li>Economical – less than hiring, especially considering benefits, payroll taxes, office spac...
Types of outsourcing providers: <ul><li>Staff augmentation firms – provide resources, but generally no management of the p...
Factors to consider in selecting an outsourcing provider: <ul><li>Stage in the lifecycle of your business </li></ul><ul><l...
How can my banker help? <ul><li>To explain the role of the banker and what the banker expects to see in a company. </li></...
In the beginning: <ul><li>Start building your banking relationships early and at a senior level. </li></ul><ul><li>In earl...
Once  you plan to establish a  credit relationship: <ul><li>The requirements of your bank will change dramatically.   </li...
The Start-up Perspective <ul><li>Steve Adelman </li></ul>
Start-ups <ul><li>Founders are often Scientists / Physicions from Academia or Pharmaceutical / Biotech </li></ul><ul><li>S...
Non-Scientific Needs <ul><li>Financial Statements </li></ul><ul><li>Payroll / Accounting  </li></ul><ul><li>Parameters for...
Contact Information <ul><ul><li>Joel F. Smith, President & CEO, J. F. Smith & Associates, Jsmith@JFSmithAssociates.com, 26...
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BioStrategy - Feb 09 - Role of CFO at a new venture

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BioStrategy - Feb 09 - Role of CFO at a new venture

