Summary
Whether an engineering firm needs a CFO can be read from the number of decisions in the next two years with an impact above 2 percent of revenue, and from who is working those decisions through now. In a worked example with €7.2 million revenue and 55 employees, a second office requires €566,905 of cash in the first year, where the director had budgeted €350,000. A controller keeps the figures up to date; he rarely does that calculation on his own initiative, and for that calculation you need a CFO, employed or on demand.
An engineering firm with 55 employees and €7.2 million revenue wants to open a second office, 90 kilometres away, where two large clients are based and competitors do not yet have an office. The owner-director put the plan together in an afternoon: €250,000 for fit-out, IT and recruitment, and €100,000 for the first-year loss. He asks the bank for €350,000. The controller has supplied the annual figures and the accountant has compiled them. The bank's account manager now asks for a 24-month cash flow forecast, and there is none.
At that moment the question comes up: do I need a CFO? The director has a controller on a salary of €85,000 and an accountant, and the accounting software is kept up to date on time. He sees his revenue, his billability, his profit and his bank balance. How much cash the second office requires before it makes a profit is not written down anywhere.
Whether you need a CFO can be read from the number of decisions in the next two years with an impact above 2 percent of your revenue, and from who is working those decisions through now. A €12 million firm that has been doing the same thing for ten years, with one office and no bank debt, can manage with a good controller. If a €7 million firm opens an office, applies for a loan, introduces a new time registration system and needs the director's holding structure reviewed, it needs someone who puts all of that into one cash flow statement. We have already written about what an external CFO firm does that a bookkeeper does not; this piece is about the question before that: is the controller you already have enough?
What is the difference between a controller and a CFO in an engineering firm?
A controller makes sure the figures are correct and on time: the month-end close, time registration, post-calculation per project, invoicing of work in progress, the VAT return and reconciliation with the accountant. The controller reports what has happened and flags what deviates from the budget.
A CFO works through in advance decisions that cost money before they make money: how much cash an expansion requires, how it is financed, which rates the margin needs, what an acquisition is worth, and in which order the director settles his private, holding and business interests. Between the two sits the layer that recruiters call "finance manager": a controller who also manages the team and deals with the bank. English-language vacancies call the first role financial controller, and the distinction controller vs CFO runs along the same line there.
Whether a controller grows into that role depends less on the controller than on the director. Wolf, Weißenberger, Wehner and Kabst (2015) studied 112 German heads of controlling and their managing directors to see whether controllers act as business partners in decision-making, and found that controllers' behaviour is strongly determined by what management expects of them (Journal of Accounting & Organizational Change, peer reviewed).
Hoitash, Hoitash and Kurt (2016) show in the Journal of Accounting and Economics (peer reviewed) that companies in growth sectors with a CFO from an accounting background invest less in research and fixed assets, use external financing less often and are valued lower as a result; in sectors without growth the same CFOs are more cost-efficient and valuations are higher. Anyone who wants to grow therefore needs a different financial profile from someone who wants to protect their margin. We see that the controller of a firm like this is usually of the second type: hired to guard the figures.
Why the finance function lags behind growth
Greiner (1998) described in Harvard Business Review (professional journal) how the management practice that works in one growth phase causes a crisis in the next.
Phelps, Adams and Bessant (2007) showed in the International Journal of Management Reviews (peer reviewed) that such phase models, with their fixed and predictable sequence, do not describe reality well. They work with tipping points: moments at which the business encounters a problem beyond its existing knowledge. According to them, whether a business gets through such a tipping point well depends on its ability to absorb the missing knowledge. A second office is such a moment, and the loan that goes with it and managing people 90 kilometres away come at the same time.
That the CFO role itself arose from such a tipping point is shown by Zorn (2004) in the American Sociological Review (peer reviewed): at US corporations the position emerged as a response to the financing of acquisitions. With firms between €5 million and €15 million revenue we see that the finance function is built on the previous phase: a bookkeeper who became controller when the firm had 25 people, and who at 55 people still produces the same monthly report, just with more lines.
