B2B CFO^®    (877) 4-B2B CFO

David works as a contract CFO at a client for which we offer audit services. David has provided great benefits by assisting the company and training them to focus on cash flow and other operating dynamics essential to the Company's business. He has enabled them to implement policies and scorecards that help them focus on crucial factors for moving the business forward. As a result the company has grown stronger even in today's poor economic environment. He is truly an asset to the 

Glenda Leduc  - Leduc & Phillips LLc CPA Firm

Desperate times lead to illegal measures

A former bookkeeper for a small insurance broker in Georgia was recently charged with stealing more than $1 million to pay for trips and shopping sprees.  Credit card bills showed she traveled to Disney World, New York, Washington, Honolulu, New Orleans, San Francisco, Lake Tahoe, and (of course) Las Vegas.  She apparently under-booked revenue invoices to create a secret fund of excess cash, and then forged checks  to siphon off the funds over a period of five years. 

There were more red flags here than the watch-listed "Christmas Terrorist’s" cash-only, one-way, no luggage, near disastrous plane trip from Nigeria to Detroit.  But you have to ask…what were the owner’s thinking?  Probably that she was a gem, and she has “never taken a sick day – ever”.  How can $1 million disappear in a business that probably bills no more than $ 3 - 5 million a year?

PriceWaterhouse Cooper has conducted an annual study on economic crime for the past ten years.  A third of the participants reported suffering an economic crime in the last year – theft and accounting fraud being the most common and seeing the sharpest rise.  The rise in fraud stems from a mixture of increased opportunities and growing incentives.  Companies have reduced the number of employees who monitor workers at a time when employees are more tempted to break the rules because their living standards are eroding and their jobs are looking shaky.  Economic crime has dismal consequences for everything from company morale to financial performance: a quarter of companies that reported accounting fraud believed it had cost more than $1 million.  What can be done to stamp out the problem?  PWC believes that senior managers should play a more active role in combating the problems.  Owners and senior executives are apparently much less likely to notice economic crime than lower level employees.  More realistically most companies should consider hiring a part-time CFO.  In many cases, for less than the cost of the monthly phone bill, a B2B CFO® can help deter and prevent economic crime from taking place.  So, what should the small insurance broker have done to prevent this $1 million calamity – which calls into question the integrity, business savvy, professionalism and continuity of the firm?

A multi-stage approach would focus on internal control, on regular review of banking records and reconciliations, on regular dashboards for key metrics, on questioning revenue levels and low profit margins and benchmarking against industry standards.  The simple presence of an outside CFO can often be enough to deter opportunistic attempts to steal company cash.

To discuss your business and dvelop a fraud prevention plan, call David Kirkup – Partner at B2B CFO® on 404 348 0326 or dkirkup@b2bcfo.com.

(This was originally a presentation I gave to a group of company owners. It was an offer they could not refuse.  This article was first published in 2008 and is back because I'm a believer in re-cycling.)

My wife and I were watching the Sopranos final season on CD and I started thinking about why we like the show. Of course there's the underlying dark comedic theme, and the realistic inside dealings of the family, as well as many New Jersey scenes familiar to me from my time there. My wife, who is in the psychology profession, pays professional attention when Tony Soprano visits his therapist. But as I watched the final episode I also realized that one thing that frustrates me about Tony.... His organization suffers from a lack of financial discipline, effective controls, crisp procedures and timely financials. He really needs a part-time CFO!

In Season Six - the final episode, the New York mob is making an aggressive takeover bid for the New Jersey family - which involves the forcible and permanent retirement of Tony Soprano, his consiliare - Silvio Dante, and heir apparent - Bobbie Baccala. As the senior executive team makes a break for the off-site location, it becomes increasingly clear that the financial side of the organization is terribly weak. Consider:

