Thursday, December 4, 2008
In these tough economic times and even when economic times are not so tough the business owner needs to know his cash position on a daily basis in real time. The only way to be certain of your cash position on a daily basis is to do daily bank reconciliations. If you have cash flow problems or cash is simply tight, the business owner cannot afford to find out that a customer’s check bounced 3 days after the fact when the bookkeeper gets the returned NSF check back in the mail. Meanwhile the business owner sent checks on that money already and risks bouncing an important check. If an EFT out of your account or a debit card transaction hits more than once due to clerical error by a vendor or bank what good is it to find out about it when you do the month end bank reconciliation. The important check you sent on money you thought you had just bounced. There are many other situations when you need to know changes to your bank balance in real time! The part time CFO needs to establish a policy of daily bank reconciliations and instill the discipline to make sure it gets done.
By having access to your banking transactions online, daily bank reconciliations should take less than 10 minutes per day. By doing this the business owner will know exactly how much money they have and can make decisions on what bills to pay with more confidence.
By the way you bookkeepers out there, when you do daily bank reconciliations the month end reconciliation is a snap!
Monday, November 24, 2008
Credit card Services
Property Casualty Insurance Services
Medical Insurance Services
Telephone and Cell Phone Services
Office Supply Services
Graphic Art Services
Real Estate Services
With contacts with as many service providers as possible your CFO Services will be more valuable.
Tuesday, November 18, 2008
Rule number one for good communications is a good communicator is responsible for both the sending and receiving of communication. You cannot be a good communicator if you are only going to be responsible for what you send out. You must also be responsible for what you receive in to make sure what the other person is saying is understood. It is important for the Part Time CFO to identify the clients needs and wants and that is where good communication comes into play.
Where communication starts to break down is when one of the people engaging in the communication does not like someone else in the communication loop. This dislike gets in the way of agreement and understanding and their must be agreement and understanding if there is going to be good communication. On the other hand you can have people who like each other in the communication loop but who do not agree or understand each other and that results in another breakdown of communication.
Therefore the objective of good communication is to have a liking and respect for the person or people in the communication loop and to attain an agreement and understanding. Once these objectives are accomplished good communication will result.
Having good communication skills and also being able to impart good communication skills to your clients organization helps the CFO perform another valuable CFO Service.
Saturday, November 15, 2008
This insurance is relatively inexpensive when you consider the risk of employment claims.
EPLI Insurance is a great first step for the Part Time CFO to be proactive in protecting their client from the risks associated with having employees.
Saturday, November 8, 2008
When considering what supplier to purchase inventory from the following is what needs to be considered:
2. Price breaks
4. Freight costs
5. Turnaround time
6. Minimum quantities
7. How does the vendor stand by their product
8. Restocking charges
9. How efficient is the product to handle
10. How efficient is the product packaged
11. How efficient is the product to use
12. What type of support are you getting from the vendor to help sell the product.
13. How flexible is the Vendors credit department
14. What products do the competitors sell
15. Can orders be cancelled without penalty
Looking for the best price is obvious, but understanding where the quantity discounts or price breaks are compared to other suppliers is important. Some suppliers offer free freight, so if you are not getting anywhere negotiating prices with the vendor ask for free freight.
Understand what the turn around time is and how quickly you can get product once ordered. Clients with Cash Flow Problems need to time their inventory receipts more precisely so turnaround time plays a greater role. What are the minimum order quantities? Once again this plays more of a role with clients with Cash Flow Problems because sometimes you just need small quantities.
It is very important that a vendor stands by their product. If something is wrong with the product either quality wise or technically the client must have assurances that the vendor will issue proper credit upon the products return. Understand what the vendor’s restocking fees are for product incorrectly ordered. Unless the client is in an industry where there are a lot of special orders, vendors should wave restocking charges.