The worked example of an engineering firm with €7.2 million revenue and 55 employees
In this worked example the firm has 45 billable engineers and consultants and 10 indirect staff: two directors, five people in project support and administration, one in business development and two in HR and quality. The billable staff write an average of 1,450 hours a year at an average rate of €110. That gives €7,177,500 in hours, plus €22,500 of recharged costs: €7,200,000 revenue.
| Item | Amount (euro) | Percentage of revenue |
|---|---|---|
| Revenue (45 FTE × 1,450 hours × €110, plus recharged costs) | 7,200,000 | 100 |
| Staff costs (55 FTE × €86,000, including employer's charges) | 4,730,000 | 65.7 |
| Premises | 390,000 | 5.4 |
| Other operating costs (cars, IT, training, insurance, marketing) | 1,280,000 | 17.8 |
| EBITDA | 800,000 | 11.1 |
| Depreciation | 130,000 | 1.8 |
| Interest | 20,000 | 0.3 |
| Profit before tax | 650,000 | 9.0 |
| Corporate income tax (19 percent on 200,000, 25.8 percent on 450,000) | 154,100 | 2.1 |
| Net profit | 495,900 | 6.9 |
Corporate income tax (vennootschapsbelasting, VPB) follows the 2026 rates as published by the Dutch Tax Administration (government source): 19 percent up to and including €200,000 of profit, 25.8 percent above that. The assessment for this year only comes next year; this year the firm pays a provisional assessment (voorlopige aanslag) based on last year's profit.
The firm invoices monthly based on hours written and clients pay after 58 days on average. With 21 percent VAT added, receivables average 7,200,000 × 1.21 × 58 / 365 = €1,384,373. On top of that there is work in progress: hours already written but not yet invoiced, 25 days on average, 7,200,000 × 25 / 365 = €493,151. Together €1,877,524, 26 percent of revenue, which the firm pre-finances before a client pays anything. Every euro of new revenue therefore requires roughly 26 cents of working capital.
This firm is healthy: it makes a 6.9 percent net margin and repays the existing loan at €60,000 a year.
At which five tipping points does an engineering firm need a CFO?
The tipping points below apply in combination. A good controller can usually handle one. If two are in play at once, it gets tight, and from three onwards the firm needs someone who works them through together.
A second office or a second activity
In the worked example the new office starts with 8 employees, who join spread over the year, so that on average 6 FTE are present. New people at a new location are 55 percent billable in the first year. Revenue in year one is then 6 × 1,450 × 0.55 × 110 = €526,350. Costs are 6 × 86,000 = €516,000 in wages, €80,000 rent and €110,000 other costs, together €706,000. The loss in year one is €179,650, almost double what the director had budgeted. Then there is working capital: €526,350 of new revenue × 0.2608 = €137,255 of receivables and work in progress. With the one-off €250,000, year one therefore requires 250,000 + 179,650 + 137,255 = €566,905 of cash.
In year two there are on average 14 FTE, 75 percent billable: 14 × 1,450 × 0.75 × 110 = €1,674,750 revenue against 14 × 86,000 + 90,000 + 180,000 = €1,474,000 costs. The office makes €200,750 profit before tax. But revenue grows by €1,148,400 and that requires €299,465 of extra working capital, so on balance year two still costs €98,715 of cash. After two years the office has absorbed €665,620. Only in year three, at 16 FTE and 78 percent billable, does it generate €242,207 of cash.
The director had budgeted €350,000. The difference from the requirement after two years is €315,620, and that comes out of the overdraft facility, at a moment when the bank has just granted a loan based on a different plan. This is the calculation the controller did not make, because nobody had asked him to. We described this mechanism earlier in cash flow as a brake on growth.
External financing
The bank asks for a 24-month forecast and wants to know how the loan will be repaid if the office becomes profitable a year later than planned. With the calculation above, the application becomes €500,000, seven years straight-line, at 5.8 percent; the remaining €165,620 comes from the firm's own profit, which after the €60,000 repayment on the existing loan leaves €435,900 a year free if the existing firm keeps running at the same level. Without the calculation the application would have been €350,000, and the firm would have been back at the bank eighteen months later.
