A person who has been newly hired into the CFO position may feel overwhelmed by the vast number of tasks to be completed. Generally speaking, the new CFO should place top priorities on learning the following areas during the first few months on the job: cash flow, then contracts, followed by measurement systems and management. The remainder of this article notes the reasons for this prioritization and itemizes specific areas of concern within each one.
Cash flow is by far the most important activity for the CFO to address right away. It is the ultimate short-term requirement — if a company runs out of cash, any other CFO initiative becomes meaningless, since the company will have ceased to exist. In particular, one should create a cash forecasting model at once and improve its accuracy as rapidly as possible by instituting daily cash reconciliations, understanding when accounts payable come due, and knowing about upcoming capital expenditures and debt payments. Further, the CFO should spend plenty of time with the credit and collections staff to understand credit terms, possible bad debts and product returns, and short-term cash inflows. Only when the CFO has a thorough grasp of this area should she move on to address other issues.
If at all possible, the new CFO should place a high priority on a thorough review of all major outstanding contracts. Though at first this appears to be an annoying and time-consuming activity, the CFO needs to know right away if there are any hidden liabilities or legal contingencies hidden in the contracts requiring immediate action, or which she should at least be aware of in later determining a financial strategy for the company. By dealing with both cash forecasting and contracts as soon as possible, the CFO will have an excellent grasp of short-term risks, and can then turn to the improvement of her areas of responsibility.