Efficiency in handling the product is important for the receiving department. Remember, anywhere you can save costs throughout the entire process must be considered in the decision from logistics to manufacturing to merchandising/packaging to how efficient the product is to use. One of my clients is in the insulation business and although the pink panther insulation is more expensive, it is much easier to install making up for any increase in the price of the inventory.
The type of support that you get from the vendor to help you sell the product is a big plus whether they are free displays, marketing materials or coop advertising programs these programs tell you that the vendor is really interested in working with you. In the event the client runs into a cash crunch it is always nice to know that the vendor is willing to work with the client and that their credit policies are flexible enough to work through shifts in the economy or industry downturns.
Another consideration is what the competitors sell. Sometimes you can work a better deal with a vendor who is not with a major competitor because that vendor does not have much market share in the market the client serves.
One last rule: Do not over buy inventory as it is one of the most common reasons why businesses get in trouble. This is especially true for retailers. The flexibility to cancel orders without penalty helps prevent you from overbuying.
Monday, October 27, 2008
So what is the major question the business forecast answers? The major question answered by the business forecast is whether or not the existing business model is going to achieve the desired results. If not, you need to change the business model. A good CFO can prepare a forecast on the existing business model and then if that model does not work can prepare a forecast based on a model that does work. In order to do this the CFO must have knowledge of the industry and a sharp overall knowledge of business through having experience in owning a business. The CFO must also have accurate forecasting tools at his/her disposal.
Saturday, October 18, 2008
For example, one area the Part Time CFO can provide some insight and really help clients is in certain aspects of marketing, particularly website marketing or Search Engine Optimization (SEO). A good SEO strategy can help the business obtain top positions on Google and other search engines giving the client an internet presence enhancing their current marketing strategy. Once again this is an example of the importance of diversity of a CFO.
One SEO strategy that will help you get top positions on Google is the use of an RSS Feed. An RSS feed allows new fresh up to the minute content to go into a website. A good example of an RSS Feed is Reuters who services many news related websites with up to the minute news around the world through an RSS Feed. The best way for a business to use an RSS feed is to start a blog about their business and write articles daily about their business using key word rich content. Most Blogs have an RSS feed connection and connect the RSS Feed from the Blog to your website and every time you write an article about your business and post it to your blog it will change the content of your website. When you change the content of your website the search engine crawlers index your site. The more you change the content the more you get indexed by the search engines and indexing increases your search engine ranking.
Sunday, October 5, 2008
The basic CFO Duties and CFO services that a Chief Financial Officer should focus on are as follows:
1. Drive the bottom Line
2. Project profitability
3. Enhance systems, improve controls and processes leading to operating efficiencies
4. Manage cash and cash flow problems
5. Optimize operations
6. Drive results
7. Contribute to business development
8. Shape financial strategy
9. Understand, identify and assess the risks of business ownership.
10. Accomplish something for the business in an area that the business owner does not expect a CFO to accomplish something. (i.e. help the company with search engine optimization enhancing its internet presence.)
If the CFO excels in these areas he will add tremendous value for the business owner.
Friday, October 3, 2008
1. Must be logical in their thinking. It is not all about one partner. Sometimes the logical business decision can disadvantage one partner over the other(s). It is critical that the partner being disadvantaged is logical in their thinking to separate what is right for the business from what is right for the disadvantaged partner.
2. Must eventually be at peace with all decisions. Although it is healthy to have different opinions and constructive arguments, eventually all partners must understand that a decision needs to be made and although it may be contrary to one partners opinion the dissenting partners must be at peace with the decisions.
3. Partners cannot be bitter if they get diluted. There are many times when a business needs more money and the partners have to ante up. Sometimes there are partners who do not have the money or do not want to invest in their business at the particular point in time when money is needed. These partners who do not participate financially cannot be bitter when their stock ownership gets diluted. If it only fair to the partners who are risking the additional capital that they get stock for the risk they are taking.
4. Partners must understand the rough and tumble world of commerce. Partners must be prepared for troubled times in the business. Exemplified by, lower salaries, difficult cash flow problems and personal guarantees. The character of the partners must be in harmony during these periods.
