Episode 58: Do you have a CFO, or a bookkeeper?

Or why to be careful when giving titles. Full transcript below.

Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur, and I’ve created this podcast to help you grow your business profits and understand your business numbers without judgment and without burying you in a whole bunch of jargon that you don’t need. Just actionable tips and case studies to help you grow your business. For show notes, go to the website, businessnumberspodcast.com.

There’s a bit of a risk that there’s a person on your team and that this episode is kind of talking about them and they find this episode and they convince you not to start working with me. So I could be shooting myself in the foot by publishing this episode, but it’s pretty important.

There’s also a bit of a risk that, because this is such a passionate topic for me, that my frustrations are going to bubble to the surface and it’s not going to be quite the same quality of podcast episode I would like, but it’s very, very important, that’s why I’m so passionate about it. So even considering the risks, I think let’s go ahead and do it.

So do you have a CFO or just a bookkeeper? And when I say CFO, there’s a few different titles. It could be CFO (which stands for Chief Financial Officer by the way, it’s a corporate title), could be CFO, virtual CFO, fractional CFO, finance manager, or finance head or director of finance. Could be any of those big titles, lots of them. People have different ideas about what each of those mean. You say virtual CFO to one person and it can mean something completely different to another person. That’s why I don’t really use the title virtual CFO anymore, because it always carries with it expectations and I need to explain what I do anyway. It’s not much of a shortcut to say I’m a virtual CFO. 

Anyway, there’s lots of different titles and, to be completely transparent here, I was called financial controller or CFO early in my career, back in the dark days when I was an employee. And I was called that when the businesses I worked for were only $1-3m million in annual revenue. And you don’t need a financial controller, you don’t need a CFO when you’re only that level of revenue. CFO is for a multiple, multiple million dollar corporate business. A CFO is a corporate role, we’re talking like $10 million revenue plus a financial controller. You don’t necessarily need one of those either, maybe in the $5-10 million range, potentially. But it was really handy that I was called those things at the time, because it meant that when I was interacting with people, inside and outside the business, that they took me a lot more seriously.

So when I called up someone and said, ‘Hi, my name’s Ben, I’m the financial controller for XYZ, I’d like to talk to you about those outstanding invoices’ then people thought, ‘Oh no, this is serious’. It’s not just like, ‘hi, I’m the bookkeeper’ or ‘hi, I’m the receptionist’, people actually took me seriously and I got better results for the business and for my employer at the time by having that title.

But there were some downsides, as well. In my head, I thought, incorrectly, that I’d have more of a voice in big decisions in the business and I felt insecure when meeting with someone that had the experience and skills to do the title that I had, and worried that they had the ambition to try and encourage my employer to outsource my job to them instead. So I got really worried that I had this great title, and I had a decent amount of pay (and I could see that working towards the kind of pay that that title normally has is what I was thinking), and then we had a meeting with somebody who could potentially just take on all the stuff and my job would go.

I didn’t feel like I could get another title like that. I had fraud and imposter syndrome about having the title like that, and so it was actually quite a negative thing, a negative impact on my performance.

So I have a bit of an idea about what’s going on in the head of that person on your team that has a big title.

The key lesson for you is: don’t give away a big title, don’t give them a big title in the first place.

I know why you do it, and I’ve been there too: we think that this will motivate them to a high level of performance and give them a sense of ownership.

But what actually happens in the majority of cases that I’ve seen is that it tends to warp the mindset of the person you give the title to, in a negative way. It can breed entitlement, like how much pay and how much say they have. And it could also breed insecurity that they’re an imposter, that they don’t know how to do it, that at any moment this wonderful title could be taken away from them when their employer or client discovers that they don’t deserve it. 

And the other thing is when you try and work with an advisor in that area that advisor might need… I’ve had this experience, actually: I’ve worked with a number of clients where I need to be extra careful when dealing with the bookkeeper because of the big title they’ve been given and the fact that that’s now making them feel a bit threatened and insecure. 

One in particular big frustration for me: I was working with a client who had a finance director on the team who had no experience with finances, didn’t even have a bookkeeping background or any experience there, but was “managing” an external bookkeeper. This finance director felt very threatened when I emailed some instructions to the bookkeeper about changes we wanted to make to how the bookkeeping was done that I’d discussed with the client. The client had said to me, ‘Yeah, no worries, just email the bookkeeper and CC this other person who’s overseeing her.’ And that person got really upset and territorial, and I quickly got an email back saying, ‘Please do not interact with my team member until you have run these things by me, it’s very important that I keep on top of everything that’s going on here.’

This person would have had no useful input into the changes we’re making, but the client at least learned a lesson that if he didn’t wanna put this person’s nose out of joint, that they needed to be included in everything. Even if it wasn’t really something that they would have useful input on.

