Whether you are working within a start-up situation, an established private entity or a listed mid-cap company, as an SME CFO, you can expect to be part of a uniquely challenging and increasingly important environment.

In the UK there are approximately 5 million SMEs which employ 15 million and have a combined turnover of £ 1.6 trillion. The CBI lauds them as the “future champions” of British industry with the capacity to inject a possible £20 billion into the economy by 2020. So, what does it take to become a CFO within an SME and what are the challenges they face?

Most incoming CFOs to an SME will agree on one thing.

There is a higher risk profile attached to their move in comparison to securing a role in a larger, listed organisation. Perhaps it is a role only for the brave? Certainly, seasoned SME CFOs will undertake careful analysis of the business fundamentals, strategy and products prior to joining but with limitations on access to real data, particularly in private companies, the risk is apparent. Alongside the business analysis and in order to further mitigate risk, many experienced SME CFOs have developed a heightened awareness of the type of CEO they can best work alongside. Within an SME environment, with such a close CEO/CFO working relationship, it is vital the chemistry is there from the start. Whilst it is imperative that an SME CFO is in overall harmony with the CEO, success in the role is still determined by the ability to challenge and advise credibly. For first-time SME CFOs, the pitfalls are clear but by adopting a methodical approach to business and cultural assessment prior to entry, the reward of a compelling role in the right environment can be achieved.

Once in, so the fun begins.

A recent, global IBM survey of SME CFOs highlighted a trend towards increased corporate influence but with the caveat that 45 percent of respondent SME CFOs felt their functions were not up to speed to deliver to the resultant increase in demands. Certainly, a major contemporary feature of the SME world is the elevation of finance leaders from professionals responsible for core accounting and reporting functions to genuine business partners to the CEO, driving strategic planning and growth. Whilst there are many small companies who still view the role of finance as a back-office function, it is a truly remarkable trend that has seen the CFO business partner become the norm amongst SMEs. The trend can be explained in part due to the result of economic volatility and an increased focus on cashflow and capital, giving CFOs a greater forum in the boardroom. As promising a development as this trend is, it leaves CFOs with the unenviable task of delivering to a far broader range of responsibilities with the constraint of resources. Ensuring that efficient financial management from debtors and creditors to statutory filing are in place and prioritising these fundamentals is essential before value can be added through other activities. The SME CFO is consequently a holistic finance professional with a strong technical foundation augmented by a keen commercial and analytical mind. Both an accountant and a business leader, the ability to interchange between the two as the company demands is a core trait of these finance executives.

Against the back-drop of limited resources and an uncertain economy.

CFOs face an additional challenge of driving cost reductions, placing additional strain on often inadequately staffed functions. The quest to deliver more for less is perennial for the SME CFO. Yet while the obstacles are clear, SMEs and their management teams generally demonstrate strong balance sheet controls with cash flow transparency and an ability to anticipate and respond effectively to external influencing factors. If this capability can be counter-balanced with more impactful business analysis through the harnessing of both technology and data, then the finance leader’s role naturally elevates to a more strategic plateau. The balancing act of responsibilities is further strained through shouldering the responsibility for risk management, any investor relations or stakeholder management (including private equity) and supervision of external funding and bank relationships. With such breadth to their roles, it is small wonder that an increasing number of SME CFOs are looking to appoint a strong No.2 both to share the workload and as a potential successor. As ever, that is where a new discussion with the CEO on resource allocation begins…