Businesses often come to the point where they need to have clear visibility on their financial management and growth prospects. Several areas come together to influence the day-to-day operations, but you’d want to quantify the opportunities and risk factors that determine the company’s financial health.
Regular bookkeeping keeps things in check, at least from the compliance and tax perspective. However, rudimentary cashbooks can only take the business so far. Much advanced financial management is necessary if you have plans to grow higher and further in the industry.
A Chief Financial Officer (CFO) comes in to collect critical financial data and re-integrate into the business’ operations for the subsequent growth projections. They typically have more experience in your business’ industry and offer more depth than typical account books would.
However, what services can you realistically expect from a CFO? How can you employ such services, and at what cost? Read our thoughts and tips on CFO service definitions in the paragraphs below:
Chief Financial Officers are a tried-and-true solution for businesses that need a push to the next level and beyond. However, the position is highly specialized and not cheap. It means that small-to-medium companies may have a more challenging time employing a CFO full-time. But what if the business doesn’t need to hire a CFO full-time?
Employing CFO services can be an exciting proposition, as it involves getting the benefits that chief financial officers offer without hiring one full-time. Luckily, there is an active market for outsourced CFO services that immediately put the business back on track at a fraction of the price you’d pay were you to hire.
Areas CFO Services Help Out With
Businesses need to understand their current situation to forge a way forward. Also, hiring an outsourced CFO Service makes sense if the provider and the company know the data they’ll be working on.
Therefore, you’ll need to look at the raw financial numbers and see how they denote profitability. Also, the business owner has to consider if the company is scalable and to what extent. This helps shape your expectations when the CFO services come in.
When you bring in the services, some of the areas with which an outsourced CFO service can help out includes:
- Financial Reports: Most small and medium businesses think they have a clear picture of their financial reporting, but do they? Having adequate reports allow you to monitor every operation aspect, but companies tend to miss out on a few details on the spreadsheets. For instance, a small financial department cannot singlehandedly provide all the necessary KPIs (Key Performance Indicators) and may not account for several operational cost analyses against sales and revenue. As a result, financial spreadsheets alone – with their inadvertent inaccuracies – won’t help you in the long run.
- Operations Management: You most likely started a business for profit-making and not necessarily for balancing the financial books. However, it means you would be starting on the back foot as you try to manage employees that would handle the books for you. Since the numbers they’d crunch aren’t the end goal you want for the business, there is a tendency to slack off on them. On the other hand, you’ll have to make the financial decisions necessary for the business’ growth, such as overhead cost, operating cost, etc. It mostly leaves you in a “Catch 22” situation, and a CFO service can readily help.
- Accountability: Businesses often face accountability issues as they expand their operations. It happens as their financial aspects become more extensive due to more transaction and sales volume. You become saddled with scaling up information and performance standards to avoid being exposed to fraud. It is more prevalent in family-owned businesses seeking to transition into a bigger venture. As a rule, No one entity must have the most financial control in the company, especially when the goal is to grow from level to level. CFO services can come in to set up the proper checks and balances by handling and optimizing the businesses’ accounting operations.
CFO Service Functions
It helps if you know the areas where CFO services can help out in the business operations, but how do they help in reality? Below are some essential functions business owners can expect when hiring CFO services:
- Granulated Reports: CFO services generate granulated reports by the month or week for the business. These reports are often in simple, comprehensive formats enabling the company’s management to have clearer visibility on the business’s current state and prospects.
- Budget Projections: CFO Services also provide budgetary projections, which can better inform your business’s future decision-making. The predictions will also help with short and long-term goals and equip the management to “get all hands on deck.”
- Financial Coaching: You may also get financial coaching from CFO services, with tips on practical investment approaches which would enable the business to attract lucrative expansion opportunities.
CFO Service Forms
You can hire CFO services in various forms, which you can expect since you don’t have to hire a chief financial officer full-time. Some of the common kinds of CSO service you can find includes:
- CFO Consortium: These are bodies that provide CFO services within a state or a region. Companies would likely apply through a government process.
- Virtual CFO: These are agencies that offer CSO services remotely. They are suitable for long-term financial needs but wouldn’t proffer day-to-day services. However, they’ll interface with controllers in the company every week.
- SS CFOs: These are Single Source CFO services offered by a one-person setup. They provide CFO services for multiple businesses across various industries.
- Staffing Firms: Staffing firms offer CFO services, although in a more general setting. As a result, it might not accurately meet your business needs.
Running a business is already no mean feat, but it takes a lot more to set it on the right path for growth, transcending “balancing the books” and “breaking even.” The answer often lies in the companies’ financial management department. However, you need a CFO to unlock the hidden potential your regular bookkeeping might not have detected.
The tips mentioned above can guide small and medium business owners in preparing the business for the push a CFO would bring. It also helps you consider the various aspects in the company which a CFO can fix: processes that can get tightened and operations that can get streamlined for optimum growth index.
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