Here’s another key dimension in deciding on your head of finance- "Do they have more of an operations background or a treasury background?"  This is how they differ:

 

·         Operations.  This person is involved in the day to day financial operation- accounting, budgeting, financial reporting, taxes, financial analysis, processing invoices and collecting accounts receivable, accounts payable, inventory, fixed assets, acquisitions and other operational activities.

·         Treasury.  Someone here is mainly involved with raising or restructuring capital, whether debt or equity, setting up capital arrangements (versus accounts receivable) with customers, and the related cash management and services.

 

In other words, the treasury person lines up the financing and manages cash, while the operations person plans and keeps track of results and oversees the assets and liabilities involved in the daily operations.

 

Some positions may require some of both skills.  However, usually one will be the dominant role.

 

Most of the time in smaller to mid-size companies, operations will be the primary need.  When I was CFO for a pharmaceutical firm, there was a split need, but most of the time was spent in operations.  There was time spent initially on treasury when we raised a round of private equity and restructured the bank debt.  Once we had this in place, it covered our needs for the next couple years.  Aside from some minor cash management work, I didn’t have to spend much time on the treasury end until it came time to raise another round of private equity.

 

It could work the other way in a smaller company.  For some firms, the capital raise is very involved and is a make or break situation.   Most of the early time is spenT raising a round of equity from angel investors or private equity firms.  Once one round of financing is raised, they are already starting to prepare for the next round.

 

Sometimes part of the work could be outsourced.  An early stage firm might use an outside company to raise the capital for them, or they might outsource the financial operation management such as the monthly accounting and taxes.

 

In other situations, the second in command in the finance area might counterbalance the top person.  The head of finance might be more treasury oriented, but is buffered by having a strong operations person as his/her second in command.

 

The needs can change over time as well.  A company might have an operations person running finance then bring in a treasury person once an IPO is around the corner.

 

The key is to know what your primary needs are at any given stage of your company.  Then when you go out to hire someone to lead your finance area, you can use this as one major checkpoint to see if a person will really fit your organization.