BioStrategy - Feb 09 - Role of CFO at a new venture

BioStrategy - Feb 09 - Role of CFO at a new venture

• 1.
  February 5, 2009CFO: Bookkeeper or Financial Leader?
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  Introductions Moderator: Joel F. Smith, President & CEO, J. F. Smith & Associates Panelists: Steven J. Adelman, Ph.D. – CEO, Vascular Strategies, LLC James J. Caruso, CPA, Partner, Financial Management Outsourcing & M&A, Fesnak & Associates Thomas P. Hess CPA, Senior Vice President of Finance, CFO , Yaupon Therapeutics Michael L. Rainone, Senior Vice President , Citizens Bank
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  “ Maybe it’stime for you to hire a Controller or a CFO.” Tom Hess
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  The Skill SetsEntrepreneurs who experience significant growth in their business may eventually hear this advice. Financial Management in a growing business can become strained, and it is time to upgrade your team. What exactly does a controller or CFO do in a business? What value do these skills bring. And how much will one cost me? Can I afford these skills? The titles bookkeeper, controller and CFO can get tossed around rather loosely in small and growing ventures. But, these titles have specific meaning.
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  A bookkeeper performsbasic financial record keeping and can create simple financial reports. A bookkeeper does the following basic tasks: Keeps accurate records of financial transactions and can create basic financial statements (Income Statement and Balance Sheet) using accounting software. Performs basic A/P management– makes sure bills get paid and records these entries into the accounting system. Performs basic A/R management– if the business has to send invoices to customers to get paid, sends out invoices usually once a month. The Bookkeeper
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  Moving up toa controller adds more power to your financial management. In fact, a good controller can often pay for themselves in a growing company that needs more advanced systems by helping to keep costs under control and by helping to better manage cash flow. A controller does the following tasks: A controller will either perform all of the functions of a bookkeeper, or supervise the staff that does. They can create customized daily, weekly, and monthly financial reports to meet the specific needs of your business. They have the knowledge to choose and maintain financial software. They can take over the basic cash flow management of the business. Major cash flow decisions will still be up to the entrepreneur, however. The Controller
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  Some businesses eventuallyneed a Chief Financial Officer. A CFO does the following tasks: Performs all functions of a Controller Is able to structure and negotiate complex financing, including debt and equity. Can create complex financial projections to aid in strategic decision making, and is an active player in the strategic management of the business. Manages banker and other financial relationships for the business. The CFO
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  How can mysmall business afford these skills? To explain some proven affordable strategies to have the right skills when you need them. Jim Caruso
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  The Challenge: Balancing the Needs in Finance The Problem: Start-ups, early-stage and emerging growth companies need the same accounting and finance functions as larger companies, but they are not individually full-time roles: Bookkeeping / clerical Controllership CFO Other specialty areas – Tax, technical accounting/reporting issues, etc.
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  Alternatives Hire full-timeemployees for each role – unaffordable and unnecessary Hire part-timers for each role – impractical and difficult to manage Hire one full-timer – jack-of-all-trades, master of none; will be over-qualified for some roles, under-qualified for others; skill-level may be quickly outgrown; quality talent unlikely to be attracted to situation and will still be unaffordable Outsource to one or more service providers
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  Benefits of OutsourcingEconomical – less than hiring, especially considering benefits, payroll taxes, office space, IT, etc. Money spent across appropriate mix of skills and talent (subject matter experts) Depending on provider(s), won’t outgrow skill levels Depending on provider(s), may have access to supplemental resources as needed (integrated solution) The right provider(s) will bring credibility with potential investors and lenders
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  Types of outsourcingproviders: Staff augmentation firms – provide resources, but generally no management of the project or function Interim executive staffing firms – generally want to place executives full-time for some period Independent consultants – can be a good option for the CFO level Bookkeeping firms – basic bookkeeping only; no financial statements or advice Accounting or consulting firms – can be a good integrated solution
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  Factors to considerin selecting an outsourcing provider: Stage in the lifecycle of your business Complexity of your business Capabilities of the service provider – now and in the future Have an understanding of the comparative cost of alternatives
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  How can mybanker help? To explain the role of the banker and what the banker expects to see in a company. Mike Rainone
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  In the beginning:Start building your banking relationships early and at a senior level. In early stage companies a part-time bookkeeper can be sufficient. Take advantage of banking services that can reduce your finance staffing needs and save you money. There are banking services that can be put in place at an early stage. This will result in less work being done by a finance professional.
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  Once youplan to establish a credit relationship: The requirements of your bank will change dramatically.   A higher level of skill in finance will be expected: experience dealing with banks and banking reporting requirements.   TIMELY financial reports. You should have a team of “Trusted Advisors”.   These individuals should have experience in areas such as law, accounting, insurance, human resources etc.  
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  The Start-up PerspectiveSteve Adelman
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  Start-ups Founders areoften Scientists / Physicions from Academia or Pharmaceutical / Biotech Skills are typically Innovation / Discovery / Development Specific business needs and skills differ Finance / Accounting / Tax
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  Non-Scientific Needs FinancialStatements Payroll / Accounting Parameters for Valuation Understanding of Exit Strategies Growth in complexity
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  Contact Information JoelF. Smith, President & CEO, J. F. Smith & Associates, [email protected], 267-513-1776 Steven J. Adelman, Ph.D. – CEO, Vascular Strategies, LLC, [email protected], 215-348-3356 James J. Caruso, CPA, Partner, Financial Management Outsourcing & M&A, Fesnak & Associates, [email protected], 267-419-2212  Thomas P. Hess CPA, Senior Vice President of Finance, CFO , Yaupon Therapeutics, [email protected], 610-975-9290 Ext. 352 Michael L. Rainone, Senior Vice President , Citizens Bank, [email protected], 610-941-8400