The C Suite of Executives in any business is a critical team upon which the success of an organization is built. Your CFO in particular plays a more crucial role than it is often given credit for. The executive leader of your business’ finances is a linchpin that can hold together the increasing success of an organization or allow it to fall apart. More than just are you paying the right person for the job, are you paying them the right way?

Companies have shied away from paying financial executives using a bonus structure tied to profit as it can incentivize fraud in some scenarios. But incentivizing your CFO to have the same goals as the rest of the company is important to overall growth. Many accountants are trained to have a historical and retroactive approach. Financials are always done a month in arrears, tax returns are done a year after the activity happens. It’s important to have a leader at the helm who’s always looking forward. That means someone focused on not just the current bottom line, but the future one. So why not tie their bonus structure to supporting that future bottom line?

While balancing financial executive bonus structures with ensuring accurate reporting can be a delicate balance, tying an CFO’s salary to department specific performance can help. Accounting departments should have their own budgets within a company. Including staff salaries, office expenses, software expenses, etc. Large companies are frequently budgeting by department but don’t often tie administrative department bonuses to their own performance. Doing so allows an administrative team to have a positive tie to sales growth and cost reduction simultaneously.

To avoid potential discretion issues with accounting, try to tie CFO bonuses to hard and fast metrics. The more clear the numbers, the easy it is to audit the underlying documentation. Don’t design bonus structures that are difficult to calculate or subjective in nature. If you need to have a discretionary piece built in, try a bonus pool that executives must share to avoid ambiguity when determining the end bonus. Make sure your CFO is involved in board decisions and seen as a person of influence within the company to ensure everyone in the organization appreciates the importance of a strong finance department.

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