5. Only one person can run the company. It is a good idea for one partner to take the lead role in the business. Be viewed by the suppliers, customers and employees as the point person. Sometimes this can make the partners not taking the lead role feel inferior and bitter.
6. Not all partners are created equal with regard to salary. Partners must understand that different partners take different skills to the table. Some of those skills are more valuable to the business than others. The business needs to pay more money to the more valuable skill sets. You would not pay a store manager the same as a CEO. If one partner brings store management skills to the table that is valuable, but can be replaced with another store manager if the salary is out of hand. This is difficult for many partners to understand.
The CFO sometimes is called upon to act like a mediator of sorts in dealing with partner disputes, but partners need to go into these business deals with their eyes wide open.
Wednesday, October 1, 2008
1. Age. How old is the equipment and does the output from the equipment still meet good quality standards. In essence, is the equipment obsolete?
2. Repairs. Is the equipment susceptible to breakdowns and big repair and maintenance bills?
3. Productivity. Is the equipment still meeting efficient production standards?
One important CFO Service is to assess the risk associated with equipment. The cost to purchase equipment or a lease to acquire equipment is a major capital expense and an untimely purchase of equipment can cause cash flow problems. The CFO must perform an analysis on equipment performance for both quality of output and for production efficiencies. In addition an analysis of the repair and maintenance costs of the equipment must be made. Once these analyses are complete a comparison can be made as to what the monthly carrying costs of the equipment are and what the cash availability of the company is versus the repair costs, quality and production standards. Then the risk of the equipment can then be assessed as to whether or not to buy or lease new replacement or upgraded equipment.
Saturday, September 27, 2008
Always be on the lookout for a back up supplier. When you go to trade shows identify possible target suppliers and start to develop relationships with them. In the long run it can really pay off and you will be prepared when the unthinkable happens to one of your key suppliers.
Another good thing is to do a relationship check up with your suppliers. See how content or discontented they are with doing business with you. These checkups can give indications as to what their next move might be. A good CFO Service is to challenge the business owner about the strengths and weaknesses in the supply chain.
Saturday, September 20, 2008
Non compete agreements
Being able to read and interpret these and other legal documents will save the client a lot of time and a lot money in legal fees. It is also important for the CFO to understand bankruptcy and how it works, whether your client is contemplating bankruptcy or a supplier of the client is filing bankruptcy.
Saturday, September 6, 2008
Another risk area on the sales line that a CFO should look for is whether salesmen can bring their sales with them if they were to leave the company. This in my view is a major risk as salesmen always have to be coddled if they can taker their business elsewhere. Non compete agreements with salesmen can help reduce this risk.
Another CFO Service is to analyze whether selling prices are high enough and to determine if sales rise or fall with reduction of prices. In a bad economy there is always a propensity to reduce prices. Many times I have seen where reducing prices was the wrong thing to do as money is left on the table. Your best customers who usually represent 80% of your sales will usually buy from you even if they can get a better price elsewhere because they trust you and appreciate the value in your products and services.
The CFO should review whether the company has adequate sales representation in all of the companys key market areas. If major market areas are left without proper sales representation this poses a major risk to the company.
The CFO should review if the companys selling prices are meeting gross margin requirements. A low margin could be a function of product mix sold, but it also could be a function of low selling prices.
Finally it is a CFO duty to review how pricing looks as compared with the companys biggest competitors. An analysis can be done in this area to determine how the company compares price wise against its top3 or 4 competitors in the companys highest margin products.
