The way we traditionally think of CFO roles has shifted. Not only are there now both fractional and full-time CFOs, but they are now different types of CFO roles.
Depending on the specific needs of your eCommerce business, the type of CFO you hire will vary.
- Do you need to hire a virtual CFO vs. an in-house, full-time role?
- Does your CFO need to be operationally oriented?
- Or, do you need a big-picture, strategic CFO?
These are just a handful of questions to think through when you are hiring for your most senior financial position.
In this post, we’ll define what operational finance and strategic finance are and the difference between the two. Also, we’ll discuss when to hire a strategic vs. operational CFO for your eCommerce business.
What is operational finance?
As the name suggests, an operational finance CFO will have a thorough understanding of how the company operates. They have an in-depth knowledge of the company processes and focus on how you can optimize your finances to run a more efficient business.
For instance, say that you want to determine the cost of producing a new product. An operational CFO can determine not just what your budget should be but also provide context into what the widget cost means for the company.
The main thing to remember about operational finance is that it looks at the company’s past and present finances. They help paint a holistic picture of the current situation and help reduce operational costs.
What is strategic finance?
Strategic finance CFOs are concerned with creating a comprehensive financial plan for their organizations. While they also have an understanding of the company’s operations like an operational CFO does, they take the knowledge a step further by applying it to future goals.
Let’s take a look at the same product production example from above. A strategic CFO would not just have an understanding of the production costs but would look at the future growth potential and help set the vision for the company.
The key takeaway for strategic finance to remember is that this approach primarily looks to the future for planning purposes.
Key differences between operational and strategic finance
The primary differences between financial leaders with operational and strategic approaches are where their skill sets are. Operational CFOs understand cash flow, company systems, accounting, operational risks, and reporting.
Strategic CFOs can usually do all of the operational aspects well. But they are also strong at forecasting, benchmarking, and evaluating internal and external data to help the company set and reach its future goals.
When to hire an operational finance CFO
Deciding which type of CFO to hire for your company involves having a clear understanding of what you need from a CFO or vCFO. With any role, the best way to hire the right person for the job is to have a clear understanding of what the job you’re offering actually is.
You likely need to hire a CFO with an operational background if you need someone to evaluate your company’s existing efficiencies and make changes accordingly. If you need help mitigating financial risks and dealing with current equity or debt, then an operational CFO could be a good fit.
Here are some of the tasks an operational CFO can help your business with:
- Reduce excess or unnecessary spending
- Improve your company’s ROI
- Conduct financial analysis and performance management
- Discover inefficiencies and share ways to improve them
- Understand the operations and financial standing of your organization
- Create a holistic view of your company’s current finances
When to hire a strategic finance CFO
In some cases, a strategic finance CFO might be a better fit than an operational one. A strategic CFO goes beyond what an operational finance expert does by helping your company plan for future growth. If you’re looking to please stakeholders within your organization, then hiring a strategic finance CFO is a good way to do it. It may also help attract new investors.
Again, you’ll want to look at the potential tasks a financial CFO can accomplish to see if it matches with what you need from the financial expert you hire. With that in mind, here’s what a strategic CFO can help your business with:
- Work with executives to plan for the future
- Evaluate the current financial health of your business
- Collaborate with the CEO and/or HR to ensure staffing needs are met from a financial standpoint
- Determine resource allocation strategies
- Promote sustainable growth by assisting with mergers and acquisitions
- Improve the confidence of stakeholders and potential investors
Strategic and operational CFOs both have strengths that they bring to your company’s financial wellness. However, before moving forward with hiring either one, you need to determine which financial approach is right for your business. Take the time to evaluate this before looking for a new CFO to set your company up for financial success now and in the future.