Delegation versus Abdication – Week #35 of The Financial Operating System®
Business owner CEOs face the question of how much responsibility for their business’s finances they should delegate. Chapter 20, “Delegation vs. Abdication,” emphasizes the importance of small business owner CEOs retaining active oversight of financial management rather than completely delegating this responsibility.
Key points include:
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Risk and Reward:
The CEO/owner ultimately bears the financial risks and rewards, with the most to gain and lose, and therefore should remain actively involved in financial oversight even if hiring accountants or even a CFO to do much of the work.
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Role of CFOs:
- Skilled, experienced CFOs can significantly enhance financial performance.
- However, small businesses often cannot afford full-time CFOs, leading them to use fractional or part-time CFOs.
- Fractional CFOs are limited in what they can directly manage in the business.
- Fractional CFOs also cannot override owners’ decisions and rely on their collaboration to implement effective financial strategies.
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Delegation with Oversight:
While owners can delegate financial tasks, they must ensure they:
- Set clear expectations and monitor the delegated responsibilities regularly.
- Review financial reports and metrics consistently to maintain informed and in control of key decisions.
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Fraud Prevention:
- Owners are advised to conduct regular reviews of financial records, such as bank and credit card statements and reconciliation reports, to detect anomalies or fraud.
- The chapter provides a cautionary tale of potential embezzlement due to lack of oversight, stressing the benefit of vigilance.
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Decision Matrix:
- Implementing a “Decision Matrix” clarifies which decisions require owner approval and which can be handled by other managers. This prevents micromanagement while maintaining control over critical areas.
Takeaway:
The core message of this chapter is that effective financial management in small businesses requires owners to balance delegation with oversight and to avoid abdicating key responsibilities. This way they can remain informed and in control of key decisions and the risk/reward profile of those decisions.
Next Step:
Business owners can self-implement The Financial Operating System. Chapters are available to download at smartbooks.com/resources or you can buy the whole book from Amazon (the marketing firm version or the general business version).
If you would like assistance with implementation or would like to accelerate results for your business, please contact author Cal Wilder at cwilder@smartbooks.com or book a free consultation with our team directly using this calendar link.
