Do CFOs Add Value to your Business?

Author: Larry Chester, President

As a business owner, your goal is to increase the value of your business over time. While you may be on the fence about investing in a fractional CFO, it’s always productive to break down the pros and cons of your various options.  Let’s break down a few ways a CFO can add value to your business. 

What does a fractional CFO do? 

A broad overview of the roles and responsibilities of a CFO include: 

• Evaluate the company’s past financial performance
• Dive deeply into your present financial performance
• Strategically plan for the company’s future 
• Safeguard the company’s cash position.  
• Address operational structure
• Create initiatives to implement for your team 

Let’s take a closer look at how these responsibilities bring value to your company.

Brings experience from different industries

Over time we have found that: business structures are universal, but every business is unique.  

The CFOs that are part of CFO Simplified, have worked in multiple industries. They draw what they need in each new situation from the experiences they’ve personally encountered in the industries and businesses they’ve worked in adding value to your business. 

Their varied experience offers them insights into both the specific areas that you’re having problems in and ways to solve those problems. With those “outside the box” insights, they can then apply those solutions to your unique business. 

Take this example of a very experienced CFO in only one industry: 

If you hired a consultant who has worked exclusively with 20 manufacturers in your specific industry and they’ve given the same advice to every single one of those 20 companies that are competitors of yours: 

1. How do you know that advice is the best solution to help solve your unique problem? 
2. What advantage does that give you over your competition? 

These are all important questions to keep in mind when deciding if a CFO would add value to your company. Does their vertical experience provide the insight your company needs?

Improve profitability with cash flow management

If your company is struggling with cash flow issues, there may be hidden inefficiencies, accounting practices, and operational issues that can be addressed by a CFO who looks at the big picture. Where many companies go astray is when they start to cut back on the kind of insights and guidance that can save them just at the time when they need that guidance the most.  

A great CFO will save you more than it costs to hire them in operational insights and strategic initiatives that drive greater profitability and better, more efficient processes. Read our blog about the top 5 cash flow tips for entrepreneurs for more information. 

Additionally, a CFO’s ability to forecast a company’s financials based on past numbers and projections is arguably the most important piece of the puzzle. A CFO’s ability to be proactive is a key reason they add value to a business. They provide invaluable assets such as financial forecasting (for short-term and long-term plans), time, and commitment to assessing the numbers that most business owners don’t have time for. 

Succession Planning

Did you know that if you’re planning your business exit, it’s recommended to plan 3-5 years in advance? Read our blog, “Succession Planning: How to prepare to exit your business” for more information about why planning years in advance (not months) is crucial for a successful transition to retirement. 

Your CFO plays a large role in preparing your business for a sale. Not only do they forecast the future growth of your business, but they also play a role in drafting the sale agreement, and communicating with potential buyers. Review your business’ financial performance with your CFO prior to making any set-in-stone plans regarding your exit. 

An outsourced CFO can help stop internal fraud

At CFO Simplified, we know what internal controls to look for in a company to identify areas of potential, or in the worst-case current fraud, and stop it in its tracks.

When a company brings in a fractional CFO, the new eyes can reveal opportunities for growth and vulnerabilities that went previously undetected. 

Having a CFO at the helm, especially a new one who is looking critically at all transactions and processes, plays an important role in making sure that every financial transaction will be highly scrutinized. 

Processes and controls are integral to preventing fraud. Weaknesses in internal controls account for nearly half of all corporate fraud schemes. Many company owners allow for executives and stakeholders, for example, to sign their own checks (those made out to themselves). This loose oversight and lack of correct financial processes is the kind of environment that can leave the door open to abuse and fraud. 

Internal communication

Your CFO will be in constant communication with other leadership roles in your company. Communication will help define brand identity and cohesiveness for financial and personal goals. For example, during succession planning, your CFO would partner with the HR team to ensure team training and transparency is occurring during the transition. 

A final word

Your CFO brings leadership, financial knowledge, operational expertise and years of experience to your company. It’s always the right time to tackle your finances, but the beginning of a new year is a great time for strategic planning and budgeting. Learn more in our blog.