Sunday, August 31, 2008
The CFO needs to have the business owner rank each employee on a 1 to 10 scale. If there are not enough 8, 9 or 10 rated employees that usually means that the employees are not very productive as a whole. This can weigh down a Companys progress and pose a great risk to the business. It is an important CFO service to challenge the business owner on the strengths and weaknesses of employees and if the weaknesses outweigh the strengths suggest ways to transition to better employees. As mentioned in a previous post regarding inferior employees, the business owner needs to cut their losses and strive for all 8, 9 and 10 rated workers. The CFO also needs to assess whether the mix of employees is too top heavy. Business owners tend to get top heavy especially if they are phasing out of the business. It is an effective CFO Duty to look at an organization chart (or create on if it does not exist) and assess where the risk of employees is.
How effective is the company advertising? Is the percentage of advertising to sales in line with industry averages? Sometimes it is extremely difficult to help the owner measure the effectiveness of advertising mainly because there is no tracking methodology to determine which advertising works best. Lots of times owners have a sense of what may work, but many times this is perception versus reality. One rule of thumb for the CFO in assessing the risk associated with advertising is to see what advertising form the company spends most of it’s money and challenge the business owner as to its effectiveness. Having an internet marketing plan with effective Search Engine Optimization needs to be incorporated in a marketing plan.
What is the current status of the building/office lease? How many years left in the lease and does the current facility still meet the companys needs? An important CFO Service is to assess the risk of operating in a facility that has a long term lease that no longer meets the business needs. In addition, it is important to know if there is a personal guarantee on the lease. If the lease expires in the short term, it is incumbent upon the CFO to put together a plan to transition to a new facility they will meet the needs of the business.
Thursday, August 21, 2008
From a housekeeping standpoint the CFO needs to make sure that all of the vendor invoices are entered into the system with proper amounts and due dates. If this is inaccurate you will get vendor phone calls that could have been avoided. It is always best when the company calls a vendor about an anticipated problem versus the vendor having to call. It usually impresses the Vendor’s credit manager when the Company initiates the call because it shows the company is on top of the situation and is proactive. An important CFO Service is to determine which vendors need to be called proactively and establish a payment plan for any past due invoices and a plan for paying for new merchandise.
Paying for new merchandise to a vendor you are behind with can get dicey. The reason is that if a vendor makes it difficult for the company to get new merchandise (for example requiring COD on new shipments) then there is a natural tendency for the Company to look to another vendor who will give the Company terms. When that occurs, the Vendor who you are past due with gets incredibly upset because they not only are carrying a receivable but they are losing business. The CFO needs to manage this delicate balance and needs to be aware of this dynamic.
Tuesday, August 19, 2008
Once a poor performing employee is recognized cut your losses and get that employee out of your organization. Having sub par performing employees is a major risk for a business. Not only are they a risk to the performance of a business but they can pose a legal risk as well. Sub par performers decrease the morale of the other employees and reduce overall productivity. Get rid of them!
It is a valuable CFO Service to suggest ways to keep key and high performing employees. The best ways I have seen to keep key high performing employees happy is to provide them with bonus programs that produce win-win situations for both the employee and ownership. The CFO should help develop a metric or group of metrics used to determine what the bonus or incentive program should be that would generate that win-win situation for key employees.
The risk of not having an employee handbook is huge. An employee handbook and following the provisions in said book ensures that you are handling all employees the same way. The worst situation you can have is treating one employee one way and another employee a totally different way. This leads to employee lawsuits and ugliness. The ideal situation is to have an employee handbook, have all employees sign it and then follow its provisions.
On a final note, one of the best ways to motivate all employees collectively is to establish productivity games within the workplace where all employees participate to win a productivity game as a team. Once the team hits the productivity target they all win. Just like in a team sport when someone is not pulling their weight team members work to motivate those employees. Ted Castle at Rhino Foods in Burlington Vermont actually puts this plan in place and is tremendously successful at motivating employees.
Sunday, August 10, 2008
The other risk of debt is personal liability. Virtually all bank debt and credit card debt has personal liability along with it. Another item the CFO should note is whether any of the companys debt is in technical default. A loan may not be in payment default, but it is good to know if a loan is in technical default. A loan is in technical default when a loan violates a covenant or a provision in the loan with the exception of non payment. If non payment provisions are violated then the loan is in payment default. Another CFO service is to identify if any loans or notes are due in the short term. It goes without saying that debt is a risk, it obviously can be major cause of Cash Flow Problems.
