July 8th, 2016
Vetting your New Controller or CFO
We are in touch with a number of door and window companies that are taking advantage of their increased profitability to improve their financial management team through promotions and new hires. Other companies are assessing the capability of their financial staff in the face of a pending sale or capital placement. Whatever the reason, there are some non-obvious questions that should be asked of a candidate for a controller or chief financial officer position.
Learning that a candidate has, in a prior role, performed audit work or prepared financials for a publicly traded company is a major plus. These are activities that are driven by strict standards, deadlines and requirements. Thriving in that environment is a good indicator of success at your company. Also, audit work, in particular, typically makes a financial manager more astute in one of the most commonly mishandled areas of a door or window company’s financials – its monthly accruals.
If your company does not yet operate on a perpetual inventory system, you need to find a candidate with experience in those systems. They will be more likely to be able to help you implement a perpetual system in the future. Another area to explore with your candidate is their background with various accounting and software packages. Don’t ask them if they’re familiar with a list of systems. It’s too easy to say yes to that question. Rather, ask them about which ones they’ve used. To dig further and learn about how they really view financial reporting, ask them to compare and contrast the advantages and disadvantages of the various systems they’ve used in the past. If they are unable to do this, it is more likely they were a cog in the wheel at previous organizations, rather than the driver of the financial reporting process.
Another critical area to assess is the candidate’s experience with preparing monthly financial reporting. Most businesses will, at some point in their development, either seek to be approached by a buyer or take on external debt or equity capital. In any of these events, the company will have to start preparing a monthly reporting package. Having done such work at a prior company is a good starting point for a candidate. Drill deeper, though, and ask for whom the monthly statements were prepared. It is one thing to send a silent owner another set of monthlies for their “when I get around to it” pile. It is entirely another to send them to an active user of those statements, such as a capital provider or corporate owner. The ideal candidate will be able to drill down and answer questions like, “Why did margins increase or fall last month?” or “What will happen to operating expenses when you launch the new product, start the second shift, etc.?”
Asking these tough questions in advance can help you make a better hire. In turn, having a stronger management bench makes it easier to undertake a capital event or simply take your company to the next level of success.