Revenue above about €5 million
There is no fixed revenue level above which a CFO pays for itself; the weight of every decision grows with revenue. At €7.2 million, a 1 percent rate increase is €71,775 a year, at €2 million revenue €20,000, and in this worked example a single rate decision that has been worked through therefore pays back an on-demand CFO costing €50,400 a year. How growth and margin weigh against each other at a service provider of this size is set out in the article on the Rule of 40 at an IT service provider.
An acquisition or a sale on the horizon
Anyone who wants to acquire another firm or sell their own within five years needs figures a buyer believes: normalised EBITDA, a director's salary at market level, work in progress that is correct, and a three-year forecast. In the worked example this only comes into play if the office succeeds.
A director who spends more time on figures than on the business
The director in the worked example spends 10 hours a week checking invoices, dealing with the bank, cash planning and costing large quotations: 460 hours a year. Making half of that billable at €150 is €34,500 a year. The heavier consequence: those 460 hours did not include a single hour for the second-office calculation; this week's invoices came first.
| Tipping point | The question you ask yourself | In the worked example | Who can handle this |
|---|---|---|---|
| Second office or activity | How much cash does this require before it makes a profit? | €566,905 in year one, €665,620 after two years | CFO (employed or on demand) |
| External financing | How much do I ask for, and how do I show that I will repay it? | €500,000, seven years, 24-month forecast | CFO, with the controller for the figures |
| Revenue above about €5 million | How much does one percentage point weigh in my decisions? | 1 percent on rates = €71,775 a year | Controller, as long as the other points are not in play |
| Acquisition or sale | Are my figures defensible to a buyer or seller? | Not yet relevant | CFO |
| The director and the figures | Am I spending my hours on keeping track or on deciding? | 460 hours a year on keeping track | Accounting team and controller, before a CFO comes in |
What the bank wants to see for a loan for a second office
Minnis (2011) studied US private companies in the Journal of Accounting Research (peer reviewed) and found that companies with audited financial statements pay significantly lower interest and that banks give more weight to audited figures when setting the rate. Cassar, Ittner and Cavalluzzo (2015) found in the Journal of Accounting and Economics (peer reviewed), for small businesses, that accrual-based accounting goes together with a lower interest rate, especially with a low credit score or a short relationship with the bank, while the likelihood of the loan being rejected stays the same.
In the worked example, an interest rate half a percentage point lower on €500,000, seven years straight-line, is €2,500 in the first year and €10,000 over the full term. You do not hire a CFO for that; the value of the bank conversation lies in the question the account manager asks: what happens to cash in month 18? The answer, €315,620 more than budgeted, determines whether the loan fits. How that works out for a business that grows faster than its profit allows, we described earlier for an installation company; the forecast the bank wants is in practice a rolling forecast that moves forward one month every month.
When is a good controller or better bookkeeping enough?
We rarely see this half of the answer written down, even though we are a CFO firm ourselves. A controller is enough if the next two years contain no decision with an impact above 2 percent of revenue, €144,000 in the worked example. A firm growing 5 to 8 percent a year from one office, with no significant bank debt, not considering an acquisition or sale, and whose director receives and understands the monthly figures on the tenth working day, does not need a CFO. It needs a controller who tracks billability per employee and per team, post-calculates the margin per project and per client, completes the invoicing of work in progress within the month and checks the rates per client against costs every year. Which figures those are is set out in the five financial KPIs that professional services firms neglect, with utilisation rate per employee first.
A CFO does not solve an accounting backlog either. We come across firms that bring in an on-demand CFO while time registration is two weeks behind and work in progress is valued once a quarter. The CFO then works with figures that are wrong. The order is fixed: the books close within ten working days and a controller draws management information from them. A CFO only comes in for the decisions that go beyond that. Anyone who wants to make projects profitable starts with post-calculation; the financing structure comes after that.
