Companies without a CFO are at a disadvantage! Many start-ups, small, and mid-market firms have sophisticated operations, complex cost structures, and other financial challenges just like large companies, only on a smaller scale. They need the expertise of a senior financial executive, but cannot cost justify hiring a CFO until their revenues reach critical mass. Bookkeepers are simply not able to offer experience, sophistication, problem solving skills, and strategic financial management vision the company needs from time to time.
We will present five reasons that a business owner should hire a CFO, at least on an “as needed” basis. In summary, we use an analogy of a doctor versus a fitness coach. You may visit your doctor for an annual check-up or at other times during the year and you try to keep them informed. But the fitness coach is there weekly and monthly helping you achieve your goals. A CFO is a fitness coach for your business.
1). CFO’s need to always be in the fiber of the company, focused on working inside the business, helping generate wealth, ensuring proper capitalization, fostering the right banking relationships, addressing compliance, and focusing on the company as a whole.
2). If you are trying to borrow, a lender wants to ensure you can service the debt over the long-term. Questions like: “Let me see your budget, Let me see your projections, Let me see your last twelve month’s financial statements, cash flow” and other similar questions will be asked. If these are lacking or are not soundly prepared, the banker will not feel comfortable.
3). Another wake-up call is when a spouse or other advisor points out that the business owner has been overly consumed by administrative and financial tasks, and has lost sight of, or has not fully committed to activities that allowed them to start, build, develop, and grow their business in the first place.
4). In every business there are, say, 3 to 10 measures – ‘metrics’ is the buzzword – that effectively give you insight on how your business is doing. What was the profit margin yesterday? What is it going to be in the future? How does this compare with your expectations and plan? What do your dashboard reports tell you?
5). You will want to have a method of estimating your cash flow beyond the short term, so you can be prepared for periods of cash shortage (or excess, to fund growth). Such forecasts should be understood, analyzed, and updated regularly to avoid surprises.
If any of these issues sound familiar, then you should strongly consider at least a part time CFO.