• Shortly before being shot by NY wiseguys, Sil is seen stuffing the Bada Bing payroll into his bag. So.. who will be making sure the staff get paid? And how does Tony ensure that this enterprise continues, and that he does not lose key staff. Are there effective procedures to cope with this kind of risk?
• While Tony's main W2 occupation is as a "waste management consultant", the family enterprise is a mostly cash business. Revenue in the form of thick envelopes arrives regularly, but I don't believe they are using QuickBooks or another reputable financial system.
• When earners deliver the monthly revenue, envelopes are described as "heavier or lighter than usual", but no serious effort at budgeting and variance tracking is evident.
• The family's business interests are widespread with many divisions, products and revenue streams. Competent analysis of profit margins is essential to maintain focus on the most profitable earners.  Often considerable resources can be wasted on losing ventures such as the declining "security and protection" business.
• There is little evidence of tax planning, and retirement investment mostly seems to consist of football spreads and the ponys. While Tony may disdain tax returns, it's a fact that the IRS has put more mob members away than the FBI.
• As a mob boss, Tony's role is that of a Finder . He guides and develops the business. But because of the lack of a strong supporting CFO he constantly finds himself immersed in detail, and has to act as a Minder. Inevitably this leads to longer hours, more stress and less time with the (real) family.

By any measure, Tony is a born leader. He has confidence and charisma, brains and empathy, inspires loyalty and reverence, and his power is rarely questioned. Tony's not afraid of confrontation... "I got some news you're not gonna like." And in the end, like most Business Owners, he's also something of a philosopher:

"All due respect, you got no idea what it's like to be Number One. Every decision you make affects every facet of every other thing. It's too much to deal with almost. And in the end you're completely alone with it all. "

So I thought it would be interesting to talk about what Tony Soprano, like any business owner with revenue up to about $50 million, should look for in a part-time CFO .

Your CFO should be a:

Technician: A professional accounting designation (ACMA, CPA or MBA),  and/ or many years of experience is the foundation. Your CFO has to have the accounting, process and tax knowledge needed to steer a company's finances. The ability to match wits with the government can also be helpful.

Financier: A good CFO not only runs the process for fundraising, but should also bring financing into the company. He will have a track record of originating and closing deals and should have a list of potential financing sources that are eager to take a call. As the Soprano enterprise grows it will become increasingly important to fund growth with legitimate backing.

Closer: Your CFO can be a key member of your sales team, available to help negotiate and close sales. The CFO can be actively involved in managing and optimizing your sales pipeline and should be capable of being deeply engaged in sales. This might involve convincing larger customers that you are indeed a serious and viable business.

Operator: The CFO should take a leading role in bringing operational quality into your company. This doesn't mean bringing in ISO 14001 or whatever the latest flavor is. That means installing just the right amount of process, reporting and structure. Not so much that it slows you down, but enough so that you smoothly run and grow the machine.

Lawyer: It will be a long time before you have in-house counsel and you don't want to go to your outside law firm every time you get an NDA to sign, or sign up another customer for the protection business. So, choose a CFO who's comfortable reviewing legal documents.

IT: No, you don't want your CFO troubleshooting Windows Outlook on your desktop, but you do want someone who's savvy enough in information technology to take the lead in driving your information systems.

Cheapskate: This isn't usually a problem with CFOs but you want someone who can stretch your dollars by knowing where to cut expenses without harming your business.

Consiliere: Your CFO should be a trusted advisor. As Tony Soprano found - running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

As you probably noticed, only one of these points (the 1st one) actually deals with accounting. Despite their accounting beginnings, the best CFOs go far beyond this foundation. They are capable of adding value to every aspect of the business. Judge yours accordingly and make sure you have a high impact B2B CFO.

Contact David Kirkup, Partner with B2B CFO on 404 348 0326 or dkirkup@b2bcfo.com.

Why should you budget?  Because “it’s something we do every year,”or is it a “big stick we use to cane those who don’t perform.”  Is this really the intended purpose of budgeting? How about “we budget in order to achieve our strategic goals”?

Budgeting is part of a larger process called “performance management.”  Performance management is a logical approach to the way organizations direct and manage resources to achieve objectives. Thus, budgeting’s central role is to allocate resources to the activities that drive value.  Organizations must therefore concentrate on two questions: 

• How can we beat last year’s performance?
• What is our competition doing, and how can we beat them?

The answers to these key questions typically appear in a strategic or operational plan, against which budgets can be set and monitored for effectiveness. But if that plan is vague or incomplete, the resulting budget will not help the organization implement its strategy.

