To a CEO of a small to medium size firm, the question of why a CFO or even a fractional CFO should be hired is not unusual. What can a CFO do to help grow the business and not be a burden on the company?
Many of the clients with whom we engage are of this size and many are companies that have only been in existence for a few years. These businesses typically employ bookkeeping services for their basic accounting, but lack the resources to hire a financial officer or sometimes the understanding of what a CFO can mean to the business. These companies are typically characterized by very dynamic chief executive owners who are fully absorbed in all aspects of their businesses and with good reason, as they are the experts in their companies and have the most at stake in the success of the businesses.
Often, the business owner has a vision which includes an accelerated growth rate and pushes hard every day to accomplish that vision. In these circumstances, how does a company such as ours best demonstrate the value we, as CFOs can uniquely add to the business?
Because we are experienced CFOs, we understand the special needs of entrepreneurs, and we understand what we need to do to support their vision for success and growth. It is our mission to add value to the business and we will work side by side with the business owner to do that. We can use our unique skills sets to enhance and support the CEO in ways that others in an organization cannot.
What we want to impart to the CEO is that our role allows them to focus on the strategy and the business. We act as a partner and sounding board, helping the business in its strategic direction and putting all the pieces of the puzzle together to push the organization forward.
The first step is to determine that the basics of the accounting and reporting procedures are in place. This is fundamental and required if the business wishes to grow and seek needed capital through lenders or investors. This step may seem prosaic, but businesses often lack the discipline to create financial statements on a timely and consistent basis. Owners are occupied with the day to day execution of their businesses and may not fully appreciate that these basic steps provide significant added value. Third parties with whom the company may need to work – vendors, customers, lenders, investors, etc., want to know that the numbers they receive have integrity and can be relied upon when they make decisions about credit or additional sales orders.
We do an assessment of the internal controls and recording procedures of the company. Is information entered accurately and timely; are accounts and bank statements reconciled; are inventories physically counted on a routine basis; are vendor prices reviewed for accuracy; etc.?
Our role in this phase is to assure the business’ CEO that these foundational steps will underpin the strategies and growth plans for the company and are not just excess costs for the business.
REPORTING AND ANALYSIS
Once we stabilize the recording process, we assist the CEO by developing accurate and timely information, targeted to the key performance indicators. There is no one size fits all, but our experience as CFOs allows us to quickly determine the information needed for the CEO to make accurate and informed decisions. Our skill sets allow us to use our knowledge and comfort with data and numbers to tell the CEO the successful areas which need to be emphasized and the challenging areas that need amending to stay on a successful path.
We develop daily reporting tools for the CEO to use in making decisions and pushing the company forward, in the proper direction. One of the more important tools is cash management and forecasting. We create a model to track the cash daily and keep a rolling forecast which shows the peaks and valleys and when cash may become tight. This allows the company’s management time to act on this information in a timely manner.
This forecasting allows us to approach capital markets in a more timely and efficient manner, again allowing the CEO to be focused on the strategy and growth.
We also direct the budgeting process for the business, which takes the vision of the CEO and translates it into a financial model that can be used by management and stakeholders to manage the business and develop accountability for those responsible for the operations of the business.
We look to answer questions that are not as obvious until they are examined in a financial report. For example, we can evaluate customer and product profitability and help the CEO analyze where the limited resources of the company should be best allocated. We can help evaluate competing capital or research projects through Net Present Value or Internal Rate of Return models. We, as CFOs, are well-suited to prepare these analyses and share with the CEO for decision making.
Our experience expands into other areas of the business and we can assist the company in areas of human resource management, including:
- Developing organization charts.
- Negotiating medical health care plans.
- Managing the administration of 401(k) and other benefit plans.
- An important feature of our expertise is succession planning and exit strategies.
We can work with management in areas of treasury management and taxes, including:
- Investment decisions in excess cash.
- Managing foreign currency, translations and conversion rates.
- Managing credit and collection departments.
What we hope to let the CEO know is that our capabilities and experience will add substantial value to the organization and help the CEO focus on the dynamics of business growth and strategy.