As your company grows, you are always looking for ways to run it more efficiently and effectively while reducing operational costs. To streamline your business and financial processes, you need a dependable and experienced finance team that can assist you in evaluating the risks and opportunities for the smooth operation of your company.
Your current finance team may be excellent at tax and compliance matters, as well as budgeting, but they may lack the experience to guide your company in the right direction. While they may need day-to-day feedback and basic financial reports in the early stages of start-ups and growing businesses. However, as a company grows in size, its finances and operations become more complicated. As the company grows, new opportunities emerge and internal inefficiencies emerge.
How do you deal with this? This is where CFO services, also known as Virtual CFO services, come into play. Now you might be thinking about how CFO service will help your business? At this juncture, the expertise of a CFO can be invaluable, as they can actively work to analyze new opportunities for maximized growth, while simultaneously identifying areas of inefficiency and lost revenue and help take your business to the next level.
How do you evaluate if you need to engage a Shared CFO and what should you ask before you hire one?
1. Has your CFO worked as a ‘CFO’?
The primary job responsibility of a Chief Financial Officer (CFO) is to manage & optimize the financial performance of a company. This includes financial reporting, managing cash flows and liquidity, and the return on investment through financial planning and analysis. Efficient book-keeping, running monthly reports, or managing tax filings are a small part of a good finance department, and an expert accountant is generally mistaken as a CFO.
Has your CFO really worked as a ‘CFO’ or is an expert accountant? To find the answer, do a simple check on finding whether your CFO is spending his time on the accounting data or shaping your future business strategy by setting and driving the financial agenda through activities such as Financial Planning and Budgeting.
2. Does your CFO understand your business and the business side of Finance?
A large company CFO is the business partner of the CEO/MD. He understands the drivers of the business, knows how to unlock the working capital blockages, and assists the CEO in the pricing decisions. The CFO understands analytics for different geographies/products/customers to manage to discount to increase your unit economics or simply put margin per unit sold.
The CFO drives the business and financial performance with financial and non-financial KPIs, adds value, and shapes your future business strategy. His experience in handling the business side of Finance in mid-to-large size organizations as a CFO plays a critical role.
This is over and above being the financial spokesperson, managing the banking relations, overseeing compliance, managing financial risks, managing tax and audits, and essentially, helping the company raise funds. If your shared CFO hasn’t worked in mid to large-size organizations as a ‘CFO’ then it’s similar to paying for a buffet but getting only a-la-carte dishes from a specialized restaurant.
3. Does your CFO have the capability to guide you through your next fundraise/acquisition/expansion phase? Can the CFO negotiate on your behalf with sophisticated investors?
A transaction such as a fundraise or acquisition has the potential to alter a Company’s fortunes for better or worse, permanently. Often promoters and accountants lack prior experience in navigating such transactions. Evaluate if you have the right set of financial experts to support you, not just as advisers, but by taking an active role in the transaction.
4. Is your shared CFO ‘virtual’ or ‘real’? Does he/she upgrade your F&A team?
Your shared CFO needs to be a real CFO – who is visiting your office at regular intervals and meeting your direct reports team and your accounting team. His interactions with your CA (who manages your compliance) help improve communication and teamwork and improve the efficiency of your organization.
Also, your shared CFO needs to not only help you manage your present but also prepare you, your organization, and your F&A team for future growth. This is achieved by constantly engaging with your F&A team, coaching and mentoring them, and upgrading their skills and knowledge, especially on the business side of finance, thus reducing your reliance on the shared CFO. After all, you will eventually hire or have an in-house trained person as a full-time CFO, and your team will be able to support that transition successfully when that phase happens, or one of the existing team members is ready to be groomed to take over the CFO position.
5. Is your shared CFO an individual or a firm/institution?
A shared CFO firm or institution means there is more than one partner – each an expert in their field. This ensures that your CFO can reach out to other experts as per your unique requirements. The CFO will ensure you not only get the required business support but also a dedicated banking relations person when needed. The CFO will pitch in with an expert who can build your business plan and investor deck and even connect you with experts whenever you have any compliance-related query. After all, the combined knowledge of an institution is always more than an individual.
Besides this, the institutional approach to shared CFO services also means that the CFO is equipped with team analysis, data crunching, and details that enable him/her to draw insights that help you make critical decisions based on solid data thus minimizing gut-feel. If he/she does not have this critical support from her firm/team and is relying on your accounts team to manage, the insights may be limited to how well your accounting team can do the base work. In many SMEs and start-ups, the mid-level may not be equipped to give this crucial support which impacts the insights and in turn the decision-making.
Using an outsourced CFO can be the ideal solution and transform your operations, especially for businesses that require the services of a CFO but do not require one full-time. A part-time CFOs wealth of experience and knowledge is a true treasure trove.
By utilizing an outsourced CFO, you can better manage budgets, increase revenue, take considerable strides in your business with their actionable recommendations, and stay ahead of the competition.
If you feel a shared part-time CFO could help your business, contact CFO Bridge today. Our team would love to discuss taking your business to the next level.