Most organizations have plans. There is, however, a huge difference between a good plan and a bad plan. A bad plan, for example, is one that focuses only on costs and revenues. This plan provides no guidance for the organization regarding how it is to achieve the revenue targets. There is no linkage between the high level goals and the day-to-day activities necessary to achieve them.

Performance management is all about managing the activities that generate results. Those activities should directly support the organization’s strategic objectives. Therefore, a good plan acts as a road map, showing the organization how it should move from its current level of performance to the desired level of performance, based on the perceived economic environment.

According to Answerthink, a management consultant firm there are eight planning best practices of high-performance organizations:

1. Good plans answer directional questions. Some are, “Where are we going?,” “How are we going to get there?,” and “What happens if things do not turn out as planned?” High-performing organizations do not assume that Plan A will always work. Instead, they prepare alternatives in case they are needed.
2. Good plans typically address three activities. They are (1) how will we maintain current operations, (2) how will we improve the efficiency of current operations, and (3) which new ventures or initiatives the organization will we implement. In this way, any change in performance can be assessed in terms of the type of activity.
3. Good plans— and organizations—are focused. High-performing organizations do not plan in detail. More detail does not equal more accuracy. More detail does, however, negatively affect the time available for good analysis.
4. Good plans include all aspects of the business. In addition to detailing how goals will be achieved, good plans also describe how the organization can continue to be effective for the future.  Thus many of the measures within a plan will not be financial. Employee knowledge, customer relationships, and the culture of innovation may create the bulk of value for any organization.
5. Good plans link strategies to activities. Activities are linked because the achievement of an objective is the result of doing the right things well. Activities as well as their impact on achieving strategic goals are monitored. By understanding these relationships, organizations begin to understand—and can build on—the true drivers of success.
6. Good plans are measurable. Objectives and strategies have measures of success, while activities have measures of implementation. In this way, the completeness of an activity can be correlated with the success of an objective.
7. Good plans include assignments for accountability. In high-performing organizations, specific people are made responsible for individual activities. They are empowered, rewarded, and have control of the resources to ensure the delivery of the activity.
8. Good plans include the recording and monitoring of assumptions. High-performing organizations monitor a range of business assumptions that are tied to the targets set for corporate objectives. If the organization discovers that their business assumptions are incorrect, they reconsider the associated plan targets and adapt accordingly.
   
   

Doing budgets well is not for the faint of heart, but failing to budget is almost a guarantee of business failure.

David Kirkup, Partner, B2B CFO - 404 348 0326 - dkirkup@b2bcfo.com

In 1998 a company web site was considered slightly cutting edge and cool.  But, not important enough to hire a professional, especially when Uncle Billy's high school son Dexter could build one for you.  Almost imperceptibly, web sites went from "nice to have" to compulsory over the next few years.

You may have heard much talk about social marketing: Linked In, Twitter, Facebook, Blogs etc, and decided it's nice to have.  Today I read an interesting article that makes the case that we're back to the future again.

In the Four Cs of Social Media , Sean Nelson of Sonar Media develops the case for paying attention to the development of this new type of communication.  I have followed Sean's growth from Insurance Broker to national Social Media guru, and now pay close attention to his blog.  The Four Cs are:

Communities
Traditional advertising and marketing is about interrupting. Social media is about sharing and interacting. You have to have someone listening in order for interactions to happen.

The interesting thing is that people want to interact. The following statistics make that clear.

• 78% of social media users interact with companies or brands via new media sites and tools, an increase of 32% from 2008.
• 95% of new media users also believe companies or brands should have a social media presence
• 89% believe that they should interact with their consumers using social media

Its important that you build communities on Facebook, LinkedIn, and Twitter that are made up of your prospects and clients.

Content
Content is King. Its been that way since cavemen began writing on walls. Since then only the means of delivery has changed.

One of the mistakes I see is companies jump into using social media and immediately begin communicating sales messages. A sales message here and there is likely fine but when its all you do…Houston we have a problem.

