When to bring on a chief accounting officer

It’s a big world. A big, complicated world, full of tedious accounting and finance work that can make CFOs wistfully dream of a simpler world where they have more time to spend strategizing and looking ahead.

More companies large and small are hiring chief accounting officers (CAOs) to take the load off, Tom Gabbert, CEO of fractional accounting and CFO services provider Milestone, told CFO Brew.

Starbucks, for example, appointed Val Bauduin, its SVP of corporate finance and development, as its CAO in June, shifting the nuts-and-bolts accounting work away from CFO Cathy Smith. Also last month, aerospace company Rocket Lab brought in experienced CAO and CPA Agostino Ricupati.

As a business’s finances grow in complexity, the need for specialized accounting skills becomes clearer, Roei Samuel, CEO of fractional service provider Connectd, told us.

“Depending how quickly that complexity appears, that need for specialization can compound pretty quickly. And those inflection points tend to be operational; they tend to be based on revenue complexity, whether there are multi-entity structures coming into place, M&A activity, regulatory exposure, etc., rather than head count alone,” Samuel said.

Spot the difference. While CFO and CAO are high-level finance roles, they focus on fundamentally different areas. Here’s how Gabbert sees it:

“[The CFO is] expected to do the strategic stuff…but also own the accounting function, so the close process, technical accounting, compliance, integrity of the books, producing meaningful financial statements, all that often falls under the CFO…I think of the CAO more as, they own the books, and they own the close, and they have to have technical accounting chops, and that’s their swim lane,” Gabbert said.

“In an environment of increased scrutiny” surrounding compliance and audits, Samuel said hiring a CAO can help ensure smooth sailing.

“I think the CFOs really have loved this evolution, because when both [positions] exist at the same time, the CFO is really freed up to work as a true strategic partner to the CEO, which CEOs love as well, and the CAO is really holding the accountability for the technical and regulatory function,” he added.

Downstream. Not every enterprise is an international coffee juggernaut, but smaller and middle-market companies have begun to bring on CAOs, too, Gabbert said.

“So revenue recognition standards, lease accounting, increased M&A activity, there’s just a lot more that seems to be going on…I think part of that’s driven by PE ownership, lenders, and sophisticated investors,” he added. “Small or mid-market companies are having to up their game.”

AI’s impact. With AI-enabled accounting applications gaining further traction, both CFOs and CAOs can automate certain aspects of their and their team’s jobs so they don’t “have to spend as much time reconciling, getting things into the system, making sure they’re right, checking it, the QA work,” Gabbert said.

“That frees up the CAO, certainly, and even the team, to focus more on, what are the numbers telling us, and painting the picture, telling the story, looking at trends.”

But the productivity boosts that automation could bring to the CAO, Samuel said, should be weighed against the risks.

“Leaders have another new task, as well as managing the geopolitical macro environment, which is ensuring the responsible and compliant use of AI within their teams, and no more so than within that CAO function, where actually there’s a high desire from teams to automate and would be a huge leverage lift if they could, but also massive risk around that as well,” he added.