Thursday, August 7, 2008
Not paying attention to unproductive and no longer used fixed assets can cause cash flow problems.
One CFO Service that should be performed is a review of the companys intangible assets. Specifically trademarks and patents. Make sure all trademarks and patents are current and have not expired. Make sure you are aware of the expiration dates. Furthermore make sure you understand the value that the trademarks and patents have. Be on the look out for infringements of your trademarks and patents and address them by having your attorney write a letter to the violator who is infringing on that patent or trademark. Competitors are always trying to knock products off.
If you do not have trademarks and patents the CFO should challenge the business owner to see if special logos and processes should be trademarked or patented. Patents and trademarks can give a company a unique competitive and marketing advantage and needs to be looked at.
Sunday, August 3, 2008
1. Too much inventory.
2. Too much salary to owner or too many withdrawals by owner.
3. Doing business with customers who are slow paying or who do not pay at all.
4. High Overhead too high.
5. Too much interest expense on debt.
6. Undercapitalization from the beginning
7. Unexpected casualty not covered by insurance.
8. Excessive purchases of fixed assets and capitalized costs.
9. Operating losses
10. Paying bills too quickly
The above bullet points represent the key causes of Cash Flow Problems. As previously stated in future posts I will identify ways to alleviate Cash Flow Problems once these events occurs.
Tuesday, July 29, 2008
Doing business with customers who are traditionally slow payers is bad business. You may think you know these customers personally and they would never stiff you. You may even expect that they are going to be late payers. In the final analysis these customers will burn you. Get rid of these customers unless they are willing to pay upfront for your product or service. It is not worth the receivable risk.
Speaking of which, I have had clients who will not do business with companies who are in bankruptcy because that bankrupt company did not pay my client. What these clients do not understand is that companies in Chapter 11 are prepared to do business on a cash in advance basis. Take advantage of that, make money and improve your cash flow. Don’t hold a grudge because they stiffed you. Business is Business.
To enhance collections send out statements. Some customers wait for statements before they pay. Many a time I have seen customers return statements versus invoices with their payments to ensure proper credit. That means they paid from the statement and if the statement did not go out they would have never paid. Also, stay on top of customers through telephone contact. Even if you just leave a message the squeaky wheel get the grease.
Sunday, July 27, 2008
Since I am a CFO that thinks like a business owner and given todays dollar weakness European investors will convert less Euros into more dollars to invest in US businesses. If you are selling your business you may want to consider a European buyer to maximize your purchase price. Of course if you are selling products or services the currency is currently in your favor.
Foreign currency risk can be significant especially when the dollar is extra weak or strong for an extended period of time. A business that has foreign activity needs to protect its downside when evaluating foreign currency risk as this one facet can cause Cash flow problems down the road.
Friday, July 25, 2008
Having too much inventory is not only the mistake of retailers. Manufacturers and distributors suffer from the same problem as well. A CFO responsibility and a CFO Service is to help the business owner recognize bad buys or slow moving produced products early. Once recognized, price them to sell, get the cash and then buy and produce good inventory that sells and turns quickly. Calculating inventory turnover ratios is a good indicator of how well inventory is moving. Another service the CFO can perform is to prepare expected or forecasted inventory turnover ratios for specific products and monitoring their performance to determine early enough as to whether that product is productive.
If your company has old or stale inventory look to move it immediately get the cash and re-invest it in more productive inventory.
Tuesday, July 22, 2008
What I see a lot of is entrepreneurs trying to survive with small cash resources and then when that runs out put in more cash. Most likely the new cash put in is a minimal amount and that runs out quick. It is a vicious circle and it is throwing good money after bad.
