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What Separates Effective CFOs from Ineffective Ones?

An effective Chief Financial Officer (CFO) knows how to communicate, manage teams, and knows the details behind the numbers. An expert CFO manages all the areas of a business, including accounting, tax, facilities, insurance, financial planning, and operations — just to name a few.

An effective CFO paints a strategic financial picture of the company’s next 12 to 24 months to help the CEO and other senior executives effectively scale the company. He or she also supports the finance team to get there. Other executives do not consider a good CFO as an accounting expert or a tax expert but as a strategic partner.

An effective CFO is responsible for cash flow. He or she understands when the balance will be low and what to do about it, whether to slow down cash burn, revise Accounts Receivable processes or raise capital.

An effective CFO obtains input from other senior-level executives, helps them understand the needs of the company versus the executive, and is the architect of a financial plan that balances those needs. A good CFO reads the tea leaves of the sales team and the overall market, then helps course-correct to ensure the company has long-term success. An ineffective CFO blames others, such as: “The executives spent too fast.” “The CEO is too optimistic.” “Our board members always think of me as the bad guy.” “VCs won’t give us funding.” “Our strategy doesn’t work.”

An effective CFO does the opposite; he or she understands the root cause of what goes wrong by highlighting the issue and proactively providing information to the board of directors, CEO, and other executives who will help them see the path forward.

An effective CFO is a great manager. He or she hires standout employees in their respective fields (e.g., accounting, tax, operations). He or she trusts them to do a great job while maintaining open communication and having regular check-ins — trusting but verifying. He or she has a network of professionals to hire or solicit feedback from in order to make the entire organization better. A good CFO knows how to delegate since it would be impossible to be an expert in each area under the CFO’s purview.

An effective CFO speaks visually, with pictures and analogies, not just analytically. Using short, pointed, nontechnical accounting or financial explanations are key to making a point. An ineffective CFO wraps himself or herself in jargon and focuses on what people can’t do and is always ready to say, “no.”

An ineffective CFO looks for loopholes and manipulates the numbers to tell whatever story they want. An effective CFO has high integrity and factually reports the numbers. He or she is a risk manager and helps manage the lows and highs by anticipating them and providing warnings to the company.

An effective CFO plans ahead and encourages staff to tell the truth quickly — whether it’s good or bad news — without retaliation. An ineffective CFO is continuously in a state of chaos and never wants to hear bad news from their staff. An effective CFO acknowledges they don’t have all the answers and engages their team in solving any issues. An ineffective CFO feels best about themselves when they have all the answers.

An effective CFO explains business overages and shortfalls methodically, carefully showing the ins and outs of how actuals vary from expectations. An ineffective CFO will not roll up their sleeves and dig into the nitty-gritty. A good CFO will pick up a piece of trash on the floor when they walk by without saying anything to anyone. An ineffective CFO tries to police employees, wielding his or her power over others.

An effective CFO has the highest business ethics and acts as the moral compass for the organization, calling out bad behavior without focusing on the individual, all the while holding their team to the highest standard.

An effective CFO focuses on shareholder value balanced with employee and societal needs. Discussing the company’s financial picture with all employees creates transparency, helps inform decision-making, and provides context to decisions that were already made.

If you are a business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced part-time CFO to help your company improve operational processes, cash flow, as well as profit margins, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.

CFO Growth Advisors (CGA) specializes in unique and highly effective growth strategies that are tailored to help companies in the San Francisco Bay Area grow more quickly and efficiently while improving sales & profit growth. Contact us to learn more.

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