Smaller companies (e.g., under 50 employees) may not give thought to adding additional executive firepower to their team given the perceived cost. This is an understandable choice for businesses that want to limit overhead and keep operating expenses low. But in some cases, a business needs the expertise provided by senior level talent in order to significantly increase revenue. One role that cannot be overlooked is that of a Chief Financial Officer (CFO). The CFO provides strategic input and oversight to make sure the financial means needed to grow are accounted for and managed properly. Simply stated, if a business wants to achieve their financial goals, the input and expertise of a Chief Financial Officer is a role that business owners cannot afford overlook.
In this article, we will take a closer look at the role of a CFO, the value a CFO brings to a business and the options business owners have to add this level of expertise to their staffing structure.
WHAT IS A CFO?
A CFO is typically a senior executive of a corporation or a large institution who oversees all of the financial affairs. She or he has multifaceted duties that can vary depending on the differing needs and policies of companies. However, these are the main functions of a CFO:
- Analyzing the books for important information.
- Reporting data that is critical for big decisions about the company.
- Performing comparisons and forecasts for success measurement.
- Keeping current with compliance issues and matching them to internal procedures.
- Providing actionable insights.
- Working with the bank to help secure funding needed for growth.
WHY SMALL BUSINESSES NEED CFOs
In today’s competitive and ever-evolving markets, many small businesses can benefit from hiring a chief financial officer. This depends on several factors. For example, a small business that averages $150 per sale but makes $10 million annually has a higher need for a chief financial officer than a smaller business that earns the same annual revenue but averages $1 million per sale for a total of 10 sales per year.
Growth is another reason for hiring one of these valuable executives. Companies need to analyze their financials to determine everything from what products to focus on to how financial regulations may affect the growth. Also, if information that is needed to make key financial decisions is not available when needed, it is time to hire a professional.
OPTIONS FOR HIRING CFOs
Bringing a CFO in-house, while optimal for many businesses, can prove to be costly. On the other hand, companies that forego hiring a chief financial officer can hurt themselves and risk the business falling into a downward spiral from making uninformed financial decisions. Options include:
- Promoting someone internally. Not every company has someone who would make a good CFO. For those that do, it can be a good option. Cost is always a factor.
- Hiring from the outside. Sometimes you need to look outside for new talent and fresh eyes. This can be good option. The question is whether or not you need and/or can afford a full time executive.
- Contracting with someone part time. This option is becoming more popular. Executive expertise is now being offered more frequently by seasoned professionals who work with a variety of businesses on a part time or as-needed basis.
We’ll explore this third option in more detail since it’s the lesser known of the three.
Investing in Outsourced CFO Services
A outsourced CFO has experience and can immediately start improving cash flow and the availability of vital information. There are no hefty onboarding costs. This leaves small business owners and their staff more time to focus on high-yield tasks, which also improves cash flow. Outsourcing these services to efficient professionals saves money while yielding information that could otherwise take weeks to gather and analyze. Also, the actionable insights from outsourced CFOs are extremely valuable.
The bottom line is this: an experienced CFO can guide you on your journey to not only reaching, but exceeding financial milestones while providing the assurance of detailed oversight and financial stability. Outsourcing these services is an attainable option for many small business owners who may not otherwise be able to bring someone on full-time.
If you would like to learn more about how a CFO can help you, please contact me at (901) 277-6165 or complete the contact form on my website.