Entrepreneurs must be honest with themselves in projecting cash flow and then must be aggressive in obtaining the cash resources needed. Cash flow problems are the number one frustration for entrepreneurs.
Signs of Cash flow problems include inventory over buys or over production, rising accounts receivable with level sales, large capitalized costs and rising payables.
Friday, July 18, 2008
1. Payroll and employees – Is the company paying 1099 wages when they should be paying W-2 wages? Is the company paying regular wages when they should be paying union or prevailing wages? Is the company current with payroll taxes and medical insurance premiums that they collected from employees? Are employees safe in the work place? Do some employees have special perks that other employees do not have? Is there risk of abuse?
2. Sales Taxes – Are all sales taxes current? Since these taxes are collected from the customer they must be paid. Certain trades must pay sales taxes upon the purchase of inventory and if their vendor does not add the tax to the invoice the Company must self impose the tax and pay it.
3. Business operations – Does the nature of the Companys business operations lend itself to legal risk with employees and with customers? For example a medical business by virtue of its operations is exposed to risk through patient care. A food business is always at risk of impacting a customer’s health with bad food. A contractor is at risk of damaging customer property through construction efforts. Of course these risks can be mitigated with insurance, but the question always is how much insurance?
4. Stockholder risk – Are the businesses partners in harmony with one another and can that harmony stay in tact for the foreseeable future? What lies ahead that may disrupt that harmony?
The aforementioned risks are the first things a CFO should look at when assessing what the legal risk is of a company. Of course there are countless legal risks but all must be assessed as to the probability of occurring.
Tuesday, July 15, 2008
I was having lunch with a colleague of mine a few weeks ago and he asked me in what areas should a CFO or part time CFO identify risk? It was a question I really had to think about.
Since I think like a business owner, one of the first risks I am going to identify is Personal Liability exposure. The first things I investigate are bank loans and leases. If these exist there is a strong likelihood of personal guarantees. The next thing I look at is if there are any personal guarantees with inventory suppliers. This is one of the hidden risks. When one fills out the credit application to do business with a supplier, more times than not there is personal guarantee language in a separate section of the application. Anytime I am filling out a credit application for a client I always cross out that section. However, most people feel it is part of the application and fill it out. This is a major risk. If you cross it out and the supplier calls you back and requires it, you can assess at that point how important the supplier is and whether or not you want to take that risk. In most cases suppliers look at it as a bonus if the customer fills it out and do not address it if the customer crosses it out.
All fiduciary taxes such as payroll taxes and sales taxes must be paid. If left unpaid, this will create more personal liability. Unpaid income taxes will also create personal liability.
Company Credit Cards outstanding represent more personal liability risk for the business owner. The CFO should look at the possibility of one of the versions of the Corporate American Express Card that had no personal liability to the owner. I have recently got one for a client.
The overall risk that must be assessed regarding personal liability is what is the likelihood that the company will not make its loan payments, its lease payments or its inventory payments. Are these payments current? Is the current and projected cash flow strong enough to at least make these payments? If not, has the owner begun to use asset protection strategies to protect his assets should they come under attack?
Sunday, July 13, 2008
1. Managing and forecasting cash
2. Identifying and assessing all risk and preparing plans to mitigate risk
3. Understanding the things that make the specific industry the CFO is engaged in unique.
For the part time CFO it is vital to grasp these 3 concepts as soon as possible. Once the Part time CFO has these 3 things under their belt they can play a major role in the success of the company and the success of the companys strategic plan.
Since cash is the life blood of any business the part time CFO must be really in tune with managing the day to day cash flow. When managing cash for troubled companies the CFO must prioritize what needs to be paid. Forecasting cash needs using a 4 to 6 week model works well and helps the Chief Financial Officer identify what needs to be paid and can mange the cash accordingly.
Identifying and assessing risk will really tell the business owner where the land mines are in their business. This is an invaluable CFO Service to the business owner. If the CFO can tell the business owner when it is cloudy instead of when it is raining, the CFO will be worth their weight in gold.