Regardless of what you sell someone out there is looking for information about it. They want to be informed, educated, and even entertained. If they like your content they will like you. If you share good content consistently over time they will likely begin to trust you.

Social media provides great vehicles to share video, photo’s, written, and audio content.

Conversations
The difference between traditional advertising and marketing and social media is the difference between talking at someone and talking with them. If you’ve built the right communities and are sharing the right content conversations should naturally happen.

There are different levels of conversations. A comment on a blog post, a retweet, a comment on your LinkedIn or Facebook status are all forms of conversations. Tou just need to be sure you are tracking these responses and reply back.

Even something that seems as trivial as a “Thumbs Up” on a Facebook wall post is a positive. The important thing is you put out a message or content and someone chose to respond.

These conversations and those among others will have an impact. These two statistics support this.

• 51% of respondents saying that social media has influenced their online transactions.
• 78% of consumers trust peer recommendations

Conversion
The final piece of the puzzle is for the preceding steps to lead to conversion. If you’ve taken the time to develop a strategy than all of the pieces should work together to lead to this point.

One of the mistakes that I see is that companies indiscriminately send people to their home page. While that may help you build site traffic it may not necessarily help you with conversion.

If you’re communicating about a product or service why not funnel any responses into a Landing page. Seth Godin has been talking about landing pages since 1991 and lists five actions that the page can generate:

• Get a visitor to click (to go to another page, on your site or someone else’s)
• Get a visitor to buy
• Get a visitor to give permission for you to follow up (by email, phone, etc.). This includes registration of course.
• Get a visitor to tell a friend
• (and the more subtle) Get a visitor to learn something, which could even include posting a comment or giving you some sort of feedback

Your home page can generate these five same actions but its not designed to focus on one of these five actions specifically. Sending them here is like sending them to a neighborhood rather than a specific location.

Wrap Up
The 4 C’s are important if you want social media to work for you. There are different ways to build communities on Facebook, LinkedIn, and Twitter. There are different ways to communicate messages on each. The conversations are even different.

Focus on applying the first three to each of the networks and begin to see the Fourth C happening a little (maybe a lot more) frequently.

David Kirkup

404 348 0326

dkirkup@b2bcfo.com

As the storm clouds of recession appear to be on the wane, there are more stories of optimism and growth.  Many businesses will grow and thrive during the rebound - taking advantage of the fall out in their industries, attractive input pricing and the needs of their customers.  So how can you position your company for growth in 2010?

1)      Focus on your customers

Your customers are the reason you exist in the first place. If you are not spending time with your customers your competitor is. Improve customer service at all levels and seek out the customers of competitors who may be looking for a new supplier after the failure of your there existing vendor relationships. Expand the amount of business you are doing with your existing customers too. Stay close and don't allow anyone else the opportunity to go after your customers.

2)      Expand Market Share

Look for opportunities to expand your share of the market. Can you expand your geographic footprint? Are there other potential customers where you need to knock on their door? Are some of your competitors vulnerable and if so perhaps you can acquire their customer list? As the weak companies fall away from the market, there is an opportunity to expand your company's share of the market.

3)      Watch Your Working Capital Closely

Accounts receivable and inventory both decline in value over time. Make sure all customers pay on time in accordance with terms. As you grow you will find cash stretching to cover new business needs.  Make sure you control these assets tightly.

4)      Target Marketing Expense

Resist the impulse to spend more without thinking deeply about where.  The key is targeting the marketing effort to maximize the return on this investment.  Generating business from the internet? Then hire a good SEO firm to improve your Google ranking. Is your company advertising in magazines or newspapers? How do you track the results?

5)      Control Costs and Expenses

The best times to control costs are when you are growing - and when you are not!  Examine all costs and expenses by line item. Bench Mark your costs, do Process Flows to eliminate lost time. Assume all costs are unnecessary.  Challenge sacred cows.  Bid out all costs on a revolving basis - or expect to pay 30% to 100% too much.

6)      Manage Cash

Working capital encompasses all of the firm's current assets and liabilities. Are you measuring, reporting and forecasting cash?  Work with your vendors. They can be the key to getting through growth spurts if you have the relationships and trust. Work with your banks and show them the plan, explain what type of funding you will need.  If things are good, make sure they don't lump you in with their other banking clients that may be struggling. Many banks are calling loans right now, so avoid what could be a financial disaster by assuring your bank understands where you are and where you are going.

