Managing the financial side of a business often feels like a secondary concern for small business owners, who are typically more focused on operations and sales. Yet, the success of your company depends on a solid financial foundation. Inspired by a recent episode of The Flywheel Effect podcast, this article explores the importance of hiring and managing accounting talent, while clarifying misconceptions about roles like CPAs and CFOs. By taking a balanced and strategic approach to financial management, you can drive stability and growth in your business.
Why Financial Talent Is Key to Growth
At its core, accounting is more than just bookkeeping and compliance — it’s the lifeblood of a business’ decision-making process. From tracking cash flow to analyzing profitability, strong financial oversight ensures that your company is not only compliant, but also primed for growth.
Small business owners who invest in financial expertise can see direct results. Even implementing something as simple as a financial scorecard can increase profitability by 1% to 3% of revenue. For a $2 million company, this translates to $20k to $60k in additional profit — funds that can be reinvested into growth opportunities or used to stabilize operations during leaner periods.
Despite these benefits, many business owners struggle to hire the right accounting talent, often defaulting to over-reliance on a CPA or failing to establish a balanced financial team.
Clarifying Financial Roles: CPA vs. Managerial Accounting
One common misconception is that a CPA can fulfill all financial needs. While most CPAs excel at compliance and tax preparation, they are not typically equipped to provide insights into the day-to-day metrics or strategic planning that drive growth.
To effectively manage your business’ financial health, you need a well-rounded team:
- CPAs: Focused on tax compliance and regulatory requirements. They ensure accurate filings and help you avoid penalties but are not always involved in managerial or operational finance.
- Bookkeepers: Manage the nuts and bolts of financial tracking, including accounts payable and receivable, booking transactions, and expense reporting.
- Managerial Accountants, Controllers, or Outsourced CFOs: Provide big-picture insights, such as analyzing profitability, fixing errors, setting budgets, and forecasting cash flow. These roles help you make strategic decisions based on operational data.
For example, a CPA might help you file your taxes accurately, but they’re unlikely to assist with creating a KPI dashboard, annual financial budget, or advising on cash flow allocations for a major capital investment. Without accurate managerial accounting, you will miss opportunities to optimize your business for profitability and growth.
Risks of Over-Reliance on a CPA
Relying too heavily on a CPA for financial advice can leave gaps in your decision-making process. While your CPA ensures compliance, they may not provide the hands-on insights needed for managing operations effectively.
Consider a business owner preparing to expand their company by adding a new location. The CPA might focus on the tax implications, but a CFO would analyze the cash flow impact, forecast revenue potential, and model different financing options. Without this additional expertise, the owner might take unnecessary financial risks or miss an opportunity to maximize their return on investment.
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Building a balanced financial team ensures these gaps are filled, giving you the confidence to make informed decisions.
Matching Accounting Roles to Business Needs
Hiring the right accounting talent isn’t a one-size-fits-all process. Your needs will change as your business grows. Here’s a breakdown of when and why to hire key roles:
- Bookkeeper
- Handles day-to-day tasks like tracking transactions and managing accounts payable/receivable
- Often limited in deep accounting knowledge, but adept at day-to-day tasks
- Ideal for businesses under $1.5 million in annual revenue
- Staff Accountant
- Prepares financial reports, oversees tax filing, and provides deeper insights into financial health
- Deeper understanding of accounting principles and able to diagnose and fix accounting issues
- A great addition for businesses approaching $4 million in revenue
- Controller
- Oversees the entire financial process, potentially manages staff, and ensures compliance
- Suitable for businesses targeting growth over $8 million in revenue
- Outsourced CFO or Full-Time CFO
- Focuses on strategic financial planning, capital investments, and long-term financial health
- Consider an outsourced CFO for businesses above $2 million and a full-time CFO for revenues exceeding $20 million
To avoid the risks of over-reliance on a single role, aim to create a balanced financial team that leverages the strengths of different specialists:
- CPA for Compliance: Tax filings and regulatory requirements
- Bookkeepers for Accuracy: Day-to-day financial tracking and reporting
- Managerial Accountants, Controller, or Outsourced CFO for Strategy: Long-term planning, KPI analysis, and operational metrics
This division of labor ensures you’re covered across compliance, daily operations, and big-picture strategy, reducing the risk of costly oversights or missed opportunities.
Practical Tips for Hiring and Managing Financial Talent
Finding and managing the right talent is crucial for building a solid financial foundation. Here are some actionable tips:
- Write Clear Job Descriptions: Define the specific responsibilities for the role you’re hiring. A vague description leads to mismatched expectations.
- Leverage Test Projects: Evaluate candidates with real-world scenarios to ensure they can handle the unique challenges of your business.
- Seek Expert Input: If you’re unsure how to assess financial skills, bring in a recruiter, CFO, or financial consultant to assist with hiring.
- Set Clear Expectations: Establish KPIs, reporting cadences, and metrics to track performance. Regularly review financial reports like P&L statements, balance sheets, and cash flow forecasts.
- Foster Growth: Encourage professional development by providing opportunities for training or certifications.
Avoiding Financial Abdication
Many small business owners fall into the trap of abdicating financial responsibilities entirely. This often occurs when an owner lacks confidence in their financial knowledge and hires someone else to “handle everything.” While delegation is essential, complete abdication — where the owner has no visibility into financial operations — can lead to disastrous outcomes.
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At a minimum, every owner should understand the basics of their financial statements:
- Profit and Loss (P&L) Statement: Shows your revenue, expenses, and profitability.
- Balance Sheet: Provides a snapshot of your assets, liabilities, and equity.
- Cash Flow Statement: Tracks where your money is coming from and where it’s going.
If you’re not comfortable reading these reports, consider taking a basic accounting course or working with a trusted advisor to build your confidence.
Conclusion: Strengthen Your Financial Foundation
Your business’ financial success depends on more than compliance — it requires a strategic approach to accounting and financial management. By understanding the distinct roles of CPAs, bookkeepers, controllers, and managerial accountants, and building a balanced team, you can make smarter decisions and unlock new opportunities for growth.
For more insights into building a thriving business, check out The Flywheel Effect podcast, where topics like these are explored in-depth to help small business owners succeed. Because when your finances are strong, your business is unstoppable.