What a controller, an on-demand CFO and an employed CFO cost
The market figures below come from the 2026 salary guide by Robert Half (market report). They are the median, the 50th percentile. The guide does not say whether bonus and holiday pay are included and makes no distinction by company size; the 30 percent employer's charges are our assumption. The rate for an on-demand CFO is our own indication, and we have an interest in it: we provide that service ourselves.
| Role | Median salary 2026 in euro (Robert Half) | Annual cost in euro including 30 percent employer's charges | What you get for it |
|---|---|---|---|
| Employed business controller | €85,541 | €111,203 | Month-end close, post-calculation, KPIs, reporting |
| Employed finance director | €141,256 | €183,633 | Controller plus financing, forecasting, bank and covenants |
| Employed CFO | €170,879 | €222,143 | Full financial direction: financing structure, acquisitions, sale, holding |
| On-demand CFO, 2 to 4 days a month (our indication, €1,400 per day) | n/a | €33,600 to €67,200 | Working through decisions, bank file, forecast, pricing policy; the controller stays |
For the firm in the worked example, an employed CFO is €222,143 for a question that may be 40 days of work in year one. An on-demand CFO for three days a month costs €50,400, alongside the controller at €111,203. Against that €50,400 stands the gap of €315,620 in the original plan. In English-language vacancies and among providers, an on-demand CFO is also called a fractional CFO, part-time CFO, outsourced CFO or CFO as a service; the service is the same, a CFO for a fixed number of days a month alongside the controller.
What is acceptable, and when you need to reach it
In our experience, an on-demand CFO starting at a firm like this has a fixed rhythm, and the director may hold him to it.
| Moment | What needs to be in place | What is acceptable |
|---|---|---|
| After 1 month | Monthly figures on the tenth working day, including billability and work in progress | Deviation between monthly figures and the later annual accounts below 5 percent of EBITDA |
| After 3 months | 24-month forecast, with the second office as a separate scenario | Cash requirement per quarter known; first meeting with the bank held |
| After 6 months | Bank file complete, loan agreed, covenants set | Forecast for quarter one deviates less than 10 percent on EBITDA |
| After 12 months | Office steers on its own figures; pricing policy for next year set | Office loss in year one within 20 percent of plan (in the example between €143,720 and €215,580) |
The 20 percent margin on the office's loss is deliberately wide, because recruitment and first assignments cannot be planned precisely in the first year; what counts is that the deviation is explained every month.
Do the decision test yourself in an hour
You do not need to hire a CFO to answer whether you need one. Take a sheet of paper.
- Write down every decision you want or need to take in the next 24 months that affects more than 2 percent of your revenue, in euros: an office, a loan, an acquisition, a rate change, a new time registration system, a distribution from the holding company, buying out a partner. At €7.2 million revenue the threshold is €144,000.
- Next to each decision, write who is working it through now, and whether that calculation already exists. "The accountant" only counts if they produce a 24-month forecast.
- Count the decisions without a calculation. Zero or one: your controller is enough, provided the monthly figures arrive within ten working days. Two: have the controller build a forecast and bring in two days of external help for the review. Three or more: you need a CFO, and for a firm of this size that means on demand.
- Check the basics before you bring anyone in: does the month-end close come within ten working days, is time registration closed weekly, is work in progress valued monthly, and do you know last month's billability per employee off the top of your head? Two noes: this first, then the CFO.
In the worked example the director arrives at five decisions: the office (€566,905), the loan (€500,000), pricing policy (€71,775 per percentage point), a new time registration system (€150,000) and the loan he has personally outstanding with his own bv (€300,000), and there was no calculation for any of the five.
When this story does not apply
This reasoning assumes a firm with one owner who makes the decisions. In a partnership firm with eight partners who each have a vote, everyone calculates differently, and a CFO only helps there if the partners agree in advance that his forecast is the basis for decision-making. For a firm that mainly does fixed-price projects it is also different: there the risk lies in project costing and extra work, and the first investment belongs in a project controller; someone who works through financing structures comes later there.
