In this article, Addition Finance founder and former portfolio CFO, Graham Davies explores the benefits of hiring a portfolio CFO and what makes a great one.

With the average salary for a chief financial officer in the UK standing at over £124,000, taking on a CFO is often far too costly for most start-ups. However, this role is vital for future growth - which is why portfolio CFOs are becoming increasingly attractive.

In this article, Addition Finance founder and former portfolio CFO, Graham Davies explores the benefits of hiring a portfolio CFO and what makes a great one.

What is a chief financial officer?

A CFO is a senior executive who manages the financial actions of a business. Their duties typically include: 

  1. Tracking cash flow
  2. Financial planning
  3. Analysing and acting on financial strengths and weaknesses
  4. Forecasting 

A CFO oversees every aspect of your company’s accounts, finances and compliance. Their job is to ensure informed decisions are made to support the financial wellbeing of the business. 

What is a portfolio CFO?

Many start-ups choose to outsource their financial management to a third-party CFO. These highly-qualified individuals manage multiple company accounts - or portfolios - at once. They’ll have extensive experience in their field, and offer dedicated services at a more affordable rate. 

The answer is simple: cost. Start-ups don’t require a CFO on a full-time basis as the cost is arguably not worth it. At £80k - £150k+, it’s often extremely hard for a start-up - or even a medium-sized business - to justify such a salary.

Of course, hiring a portfolio CFO is still an expense. However, the investment is well worth the cost. At roughly £3,000 per month, it’s almost a third of the cost, whereas the benefits will likely be considerably higher. 

Are portfolio CFOs similar to accountants?

CFOs need a particular set of skills to do their job that accountants generally don’t - like agile thinking. The role of a CFO goes beyond following the letter of the law. It involves creating strategic opportunities for growth.

Ultimately, an accountant and CFO work hand-in-hand. It’s a symbiotic relationship, which is why at Addition we have a team made up of portfolio CFOs and bookkeepers - so everyone’s talents are being used where they make the most impact.

What does a portfolio CFO do?

They might not be full-time, but they’re definitely on your team. 

During their contracted hours, a portfolio CFO will work as strategically and diligently for you as any of their full-time colleagues. Here are five of their main areas of focus:

Financial management and strategic planning 

A portfolio CFO will implement controls so spending is fluid and regulated. They’ll help you determine where the business wants to go, and how to get there - then turn this understanding into a plan.

Forecasting and budgeting

Your CFO might ask questions like, “How much are we going to spend - and hopefully earn - on all elements?” They’ll then help adjust your budget to reflect this.

KPI and performance tracking  

A portfolio CFO will implement automated ways to periodically track performance to plan.

Cash flow management

Staying on top of income and output is vital for success. Your portfolio CFO will help you utilise your cash flow efficiently. 

What makes a good portfolio CFO

A stand-out portfolio CFO should be:

Transparent 

The CFO’s analysis and guidance needs to be true and actionable for the client on their growth journey. It’s about building solid advice on the facts of the business. 

Experienced

A catalogue of prior experience with start-ups and goals like yours is key. Providing experience of how events have played out in historical scenarios helps clients understand ramifications. They should also have a network they can use to your advantage.

A team player

You’re not paying a CFO day rate for them to replace your bookkeepers. However, they should be working closely alongside your bookkeeper for maximum impact.

A visionary

Your CFO should be modeling out the future for your business, and helping set a course for the future. This could be help with raising money, working out which hires to make, and many other strategic decisions for small businesses.

Clued in 

Your CFO should always be aware of the latest financial guidance pertaining to your business. This ensures they can provide insight on the latest legislation, as well as any new grants or schemes. 

Ethical

Advising multiple clients calls for an extra set of scruples. This is especially true when it comes to any potential conflict of interest. A good CFO should also keep on top of their ethical and professional requirements - as part of their membership to the relevant accounting bodies. 

Attentive 

The biggest challenge for portfolio CFOs is staying on top of multiple clients and prioritizing effectively. At Addition, we have two portfolio CFOs to share the load. We also have a team of highly qualified accountants to handle that aspect of things.

About the author:

Graham Davies worked as a portfolio CFO and financial consultant for companies of all sizes across the UK. During his 14+ years in the industry, he helped raise in excess of £2bn for start-ups and listed companies.

Graham’s extensive experience and practical insights enabled him to successfully launch Addition - which now supports more than 180+ startups with flexible finance plans - from bookkeeping to CFO services.