7)      Track your Key Metrics and Ratios

All businesses should have a dash board to monitor key metrics and financial ratios. What is your cash position per the bank and books? What are your sales today, last week, month and year. What is your accounts receivable Days Sales Outstanding (DSO) and what is the trend. Define these items carefully and implement a system to get you the information daily or weekly as appropriate.

Planning now will let you take advantage of the coming expansion, and thrive by taking advantage of the opportunities that lay ahead. And as a B2B CFO^®  I can help you accomplish these things and more.  Please call me on 404 348 0326 or email me at dkirkup@b2bcfo.com.

David Kirkup

Partner

B2B CFO®

Office: 404 348 0326 Cell: 770 845 6897
Email:  dkirkup@b2bcfo.com
Web:   www.b2bcfo.com

Blog:    http://www.b2bcfo.com/partners/dkirkup/blog/
Bio:      http://www.b2bcfo.com/partners/dkirkup/

I am sure that many of you have a subscription to the Tool and Pipe Journal, but for those who may have missed it, I highly recommend this article on the outlook for manufacturing. More good signs for Manufacturing.  It highlights some of the leading indicators that may bring some sunshine in 2010.  In summary:

1.  The PMI, an index compiled by the Institute for Supply Management, broke through 50 percent in August. It was a huge relief. It had been below 50, indicating decreasing manufacturing activity, for nearly 18 months.
2.  The economy as a whole is doing better now than it has in more than a year. According to the Bureau of Economic Analysis, gross domestic product (GDP) finally started growing again in the third quarter of 2009.
3. The uptick in GDP seems to be driven by two trends. First, consumers are spending a bit more on durable goods.
4. Second, although it's a grim situation, more than 88,000 businesses have gone under since the start of 2008; those that managed to survive the downturn are busier than they otherwise would be because many of their competitors are gone.

5. Many consumers cut back on spending for months, and now they're opening their wallets again. Second, quite a few are purchasing homes.

6. According to the Department of Labor, the number of claims for unemployment insurance is still growing, but slowly.

Downsides? Yes, two big ones remain. Personal bankruptcies continue to rise (373,000 in the third quarter), as do home foreclosures, which hit an all-time high (937,840) in the third quarter of 2009.

Start 2010 with an Executive Company Physical - a free 20 page benchmark study to help plot a new profitable and cash rich course for your company. Contact David Kirkup at B2B CFO on 404 348 0326 or dkirkup@b2bcfo.com.

 

All business owners can expect to exit at some point.  You should begin to lay the groundwork for such a transaction long before the actual sale.  Proper planning and execution at each stage will lead to clearer objectives, higher value and fewer obstacles at settlement

Some best practices and considerations in planning your exit:

Strategy - Determine the key factors that might impact the execution of the sale transaction.  Answer the following questions, among others:

• What is the structure you prefer for the transaction - 100% sale or a fraction of the shares?
• If fractional sale - are you willing to forfeit operating control?
• What is the time frame that you want the transaction to occur?
• Do you (or other key employees) desire to stay post settlement?
• Are any key assets (employees, clients, vendors, Joint Venture partners, etc) at risk of leaving in the event of a change of control?
• Proceeds - is an earn-out acceptable or must the transaction be structured so that most of the proceeds come at settlement?
• Must proceeds be in cash or are you willing to accept equity in the acquiring company?

Preparation - It is important that the entity that is the target of the transaction has reliable financial and operational information which is produced regularly. This will serve multiple purposes.

• It will enable the seller and other parties to clearly understand the performance of the business.
• It will help to ensure that a repository of data is always available in the event that a buyer wants to perform financial due diligence.
• Reliable and clear operational and financial data will give the buyer confidence that he knows what he is getting and will increase the likelihood that the transaction will be executed in a timely manner.

