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.
 
The next priority is measuring company performance. The CFO needs to know about areas of company strength and weakness from a numerical perspective, and this is the best way to obtain the information. Examples of key metrics are gross margins by product line, sales per salesperson, and backlog -- the exact measurements will vary by company. It is best to accumulate this information on a trend line, so research into prior periods will be necessary in order to establish comparative measurements. The CFO can then use this information to devise financial strategies for the company, which is where senior management sees much of the true value of the CFO position.
 
Finally, only after the prior tasks have been completed, should the CFO turn to such simple management tasks as reviewing the staff, establishing training schedules, delegating tasks, and so on. Though many CFOs may be tempted to tackle these tasks first, they only lead to long-term improvements in a CFO's areas of responsibility -- the tasks noted earlier must be completed first, to ensure that there will be a future in which the CFO can manage her staff.
 
The tasks noted here are by no means the only ones a new CFO must address. Other areas worthy of attention include reviewing the auditors' management letter and internal audit reports for clues regarding control weaknesses, meeting with lenders to see if any issues may void future loan renewals, and gaining an in-depth understanding of working capital needs based on prospective changes in company sales volume.
 
Though the CEO may point a new CFO in other directions during her first few months on the job, she should be aware of these possible problem areas -- without proper attention, they can result in a very short term as a CFO!

STEVEN M. BRAGG, CPA, CMA, CIA, CPM, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. He is also the author of The New CFO Financial Leadership Manual and Accounting Best Practices, Third Edition. He resides in Englewood, Colorado.