I’m a bit frustrated about that experience because I wanted things to move faster for that client, but, unfortunately, having to include that other person slowed everything down. Sorry, I’m a bit frustrated and bitter about the experience. There’s no judgment on this particular person, no judgment on the client, they’re not horrible people or anything like that, it’s just my frustration coming out. But I just thought it’d be important to mention this, and share it in case you are thinking about doing a similar thing with your team members, giving them a title that’s a bit too big for what they’re doing.

So how to tell, to answer the actual question, the title of the episode, how to tell whether you have a bookkeeper or a CFO (or some other big title like CFO).

A bookkeeper handles the data entry into the bookkeeping system. They might also handle invoicing, paying suppliers, processing payroll. They might generate a report from the bookkeeping software based on all that data entry work that they’ve done. They might complete a spreadsheet-based report that someone else has designed. That’s what a bookkeeper does.

The fact that they’re generating a report for you does not make them a CFO or a head of finance. The bigger titles are reserved for when there’s a finance team to manage or when you’re giving strategic advice. 

So if there’s only one person, calling them a finance manager is a bad move. Who are they managing? Are they really managing anything? It’s better to reserve that title for when you do have someone working for them. Because if they’re the insecure type, or if you’re not clear when you’re implementing this change of putting someone else into the department, telling the existing person that they’re now the finance manager and it’s their job to manage this person can get rid of a lot of potential problems.

The other piece is the strategic advice. And here again, we’re tapping into a bit of a soapbox point, a passion point that I have. There are a lot of tax accountants that heard that compliance is dying, because AI and computers and software is going to get rid of it. “Compliance work (like tax returns) is dying, you need to get into business advisory and by the way, you can charge big fees, big ongoing monthly fees with very high profit margins if you get into business advisory.” That’s kind of the way it was framed when I saw it introduced to tax accounts earlier in my career (when I used to work for some anyway). And it was not really talked about, this idea of ‘do you actually have good advice? Can you provide good advice?’ Which is really weird because tax accountants are all about making sure that they’re only providing the advice that they qualified or registered for, because they could get in trouble if they give advice and it’s the wrong advice. But when it comes to business advice, it’s like the dollar signs just switched off the rational part of their brain, and there’s a lot of people out there, including bookkeepers, trying to give business advice when they don’t have the experience or the knowledge to do that. 

And it frustrates me a lot. There’s nothing to say that these people couldn’t learn that stuff but I think a lot of the problem is people trying to sell programs to accountants on ‘how to make more money from your practice by moving into advisory.’ Those people aren’t doing the right thing, I think, by encouraging accountants to sell something that they don’t actually have the knowledge to do.

Or it was software programs (and I promise I’m gonna get off my soapbox in a second, less than a minute). There were software programs that would say, ‘Hey, we’re gonna generate some great reports, and they’re gonna have generic advice based on how the numbers are going, and you can sell this for a thousand dollars a month, and it’s only gonna cost you $250 per client. Isn’t that a great deal? Don’t you think you should do that?’ There were a lot of software programs that were trying to encourage that kind of thinking, and I don’t like that type.

Anyway, back to bookkeeper versus a CFO.

The criteria for the bigger title was a finance team to manage or giving strategic advice. Like I said, this isn’t pointing to the numbers on a report and saying, ‘hey, look, this went up compared to the last period’ or ‘this went down.’ Pointing out that something changed is not the same as explaining why it changed. And most importantly, what to do differently in the future looking forward is really the key.

A bigger title might also be deserved when running the numbers on different scenarios. For example, acquiring a business. What’s that going to look like, in terms of the acquisition itself, affording the acquisition, and then what the merged entity might be able to do with cost savings, all that kind of stuff?

Another example could be that you’re thinking about launching a new product or service or, event, or program and running the numbers on how much it would cost to do that, and when the costs would need to be paid versus when the revenue would come in, and running some scenarios of:

  • What if it went well? 
  • What if it went poorly? 
  • What if it went average? 
  • Is it still a good idea? 
  • What could you tweak?

That kind of thing.

Another example of strategic advice is how you could use debt to grow aggressively, and how much of it you could safely spend, and what happens if it’s successful or unsuccessful in helping you grow as the business, etc. Running the numbers on these things.

As well as monitoring the numbers every month, or every week, or every two weeks, and saying what it means about the business. I’m talking about what to do differently. That’s the kind of strategic advice I’m talking about. 

Someone who can do that is not just a bookkeeper. Someone who can do that is the kind of person you would call a CFO, a virtual CFO, or financial controller, or a head of finance. You would give a bigger title like that, if they’re doing that strategic advice piece, not just if they’re doing the bookkeeping.