Analysis - Accurate and reliable financial and operation information will let you and your advisors study your business and understand its dynamics. It may also bring to light items which are "less than arm's length" which could have purchase price implications, such as:

• Vendor relationships - for instance, is rent reflected for a family owned real estate that is used by the business.
• Salaries of owners - Are they at arm's length? What are the ramifications of adjusting the salaries to arm's length salaries - does this increase or decrease potential purchase price?
• Balance sheet - Are there assets on the books that are valued on a historical basis that need to be properly adjusted to reflect market prices? Is there excess cash or working capital that is not necessary to the operation of the business - don't leave it there for the seller - consider paying a dividend so that no excess net worth is left in the business.  This could effectively increase your purchase price.

Execution - To begin executing the sales process, make sure that you have a stellar team of advisors.

• One of these advisors should be a B2B CFO® partner who can provide you with the financial, operational and strategic advice that you need to maximize the operation of your business and to make exceptional transactions like a sale or purchase as effortless as possible.
• You will also need a merger and acquisition specialist - use a quality advisor like the Woodbridge Group , an M&A advisor and a  B2B CFO® strategic partner, that has a worldwide footprint. They can help you clarify your transaction criteria and help execute an efficient search and sale transaction.

B2B CFO® has a strategy for just such an engagement called "Finding the Exit."  This program has been specifically designed for our clients to help them navigate this challenging path.  Make sure that you maximize the proceeds from a "once in a lifetime" sale of your business.

The inclusion of a B2B CFO®  partner onto your senior team can give you the financial expertise and strategic insight that you need to maximize the performance of your operation.   Our partners, who have over 2500 years of cumulative experience, (including significant merger and acquisition related experience) are part of the largest US firm providing services on a part-time basis to closely-held companies with annual revenues of as much as US$75 million.

A manufacturing client of mine faced 2009 with some major challenges.  The company builds sophisticated “metal boxes” such as commercial HVAC and telecoms enclosures.  This involves purchasing large quantities of metal sheets with volatile pricing, cutting and bending them, and then assembling and painting the final products.  It involves managing a wide inventory of miscellaneous hardware items for further assembly. 

Recessionary pressures were affecting sales as large customers put purchases on hold, or reduced demand temporarily – forcing the client to maintain sufficient inventory to meet upsurges.

Inventory consumes a lot of the resources of any company. Of course, most companies need a certain level of inventory in order to meet the demands of customers. In most cases, inventory is purchased and paid for long before it is sold to a customer.

• For some period of time it sits in a warehouse, and the cost of carrying that inventory (i.e., interest expense) reduces the company's profits.
• Moving the inventory always raises the possibility of damage, but some inventory will diminish in value just sitting there.  The more inventory you have, the more will "disappear." That costs the company more money.
• Maintaining large levels of inventory requires people to manage it, adding wages, benefits and other costs.

So a company must manage inventory very carefully. To do so, the company needs to understand what they have, and why they have it. The company must be sure it has the right information:

• Routinely prepare and review detailed reports about the inventory. What kind of inventory is it (finished goods, raw materials, work-in-process, or other categories)? How much of each type?
• How often does the inventory turnover? What are sales of the finished goods, and what level of sales are expected in the near future? Based on that forecast, is there too much inventory on hand?
• Manage slow-moving or obsolete inventory and plan to minimize scrap or sell.

A key measure on inventory management is days turnover.  This is an overall measure of the length of time it takes for incoming raw materials to be turned into finished goods and sold to customers.  Along with measures of receivables and payables performance, the inventory turnover is a key factor in the cash cycle of a company.  Starting 2009 with an inventory turnover of 68 days, we realized that lower sales would significantly impact cash flow, and that improved inventory management was a major source of cash.  Our plan for better inventory management included improved reporting using a database to key in on slow moving, expensive and unusual items, with management dashboards to maintain focus.  Better factory organization, frequent item counts, and better procedures for receiving inventory and allocation to jobs all helped.  During the year we were able to reduce inventory by nearly 30%, and to reduce inventory days turnover to less than 40 days.  This is a major success for the company, positioning for a profitable 2010 and saving significant cash that would have been used to purchase unneeded inventory.

