(Photo above (L-R) Scott Lauray, Jim Jans & Steve Bahr | courtesy of ProCFO, LLC)
I have a small company. Do I need or can I afford a CFO? We hear this question from many entrepreneurs, but many are unaware of the value a CFO can bring to the table.
What does a CFO do? Do I need a CFO in my business? Can I afford a CFO? With the financial complexities in today’s business world, these are questions that owners and operators of companies encounter on a daily basis. Today, financial analysis, compliance, and reporting is paramount.
The CFO In-sourcing model is rising in popularity within the marketplace for small-to-medium-sized companies. Business owners and CEOs recognize they need a layer of financial sophistication, but may be too early in their growth to afford a CFO on a full-time basis. It has been said that hiring an in-house CFO does not become essential until a tipping point that may occur between $10M and $20M in revenue.
Most businesses utilize a bookkeeper or bookkeeping service. A bookkeeper is responsible for recording day-to-day financial transactions in the accounting system and is tasked with keeping updated records for basic financial statements. Despite not having advanced training, the bookkeeper’s responsibilities may be greater in small companies because there are fewer employees to manage the different components of a company’s finances. Bookkeepers typically do not prepare financial statements and are focused on ensuring the accuracy of daily transactions.
What Does a CFO Do?
A CFO will perform all the functions of overseeing the accounting department or will supervise the staff that does. More importantly, a CFO will help the business owner define the following key business documents, strategies, systems or processes:
-A written 3-5 year strategic growth plan
-Identify the company’s value proposition
-A system to get accurate and timely financial statements
-Develop key management reports to measure critical company metrics
-Financial forecasting
-Determine the optimal capitalization structure
-Manage cash flow
-Calculate the return on company investments (ROI)
-Control inventory and overall operating costs
-Long-term taxation minimization strategy
-Succession planning
Do I need a CFO in my business?
Not every business needs a CFO, but all companies need someone overseeing their finances. The decision to hire a CFO, viaIn-sourcing or fulltime, is tied to their strategic growth decisions. Companies that cannot justify a six-figure salary CFO, but are interested in strategic growth have the option to utilize CFO In-sourcing. You can spend a handful of hours per month with your contract CFO and work on critical projects including accounting for startups, building extensive financial models for decision making and expansion ideas, hiring employees or raising prices. If you are poised for accelerated growth or have any type of succession plan, then the answer is “yes,” you need someone to fill the CFO role.
Can I afford a CFO?
While most accountants and bookkeepers look backward at historical data, a CFO looks forward in a strategic manner and can help identify and analyze revenue-generating activities or project and report on cost-saving ideas. The answer to this question is, “Can I afford not to have a CFO?”
Benefits of CFO In-sourcing
CFO In-sourcing can be viewed as a strategic step to add a seasoned financial professional to your management team without having to incur the fulltime salary. Some companies will only need 2-3 hours per month, while others may need 10-12 hours. Your CFO can help you set your strategic growth plan, help with financing issues, help you monitor your operational expenses, set budgets and targets, and eventually help with your succession or exit plan.
Next time we will discuss your 3-5 year strategic growth plan.
Contributed by the CFO In-sourcing team at ProCFO. James Jans, Scott Lauray, & Steven Bahr.
ProCFO, LLC is a full service CPA firm established in 2007 providing accounting, CFO, financial statements, payroll, and tax services for businesses.
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