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Every Company Needs a CFO - Jun 27, 2010

Posted by: Rick Ubinger in

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 that they don’t need on a full-time basis or can’t afford.

As an owner or CEO of a company, have you ever wondered how to solve the problems you're facing? Is digging into these areas yourself 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 that is not on your payroll.

ADVANTAGES OF OUTSOURCING CFOs

Better financial information for key decision-making. Most small to mid-sized businesses either don't prepare financial statements, or they present incomplete information that renders them unreliable. Accurate financial statements represent a scorecard that reports owner the company has performed in relation to enacted business decisions. More importantly, they provide the foundation for future business decisions. In a recent national survey conducted by 3GoodQuestions and B2B CFO, less than 10 percent of businesses follow a written annual plan designed to outline strategies to achieve specific goals and determine the financial needs of a business. In today’s environment, an owner cannot effectively run a business without a plan. A CFO can assist in developing simple, efficient and effective business planning processes designed to provide the roadmap to grow an owner’s business profitably and prepare complete and accurate financial information to provide the data necessary to react to the ever-changing environment we live in today.

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 than ever. With the current financial situation affecting all businesses, they are more skittish about lending to anyone other than the largest and safest companies. And they require regular, 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
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, 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. As noted above, 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.