Recording financial transactions and reconciling bank accounts are important tasks for running your day-to-day business and getting your taxes done. Turning that financial data into useful information for making business decisions takes a specialized skill set. It takes analytical and management skills to plan for growth and adopt a long term view.
A Chief Financial Officer, or CFO, has the experience and expertise to provide the analysis and financial direction that businesses need to make informed financial decisions and detect impending issues before they morph into expensive crises. Most small businesses can’t afford a fulltime CFO, but they often can afford to engage a CPA firm or financial consultant to perform the CFO role for a few hours a month.
So, when is it time to engage a part time CFO? Small businesses need a CFO when:
- Cash Flow Isn’t Flowing
Knowing how much cash is available to run and invest in your business is crucial to keeping your doors open. Dire and expensive surprises happen to businesses that can’t clearly project their bank balances, revenues coming in, and payments going out. If your monthly cash flow isn’t flowing in and out like you think it should, a CFO can establish cash flow projections that provide reliable information.
- Your Budget is Last Year Plus 5%
A budget spells out the financial resources needed to deliver your services or product, maintain your infrastructure, and invest in growth or improvements. If it’s just based on last year, it probably doesn’t address all your financial objectives or changes in your business. A CFO can help you build a budget that effectively addresses all the essential elements for costs, revenues, and short- and long-term investments in your business.
- Price Doesn’t Cover Costs
Charging the same price as the competition might work for the other guy, but if it doesn’t cover your costs you won’t be in business for long. Pricing your service or product requires knowing your costs and understanding the value that distinguishes your business from that “other guy”. A CFO can examine your costs, identify the fixed, variable, direct and indirect cost components, and advise you on pricing and profit margins.
A part time CFO is a business investment in sustaining and growing your business. Her or his skill set and experience focus on the analysis to make higher-level financial decisions needed to plan for growth and sustainability. Investing in a part time CFO will pay you back over and over again, as your business thrives and grows.