  1. 1. February 5, 2009 CFO: Bookkeeper or Financial Leader?
  2. 2. Introductions <ul><li>Moderator: </li></ul><ul><ul><li>Joel F. Smith, President & CEO, J. F. Smith & Associates </li></ul></ul><ul><li>Panelists: </li></ul><ul><ul><li>Steven J. Adelman, Ph.D. – CEO, Vascular Strategies, LLC </li></ul></ul><ul><ul><li>James J. Caruso, CPA, Partner, Financial Management Outsourcing & M&A, Fesnak & Associates </li></ul></ul><ul><ul><li>Thomas P. Hess CPA, Senior Vice President of Finance, CFO , Yaupon Therapeutics </li></ul></ul><ul><ul><li>Michael L. Rainone, Senior Vice President , Citizens Bank </li></ul></ul>
  3. 3. “ Maybe it’s time for you to hire a Controller or a CFO.” <ul><li>Tom Hess </li></ul>
  4. 4. The Skill Sets <ul><li>Entrepreneurs who experience significant growth in their business may eventually hear this advice. </li></ul><ul><li>Financial Management in a growing business can become strained, and it is time to upgrade your team. </li></ul><ul><li>What exactly does a controller or CFO do in a business? What value do these skills bring. And how much will one cost me? Can I afford these skills? </li></ul><ul><li>The titles bookkeeper, controller and CFO can get tossed around rather loosely in small and growing ventures. But, these titles have specific meaning. </li></ul>
  5. 5. <ul><li>A bookkeeper performs basic financial record keeping and can create simple financial reports. A bookkeeper does the following basic tasks: </li></ul><ul><ul><ul><li>Keeps accurate records of financial transactions and can create basic financial statements (Income Statement and Balance Sheet) using accounting software. </li></ul></ul></ul><ul><ul><ul><li>Performs basic A/P management– makes sure bills get paid and records these entries into the accounting system. </li></ul></ul></ul><ul><ul><ul><li>Performs basic A/R management– if the business has to send invoices to customers to get paid, sends out invoices usually once a month. </li></ul></ul></ul>The Bookkeeper
  6. 6. <ul><li>Moving up to a controller adds more power to your financial management. In fact, a good controller can often pay for themselves in a growing company that needs more advanced systems by helping to keep costs under control and by helping to better manage cash flow. A controller does the following tasks: </li></ul><ul><li>A controller will either perform all of the functions of a bookkeeper, or supervise the staff that does. </li></ul><ul><li>They can create customized daily, weekly, and monthly financial reports to meet the specific needs of your business. </li></ul><ul><li>They have the knowledge to choose and maintain financial software. </li></ul><ul><li>They can take over the basic cash flow management of the business. Major cash flow decisions will still be up to the entrepreneur, however. </li></ul>The Controller
  7. 7. <ul><li>Some businesses eventually need a Chief Financial Officer. A CFO does the following tasks: </li></ul><ul><li>Performs all functions of a Controller </li></ul><ul><li>Is able to structure and negotiate complex financing, including debt and equity. </li></ul><ul><li>Can create complex financial projections to aid in strategic decision making, and is an active player in the strategic management of the business. </li></ul><ul><li>Manages banker and other financial relationships for the business. </li></ul>The CFO
  8. 8. How can my small business afford these skills? <ul><li>To explain some proven affordable strategies to have the right skills when you need them. </li></ul><ul><li>Jim Caruso </li></ul>
  9. 9. The Challenge: Balancing the Needs in Finance <ul><li>The Problem: Start-ups, early-stage and emerging growth companies need the same accounting and finance functions as larger companies, but they are not individually full-time roles: </li></ul><ul><li>Bookkeeping / clerical </li></ul><ul><li>Controllership </li></ul><ul><li>CFO </li></ul><ul><li>Other specialty areas – Tax, technical accounting/reporting issues, etc. </li></ul>
  10. 10. Alternatives <ul><li>Hire full-time employees for each role – unaffordable and unnecessary </li></ul><ul><li>Hire part-timers for each role – impractical and difficult to manage </li></ul><ul><li>Hire one full-timer – jack-of-all-trades, master of none; will be over-qualified for some roles, under-qualified for others; skill-level may be quickly outgrown; quality talent unlikely to be attracted to situation and will still be unaffordable </li></ul><ul><li>Outsource to one or more service providers </li></ul>
  11. 11. Benefits of Outsourcing <ul><li>Economical – less than hiring, especially considering benefits, payroll taxes, office space, IT, etc. </li></ul><ul><li>Money spent across appropriate mix of skills and talent (subject matter experts) </li></ul><ul><li>Depending on provider(s), won’t outgrow skill levels </li></ul><ul><li>Depending on provider(s), may have access to supplemental resources as needed (integrated solution) </li></ul><ul><li>The right provider(s) will bring credibility with potential investors and lenders </li></ul>
  12. 12. Types of outsourcing providers: <ul><li>Staff augmentation firms – provide resources, but generally no management of the project or function </li></ul><ul><li>Interim executive staffing firms – generally want to place executives full-time for some period </li></ul><ul><li>Independent consultants – can be a good option for the CFO level </li></ul><ul><li>Bookkeeping firms – basic bookkeeping only; no financial statements or advice </li></ul><ul><li>Accounting or consulting firms – can be a good integrated solution </li></ul>
  13. 13. Factors to consider in selecting an outsourcing provider: <ul><li>Stage in the lifecycle of your business </li></ul><ul><li>Complexity of your business </li></ul><ul><li>Capabilities of the service provider – now and in the future </li></ul><ul><li>Have an understanding of the comparative cost of alternatives </li></ul>
  14. 14. How can my banker help? <ul><li>To explain the role of the banker and what the banker expects to see in a company. </li></ul><ul><li>Mike Rainone </li></ul>
  15. 15. In the beginning: <ul><li>Start building your banking relationships early and at a senior level. </li></ul><ul><li>In early stage companies a part-time bookkeeper can be sufficient. </li></ul><ul><li>Take advantage of banking services that can reduce your finance staffing needs and save you money. </li></ul><ul><ul><li>There are banking services that can be put in place at an early stage. </li></ul></ul><ul><ul><li>This will result in less work being done by a finance professional. </li></ul></ul>
  16. 16. Once you plan to establish a credit relationship: <ul><li>The requirements of your bank will change dramatically.   </li></ul><ul><li>A higher level of skill in finance will be expected: </li></ul><ul><ul><li>experience dealing with banks and banking reporting requirements.   </li></ul></ul><ul><ul><li>TIMELY financial reports. </li></ul></ul><ul><li>You should have a team of “Trusted Advisors”.   </li></ul><ul><ul><li>These individuals should have experience in areas such as law, accounting, insurance, human resources etc.   </li></ul></ul>
  17. 17. The Start-up Perspective <ul><li>Steve Adelman </li></ul>
  18. 18. Start-ups <ul><li>Founders are often Scientists / Physicions from Academia or Pharmaceutical / Biotech </li></ul><ul><li>Skills are typically Innovation / Discovery / Development </li></ul><ul><li>Specific business needs and skills differ </li></ul><ul><ul><li>Finance / Accounting / Tax </li></ul></ul>
  19. 19. Non-Scientific Needs <ul><li>Financial Statements </li></ul><ul><li>Payroll / Accounting </li></ul><ul><li>Parameters for Valuation </li></ul><ul><li>Understanding of Exit Strategies </li></ul><ul><li>Growth in complexity </li></ul>
  20. 20. Contact Information <ul><ul><li>Joel F. Smith, President & CEO, J. F. Smith & Associates, Jsmith@JFSmithAssociates.com, 267-513-1776 </li></ul></ul><ul><ul><li>Steven J. Adelman, Ph.D. – CEO, Vascular Strategies, LLC, sade274392@aol.com, 215-348-3356 </li></ul></ul><ul><ul><li>James J. Caruso, CPA, Partner, Financial Management Outsourcing & M&A, Fesnak & Associates, jcaruso@fesnak.com, 267-419-2212  </li></ul></ul><ul><ul><li>Thomas P. Hess CPA, Senior Vice President of Finance, CFO , Yaupon Therapeutics, thess@yaupontherapeutics.com, 610-975-9290 Ext. 352 </li></ul></ul><ul><ul><li>Michael L. Rainone, Senior Vice President , Citizens Bank, Michael.Rainone@citizensbank.com, 610-941-8400 </li></ul></ul>

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