The worked example is also a model. The factor of 26 cents of working capital per euro of revenue belongs with 58 days of receivables and 25 days of work in progress; a firm that invoices in advance, as is common for government contracts with stage payments, has a lower factor and a smaller cash requirement. The 55 percent billability in the first year is also our assumption, and anyone opening with experienced people who bring their clients along will be higher. The same applies to the 5.8 percent interest and the €1,400 per day for an on-demand CFO. Finally, the average of 1,450 hours per FTE hides the fact that a senior may be at 1,250 hours and a junior at 1,600; anyone who does the calculation per team sees what the new office actually runs on in its first year.
What the tax plans for 2027 do to the order of your decisions
The fifth decision from the test comes from the holding company. On 29 September 2026 the Dutch cabinet presented additional measures to the 2027 Tax Plan (Belastingplan 2027), reports Forvis Mazars (adviser's page): under that proposal, the rate in the second bracket of box 2 goes from 31 to 29.2 percent in 2027 to 2030, and the threshold for borrowing from your own bv falls in five annual steps of €80,000, from €500,000 to €420,000 in 2027 and €100,000 in 2031. These are proposed measures from a letter to Parliament; both Houses still have to vote on them, so what is written here may still change.
For the director in the worked example, who has borrowed €300,000 from his own bv for a private investment, the proposal means that he is €40,000 above the threshold in 2029, €120,000 in 2030 and €200,000 in 2031. He can repay, and then that money has to come from somewhere, or pay out dividends in the years with the lower rate, and then that money leaves the bv while the second office is asking €665,620 of it. That is first and foremost a question of sequence, and a CFO belongs in the room for it: first the office and the holding in year three, or the other way round with a larger loan.
We do not give tax advice or legal advice. The questions for your tax adviser are these: what happens if the proposal is adopted and the threshold falls below my debt in 2029; is repaying or paying a dividend more advantageous in my situation, and in which year; how does a dividend distribution relate to the solvency requirement the bank sets for the new loan; and will there be transitional rules for a debt that already exists?
Frequently asked questions about CFO or controller at an engineering firm
When does a business with €7 million revenue need a CFO?
A business with €7 million revenue needs a CFO as soon as three or more decisions with an impact above €144,000, 2 percent of revenue, are coming up in the next two years and nobody in the business is working those decisions through. A second office, a bank loan, a new time registration system and a review of the holding structure at the same time is such a situation. At this size that is usually an on-demand CFO, alongside the controller.
Is a controller enough for an engineering firm with 55 employees?
A controller is enough for an engineering firm with 55 employees if the firm is growing from one office, has no significant bank debt, is not considering an acquisition or sale, and the managing director receives the monthly figures within ten working days. As soon as the firm opens an office or applies for a loan, that is no longer enough.
What is the difference between a controller, a finance manager and a CFO?
A controller makes sure the figures are correct and on time. A finance manager does that too, manages the accounting team and deals with the bank. A CFO works through in advance decisions that cost money before they make money, such as an expansion, a financing, an acquisition or a partner buyout, and negotiates about them with the bank. In the worked example, a firm of 55 employees, the first two are one person and the third comes on demand.
Do I need a CFO to get a bank loan for a second office?
No. The bank asks for a 24-month forecast with the office's cash requirement per quarter, and you decide who does that calculation. In the worked example that requirement is €566,905 in year one and €665,620 after two years, where the director had budgeted €350,000. The lower interest from better figures is small, €10,000 over seven years. The benefit lies in the size of the loan, which then matches the actual cash requirement.
Should I hire a controller first before bringing in a fractional CFO?
Yes. A CFO works with the figures the accounting team and the controller supply; if time registration is behind, he is working with figures that are wrong. The books must close within ten working days and a controller must draw management information from them. A CFO comes after that, for the decisions that go beyond it.
Further reading: what an external CFO firm does that a bookkeeper does not, the five financial KPIs that professional services firms neglect, rolling forecasts instead of an annual budget, why a profitable installation company gets stuck at the bank as soon as it grows faster than its profit allows and how an IT service provider reads the Rule of 40 when its margin falls from 15 to 9 percent in a growth year.
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