I’ve had a lot of people actually on a sales call approach me and because of my title (at the time I was advertising as a virtual CFO and profits coach, but the virtual CFO was the bit I was pushing), they hop on a sales call and ask, ‘Are you gonna do the bookkeeping for us?’ It didn’t say bookkeeper anywhere on my website. I sold the bookkeeping business, many, many years ago now. Not the kind of thing I want to do myself. And it’s a bit of a waste. My advice is more valuable to people than me sitting and spending an hour doing bookkeeping. 

I suppose I should mention that, just to be clear, I’m not saying that bookkeepers are less than people who can do strategic advice, or there’s something like they’re lesser human beings or, that they shouldn’t be paid well for what they do. A good bookkeeper is worth its weight and gold. I’m constantly searching for new bookkeepers because I tend to fill them up with referrals to my clients. Usually my clients come to me with a bookkeeper that’s not quite at the level they would like and they ask me to help them find a new one, so I’m constantly searching for good bookkeepers. They are hard to find and you should absolutely pay a good one $50, $60, $75 bucks an hour. If they’re fast, who cares what their hourly rate is? Don’t focus on that and hire someone $5-10 an hour from the Philippines who’s going to do everything wrong, and take five times as long anyway. 

Good bookkeepers are an amazing asset for our businesses. There’s no making decisions based on the numbers, if there’s no numbers being done. It’s critical that there are numbers there to rely upon. I ran and sold a bookkeeping business, so I know and love bookkeepers. I didn’t get rid of the bookkeeping business because I didn’t like bookkeepers. And bookkeepers, as I said, they enable me to give advice to my clients. So I’m very happy when there’s a good bookkeeper. I’m not belittling or insulting bookkeepers here. I think I’ve waffled enough on that point. You get the idea.

If I’m picking on anyone I’m actually picking on you. I’m picking on you, the business owner, for giving titles that are too big for the role and too big for what your business actually needs. I’m picking on you with love, because there are negative consequences of doing this. Negative effects it can have on your team member. So I don’t quite want to call myself a knight in shining armor, saving them from the business owner who’s gonna do the terrible thing- that’s a bit melodramatic. But it’s just something you’ve got to be really careful of, this stuff. Like I said before, it can warp their mindset and their performance in a negative way and not take things the way that you would like.

Any frustration you hear in my voice during any of this episode, it’s thinking about younger Ben, earlier in my career when I had titles and they changed my opinion in an unproductive way and caused me frustration. And the frustration you’re hearing in this episode is also at one particular client who I couldn’t convince to stop giving out Director titles to people.

There’s one or two people I’ve spoken to that have a  “leadership team” that they’re paying too much for, but their business doesn’t actually need a leadership team just yet, the business needs a lot less.

So that’s where my frustration is coming from. There’s no judgment on the bookkeepers.

I mean, I do get frustrated at people charging for advisory when they don’t actually have the right skills and experience to be doing that. But honestly I think that’s partly they’ve been led astray a bit, and partly they’ve not seen what good advice looks like. For me earlier in my career, I worked for a variety of different accounting practice owners. And some of them were fantastic at giving business advice and others were not so enthusiastic about doing it. So it wouldn’t surprise me if a bookkeeper hasn’t seen a good example. And then there’s these influencers in the industry, trying to encourage them to do the wrong thing. 

Anyway, I’m starting to talk about my soapbox topic again. Let me wrap it up here, just with a final reminder: do you have? Do you have a CFO or just a bookkeeper? Make sure also: what does the business need? Does the business need a bookkeeper or a CFO? It’s probably too small for a CFO if you’re listening to this. You already know that you need a CFO, if you actually need one.

But if you’re not sure, you can always reach out. Send me a question through Facebook or there’s a contact form on the website businessnumberspodcast.com. Always happy to answer questions on the podcast, anonymously of course. If you want to give me the raw details, I will sanitize it and mask it so no one will be able to tell it’s you before answering it on a future podcast episode.

I hope this was helpful. Remember to be careful to put the right title on the right role so that your team member has the right idea about what the business needs.

I hope this was helpful. Thank you as always for listening.

Before you go, two quick things:

  1. If this was useful, please give it a review and share it with a friend who it might help.
  2. If you want help from me to unlock growth and profits, and greater clarity around your numbers, book a call through ProfitsCollective.com and if we’re not a fit I’ll point you in the right direction.

Ben McAdam

Hi, I'm Ben McAdam. I'm a Profits Coach and entrepreneur. I help business owners grow their profits and gain clarity around their numbers, without judgement or confusing jargon. If you want some help with that: let's have a chat.
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