What’s the difference between a bookkeeper and a Chief Financial Officer (CFO)? I suppose it is a matter of interpretation.  No pun intended!  Every business (and yes, insurance agencies as well ) no matter how large or small has the same essential accounting functions.  Therefore, almost every agency needs a bookkeeper, CFO, and CPA. Surprised? It will all make sense in a minute. Let’s think of these three needs as Tactical, Strategic, and Universal.

Tactical:  Every organization needs to keep a set of financial books – think debits and credits.  Clients need to be invoiced, cash received must be posted and deposited in the bank.  Carriers and vendors need to be paid.  Let’s not forget to pay the employees as well; payroll must be processed.  At the end of each month, bank statements along with the general ledger are reconciled to ensure the books are in balance. A bookkeeper’s work life is generally quite routine.  There are daily processes – things that need to be posted on a daily basis, weekly or bi-weekly processes like payroll, and monthly processes like closing the month and reconciling bank and GL accounts.  Get the routine? One month looks pretty much like all the rest.

Universal: If nothing else, every agency regardless of its legal structure must file a tax return. The tax return is most likely prepared and filed by a CPA. When it comes to taxes, it’s generally best to leave it to a professional who is well versed in the ever-changing world of tax law. In addition to standard tax filings, CPAs will review or audit financial statements that are often required by financial institutions and lenders.  They also might advise on tax strategies, financing options, and general business advice. A good CPA fills a need that exists for almost every agency and they work congruently with your bookkeeper. You need both.

Strategic:  If the bookkeeper is performing all the posting and the CPA is filing the taxes and producing formal financial statements, what’s left for the CFO to do?  A lot.  Perhaps the most important role of the CFO is to interpret and strategize.  The CFO is charged with interpreting how the agency is performing and recommending adjustments to grow faster, increase profitability, and find opportunities to improve financial and operational performance.  The CFO creates the annual budget and reports all variances and works to resolve any issues.  Beyond the budget, the CFO may be responsible for compiling internal financial statements as well as key performance indicators.  Yet the CFO’s value is not in the creation of budgets, financial statements, and KPIs; it is in the interpretation of their meaning and then determining the course corrections necessary to improving results.

If you are looking to grow and scale your agency while remaining profitable adding a CFO to your Bookkeeper/CPA mix is just smart business.  That doesn’t mean you need to hire any of these roles in house.  All of these needs and positions can now be outsourced.  The world has changed, and new options are available for your agency.  It’s likely time to reevaluate your needs and options to fulfill them.