Saturday, October 3, 2009

What it means to Provide CFO Services

What does it mean to provide Chief Financial Officer Services? Companies from start up to 10 million in sales cannot afford nor do they require the services of a full time CFO. Why not find someone who provides these high quality professional services on an as needed basis?

It is best to use a CFO who truly understands the risks of business ownership. A CFO who understands what it feels like to have to make a payroll on a Friday with no money in the bank account on Wednesday. A CFO who understands what it feels like to see employees sitting around or being disruptive. A CFO who knows what it feels like to have a lot on the line.

What are CFO Services? Well as I go through these CFO services please keep in mind that you can choose one of them, some of them or all of them and at any time. You certainly do not have to do everything at once. That is the beauty of the flexibility of having a Part time CFO. Also a good Interim CFO works in your office location

And now for the services….

The CFO should make sure you have good financial numbers. Making business decisions without good numbers is like a Doctor making a decision to operate on your ankle without X-rays. It simply shouldn’t be done. So the first thing to do is if your numbers are not right the CFO should make them right.

The Part Time Chief Financial Officer should also Identify, assess and mitigate risk. Whether you are Microsoft or the local pizza parlor your business has risk. The question is how severe are those risks? You should be able to work together with your Chief Financial Officer to Identify the risks in your business. The CFO should also assess the severity of that risk and if severe suggest actions to mitigate the risk. Severe risks in your business could be cash flow problems, low or no cash reserves, the need for financing, employee risks, inventory obsolescence risk, legal risk and personal liability risk just to name a few.

A CFO should be able to tell you when it is cloudy not when it is raining.

Business Owners hate surprises. They need to be prepared so they can review options and have time to fix whatever needs to be fixed. The last thing business owners want to do is go into fire drill mode and have no time to react. The CFO should have business forecasting and modeling tools that give the business owner the needed foresight to take action. Forecasting tools that give the business owner the time to react to both downturns and upturns in their business. For example Next Step CFO developed an exclusive forecasting and modeling tool called "CashTell".

There are several things that a good forecasting tool should do but let me hit the major points:

First of all any forecasting tool including CashTell is based on a solid set of assumptions. The beauty is the business owner can change those assumptions any way they want creating multiple what if scenarios.

A good forecasting tool can tell you how much cash you will have or need at any point in the future based on whatever assumptions you give it.

So if you want to know if you will have enough cash to survive a 20% decrease in business. A good forecasting tool can tell you that.

If you want to know if you will have enough cash to survive a 50% increase in business. A good forecasting tool can tell you that.

Can your business absorb the purchase of equipment, machinery or a new computer system? A good forecasting tool can tell you that.

A good forecasting tool also tells you what you need to do to increase cash flow. It isn’t always more sales.

A good forecasting tool helps determine key metrics to evaluate your business on a going forward basis.

In one sentence a good forecasting tool helps you figure out the strategies that need to be implemented that drive profits and cash flow. Then it is the job of the CFO to implement those strategies.

A good CFO should help you determine and develop metrics to evaluate your business. Metrics are quantitative parameters that help you evaluate the performance and productivity of every aspect of your business. Metrics are a terrific management tool.

The best CFO's will help you Drive results, contribute to business development, help shape your financial strategies, identify employee theft, improve controls and processes leading to operating efficiencies and also help you develop and execute exit strategies. After all someday you will be separated from your business.

I hope this was helpful to the small business owner in making them aware that the Part time CFO option exists and how they can help them.