Author: Meelis Udars

Why can the wrong choice cost a company dearly?

How do you choose a CFO? When choosing the right CFO, assess the candidate's ability to turn numbers into management decisions, their previous practical experience with similar business processes, and their courage to ask critical questions. What matters is finding a strategic partner who understands your company's specific needs, whether that's raising investment or increasing profitability.

Many entrepreneurs reach a point where they realise that accounting alone is no longer enough. The numbers are there and the reports get submitted, but there's still no clarity about the company's real situation.

Is the company actually profitable? Is growth really sustainable? Is money being used correctly? Will the next decisions support the company's development or create extra pressure later? This is exactly where the question arises: is it time for the company to bring in professional financial management at a strategic level?

And if the answer is yes, the next important question is: how to choose a CFO, who is the right partner for your company?

Why is it important to know how to choose a CFO?

Because a CFO isn't simply someone who looks at numbers. A good CFO helps you as a manager make better decisions, see the bigger picture and run the company with more confidence. In line with Estonian accounting and financial reporting standards , it's important that the data is reliable and transparent.

The right CFO helps you understand:

• what your company's profitability actually depends on
• where the money really goes
• which costs are worth reviewing
• when is the right time to invest
• how to plan growth so that cash supports it rather than holding it back

Five steps to choosing a CFO for your company

1. See whether they understand your company's real needs

Not every company needs a CFO for the same reason. One company needs help with budgeting, another wants to raise additional funding. A third wants to understand why sales are growing but profit isn't. What matters is whether the partner understands what your company actually needs today. A good CFO doesn't offer everyone the same solution, but can see the bottlenecks in your business.

2. Assess whether they can turn numbers into decisions

This is one of the most important skills. A CFO doesn't create value by sending you a complicated file. Value is created when they can tell you what the numbers mean, what matters most for your company, and which decisions would be sensible to make next.

3. Check whether they have experience with real companies

Knowledge is important, but it's not enough on its own. A good CFO has seen real-life situations: cash flow pressure, the risks of rapid growth and profit disappearing into costs. It's precisely practical experience that helps spot the details you can't see just by looking at reports.

4. Ask how they work

You probably don't need someone who just sends a file once a month. You need a partner who helps you run the company more consciously. Before deciding, it's worth understanding how often they produce overviews, which indicators they track and how your communication will work.

5. See whether they dare to ask uncomfortable questions

A good CFO isn't just someone who nods along. They ask: why has this cost grown? Is this service actually profitable? Can the company really afford this investment? It's exactly these questions that help a manager see what might otherwise go unnoticed.

Don't choose a CFO on price alone

This is where mistakes are very often made. A cheaper service may seem sensible at first, but if it doesn't give you more clarity or stronger decisions, it can end up costing much more. A good CFO isn't a cost – they're an investment in clearer management.

With the right choice, you get the feeling that you have a better overview of the company's money and that decisions are easier to make. You're no longer running the company on gut feeling alone, but relying on facts and best practice in finance.

In summary

When choosing a CFO, don't look only at the CV or the price of the service. See whether this person understands your needs and helps you feel more clarity as a manager. The right partner doesn't make decisions for you – they help you make better decisions. It's an important step towards growing your company consciously and profitably.

Do you feel your company could use more financial clarity? Write to me and let's look together at what kind of support your company actually needs today.

Read on: Part-time CFO · Business controlling · Financial controlling · Pricing

When is accounting no longer enough?

When does a company need a CFO? Usually when accounting alone is no longer enough and management decisions require a stronger financial perspective. The main reasons for bringing in a CFO are raising investment, the need for accurate cash flow forecasts and the wish to increase business profitability. Financial management helps turn numbers into a clear action plan, ensuring the company's sustainable growth and stability.

It's often thought that only a large company needs a CFO. In reality, the need doesn't depend only on the size of the company, but on its stage of development and the decisions that need to be made.

Accounting helps keep past data in order, submit reports and meet obligations. Financial management, however, helps you go a step further – understanding what the numbers actually mean, where the money is going and which decisions affect the company's results the most.

A CFO helps a manager answer very practical questions:

• Is the company's growth really profitable?
• How much additional funding is actually needed?
• Are costs under control?
• Do today's decisions support the company's long-term development?

When is the right time to bring in financial management?

A CFO is usually brought in when the company faces a bigger change, growth, an investment or the need to get better control over money. Professional financial management ensures that all business decisions are backed by data.

Financial management and raising investment for a start-up

One of the most common reasons for bringing in a CFO is raising funds. If a company wants to take out a loan, bring in an investor or apply for a grant, well-kept reports alone aren't enough. It needs clear financial forecasts, a well-thought-out funding requirement and an understandable plan.

An investor or bank wants to see how much money the company needs, what it will be used for, how it will help the company grow and when a return can be expected.

A practical example: We helped a start-up, that was preparing for negotiations with investors. The company had a working service and its first clients, but lacked a clear financial view of how large its funding requirement really was and which goals it would be used to achieve. We worked through the company's revenue model, fixed costs and forecast sales growth, and prepared financial forecasts and a cash flow view. As a result, the start-up went into fundraising much better prepared.

When budgets need to be set

A good budget isn't just a spreadsheet. It's a management tool that helps plan activities, set goals and track whether the company is moving in the desired direction. Financial management helps prepare a realistic budget based on real data, not assumptions. This gives a manager a firmer basis for decisions and helps avoid managing by “gut feeling”.

When costs are rising and profitability is falling

In smaller companies it often happens that there are sales, but at the end of the month there's still a feeling that no money is left. In that case, the costs need to be reviewed in detail to assess which of them support the company's goals and which don't.

A practical example: We helped a micro company whose owner felt under constant financial pressure. We mapped the company's fixed costs, variable costs and irregular expenses. The analysis revealed several costs that had remained out of habit but created no value. As a result, the company was able to reduce costs and set up a system for tracking them. The manager gained a clear overview of where the money goes.

When the manager lacks a clear financial overview

Sometimes decisions are made largely on feeling. Financial management helps establish which indicators to track regularly and how to make decisions systematically. This makes management calmer and more conscious.

When bigger decisions lie ahead

Hiring a new employee (including accurate payroll), launching a new service or investing in equipment all affect the company's financial position. A CFO helps assess whether the company can afford it and what the cash flow risks are.

Why is a CFO needed?

A CFO's value lies in seeing the whole picture and making decisions with certainty. A CFO is often brought in precisely when a company wants to grow smarter, not just faster.

In summary: A CFO isn't brought in only when a company has problems. Often they're brought in when the company wants to take its next step more consciously and on a stronger financial foundation.

Accounting shows what has already happened. Financial management helps decide what should happen next. If you want to get your company's finances in order, get in touch with KL Raamatupidamine.

Read on: Part-time CFO · Business controlling · Financial controlling · Pricing