Based on an article from B2B CFO Partner - Paul Shackford

Companies without a Chief Financial Officer are at a competitive disadvantage.  It's not unusual for small to mid-sized firms to have sophisticated operations and complex cost and financial challenges like large companies.  This often means that the CEO or the owner of the business needs the expertise of a senior financial executive.

As an owner or CEO of a company, have you ever wondered how to solve the problems you're facing?  Have you ever spoken with another owner and come to the conclusion that what you really need is the advice of a CFO . . . but knew that you either didn't need a CFO on a full-time basis or couldn't afford the cost of a full-time CFO? You are not alone.  And, you are perhaps doing what many owners do - You try to figure it out yourself.  Let's be honest. Are you really the right person to do that?  Do you have the background or expertise to prepare accurate and useful financial statements, or even truly understand them?  And is your digging into these areas even a good use of your time?  As the owner, you need to be the visionary, focusing on the future - and you are the one who should be spending more time with your customers.

What you need is the assistance of a high level financial professional.  Outsourcing this function is a cost effective alternative to hiring another employee because it avoids the cost of a full-time salary, payroll taxes, and fringe benefits. A contract CFO is a very affordable means to obtain that higher level of expertise and add significant value to your business.        

ADVANTAGES OF OUTSOURCING CFO's

- Better financial information for key decision-making.  It's a fact:  most small to mid-sized businesses either don't prepare financial statements, or they are not reliable.  You cannot make important business decisions while relying on bad, inaccurate, or incomplete information.  If you have found yourself frustrated with the lack of information from your bookkeeper or controller, chances are the information they are giving you is of questionable value.  You cannot effectively run a business in that situation.

- More time to spend with customers.  To be competitive, you need to spend most of your time with current and prospective customers.  Particularly today, you need to be with your customers as much as possible.  Just as you are trying to get new customers, your competitors are trying to meet with your customers.  You simply need to be spending the majority of your time with them.

- More money from the bank and from vendors.  Bankers and vendors are more sophisticated and less forgiving than ever.  With the current financial situation affecting all businesses, creditors will refuse to lend money to anyone other than the safest and most reliable companies.  And they will require regular and reliable financial statements. The financial statements must look professional, follow accepted accounting principles, and highlight the company's key ratios. A CFO working with you on a part-time basis can improve your company's external "image" and assist you with opening doors to banks and obtaining better vendor terms.

Other advantages to having an outsourced CFO include:

    - A sounding board for the owner in making key decisions
    - Fewer cash flow surprises
    - Better trained accounting staff
    - A theft deterrent
    - Better documentation and controls
    - Fewer surprises relating to tax payments
    - Solutions to company problems

SOME THINGS TO CONSIDER

A CFO is a proactive professional that has a pervasive knowledge of information important for the owner to properly run the company.  This includes handling not only financial matters but also addressing HR, operations, sales and marketing, IT, and other issues needed to help the company succeed.

A common misconception is that a CPA can take the place of a CFO.  The simple reality is that a CPA cannot do the work a CFO does because each has a different set of skills.  A CFO has a broad range of experience in financial and non-financial areas.  The CPA and the CFO should work very closely together, but neither has the ability to step into the other's shoes.

So, when you are looking to outsource the CFO position, you need to look for a professional with 25-plus years of experience.  You should be sure that the CFO is supported by a national organization that has the resources to be able to give your CFO the support that may be needed.  In finding someone with this experience level and support, it is highly unlikely that a problem or issue will come up that can't be resolved.

Avoid signing contracts.  If an organization is not confident and competent enough to perform these services based on a hand-shake, consider walking away.  You should be comfortable that the fee fits comfortably within your budget.  Ask that there be a monthly "ceiling" for the fees to be paid; there should never be any surprise on fees.

Finally, be sure that you are comfortable with the CFO.  With a high level of trust between the owner and the CFO, the company will be in a better position to meet the challenges that it faces.

Companies without CFO's can gain a significant competitive advantage and improve profitability by outsourcing a CFO on an as-needed basis.  These days, it's a wise investment, and can fit within the budget of most companies.

Contact David Kirkup, Partner with B2B CFO, on 404 348 0326 or dkirkup@b2bcfo.com.