The Role of CEO and CFO in Different Business Sizes

The size of a company often dictates whether or not there are separate Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs). Larger companies typically have these positions as separate roles, especially if they have a Board of Directors and publicly traded shares. However, in smaller privately owned businesses, one individual or a small team can often handle both roles.

Larger Companies: Separate Positions for CEOs and CFOs

In bigger corporations, the CEO and CFO roles are usually distinct. The CEO focuses on operational management, deals with shareholder concerns, media requests, and long-term planning. They often work closely with the operations department. On the other hand, the CFO's job is to oversee the company's monetary functions, such as preparing financial reports, managing cash flow, securing long and short-term financing, and ensuring accurate financial disclosures, especially for public companies.

Smaller Businesses: Combined Roles for Efficiency

In smaller privately owned businesses, one of the owners often fills both the President/General Manager and Finance roles. This is often handled by an accountant or a partner with accounting credentials. In some cases, financial tasks are completed to a certain extent and then handed to a chartered accounting firm for completion. The combination of these roles in a smaller business can be efficient but requires careful management to ensure all necessary tasks are adequately covered.

The Importance of Distinct Skill Sets and Oversight

Both the CEO and CFO require very different skill sets. One focuses on overall leadership, strategic planning, and stakeholder management, while the other deals with the nitty-gritty of financial management and reporting. This distinction is crucial for the success of a business.

Is it Rare for the Same Person to Be Both CEO and CFO?

Generally, the combination of the CEO and CFO roles is rare, but possible in very specific circumstances, such as a highly specialized accounting firm. However, I would consider this a red flag for most businesses due to potential conflicts of interest and a lack of adequate oversight. If a company chooses this path, the CFO should still have oversight from external auditors, report to the CEO, and attend all board meetings to present the financial picture. The CFO does not need to be a board member, but should be present to provide an objective financial perspective during board meetings.

Most importantly, the CEO and CFO should have separate spheres of influence to maintain transparency and accountability. If I see this arrangement in an organization, it would signal a potential problem with the company's management structure and the potential for oversight issues.

Conclusion

The roles of CEO and CFO are distinct and should be separated for the best performance of the business. While very rare in most industries, combining these roles can be considered risky and should be approached with caution, especially in publicly traded companies. If you have any specific cases where you need advice, feel free to reach out. I am always here to help!