People often ask me why does a numbers guy need to know about the business and the industry in which they work? Knowing the business and the industry is critical in managing cash and in identifying risk. Without this knowledge managing cash and identifying risk would be like reaching for a light switch in the dark.
Wednesday, July 9, 2008
Sunday, July 6, 2008
• Obtaining financing
• Company is being acquired or merged
• Shareholder buyout or disputes
• Personal Financial Statements
• Employee Stock Ownership Plans (ESOP)
• Litigation or Divorces
• Conversion of Corporate Status from a C-Corp to an S-Corp
• For Estate and Gift Tax Purposes
• For purposes of the business Owners goal setting
• Shareholder Buy and Sell Agreements
CFOs should calculate two different valuations. One valuation I will call the Book Valuation. This is the valuation that uses the traditional metrics like sales, EBIT, cash flow and assets. The second valuation that should be made is a valuation that a strategic buyer would pay. This is a buyer who is in the same business and will be able to take advantage of economies of scale and synergies. This buyer will probably pay a higher price than the book valuation. I call this the Synergy Valuation.
Friday, July 4, 2008
Wednesday, July 2, 2008
Sunday, June 29, 2008
Friday, June 27, 2008
Thursday, June 26, 2008
Wednesday, June 25, 2008
Give me a CFO who has owned a business before over anyone with a lot of practical experience and a lot of diplomas. The reason is the Chief Financial Officer who has owned businesses understands the business owners risk because they too have been there. Not only do they understand the risks and feel the risks, they can identify the risks more easily and quickly because they have an owners perspective.
Until you felt what it is like to have an unsuccessful sale in retail or to not be able to fill manufacturing orders because you did not have the right inventory or not having enough cash flow to make payroll, or the pressure of employees underperforming you do not really understand. These are just a few of the issues that only business owners worry about and stay up nights thinking about.
Employees and vendors do not worry about these issues nor do they have the owners perspective of these issues. A CFO who owned a business before not only has the financial and business acumen to be productive, but also has a mind set that only a business owner has and can perform like a business partner without owning stock. In short, it gives the business owner another set of business owner eyes and that is invaluable.
The most cost effective and productive way to use a CFO is on a part time basis. In other words a CFO Consultant. Back in the day, Chief Financial Officers were more commonly called controllers and controllers would pay a lot of attention to monthly closings, financial statement preparation and profit planning. With todays operating systems and more sophisticated accounting modules, CFOs can turn more of their attention to areas that are more productive to the business owner. For example CFOs can turn their attention to business forecasting, inventory planning and reduction of risk. These aforementioned productive CFO duties and CFO services do not take full time manpower. You can even add a number of other CFO services and it still will not require a full time CFO. When you hire CFOs on a part time basis they will not require benefits as most are of independent contractor status. These CFOs are also your CFO as long as you want to keep them. The Business Owner will not get a two week notice because they found another job. In closing CFOs who work on a part time basis are more valuable because they will tackle the most important issues in your business and they are extremely cost effective.
One thing business owners hate is surprises. Unless of course the surprise is a pleasant surprise and then all is well. However, if the surprise is an unpleasant surprise it is enough to give a business owner gray hair at a very early age. Chief Financial Officers or CFOs need to tell the business owner when it is cloudy not when it is raining. This is a key role of the CFO. Reducing the element of unpleasant surprises is one of the main roles of a CFO. Identifying cash flow problems before they occur, identifying inventory overstocks or shortages before they occur are just a few trouble spots that can be identified.
Another reason why companies need CFOs is for identifying and assessing risk. Todays business owner wears so many hats and needs to make decisions quickly. Business owners need a Chief Financial Officer to help them identify and assess the risk associated with those quick decisions. Todays CFO can also do many things to help reduce the business owners risk. One example of this is looking into the Corporate American Express Card. Qualifying for certain classifications of corporate American Express Cards will just have corporate liability and no personal liability.