The CFO'S Perspective

Planning for Next Year's Raises in Today's Competitive Business Environment

With full nationwide employment, pricing pressure on materials, and generally modest revenue growth, how do you plan or budget raises for your employees? As you create next year's budgets and update your strategic plans, you also need to take several vital steps.

These include looking at the big picture, understanding and limiting your risk, getting help if you need it, and utilizing a financial planning tool to provide the right raises to retain and attract talent.  This may seem like a tall order, but a systematic approach will help your organization achieve its staffing and budget goals.

Topics: Planning HR Budgeting Salaries

How Much Cash Should a Nonprofit Have in Reserves?

An 84-year-old resident of Longview passed away this year, leaving $750,000 of her estate to three local non-profits. Relying on these types of unexpected donations is one way to build up your organization's reserves, but you can't count on these generous gifts.

Case in point is the Anacortes-based conservation nonprofit Pacific Biodiversity Institute, which just closed its doors due to a lack of funding. Whether flush with funds or struggling to keep the lights on, there’s never enough funding for a nonprofit to accomplish every initiative it would like.

Every organization needs to determine how much it requires for Operations, in Operating Reserves, and what can be dedicated to mission-focused initiatives. The answers to these questions are, of course, “It depends.”

The variables that must be considered include seasonality, worst case scenarios, and more. The key to developing a specific answer is knowledge - knowledge of the organization’s current financial state and donation history, as well as the data that is produced from a solid budget and cash forecast.

For those organizations that struggle, a plan must be developed to raise donations and reduce expenses. If you are fortunate enough to have a surplus of reserves additional questions arise. Where do you put those reserves? How should you safely manage them? While the answers vary from nonprofit to nonprofit, there are a solid set of financial best practices to follow and ensure that these questions are answered.

Topics: Non Profit Organizations Planning Cash Flow

Before & After... Hiring a Part-Time CFO

The thought of needing to hire a CFO often doesn't come before there is some sign of trouble. Most companies try to operate using the “bank account formula” for as long as possible and then make a change only when the pain becomes too great. “Let me look at my bank account… if I have money, I must be OK!”

Fortunately, this no longer a black and white choice. The most successful businesses are built on a collaborative foundation, and a growing number of companies are embracing the concept of hiring a part-time CFO. Instead of being just a sunk operating cost, this move is now widely viewed as a smart business investment that is delivering positive returns.

Topics: CFO Hiring Planning Analysis

Profit Margin Shortcomings – The Perils and Potential in Manufacturing

As a CFO, one of the common reasons I am brought into a manufacturing organization is to solve the mystery of “Why our sales are growing, but not our profits.”  Most of the companies I work with have rigorous quoting processes that they assume will protect them financially, but in the end their actual monthly profit margins often fall short of quoted (and anticipated) profit margins.

Before diving into an examination why profit margins lag behind sales growth projections it is important to take a look at accompanying financial reports. These are categories from a simplified manufacturing income statement:

In this article we will discuss materials, direct labor and manufacturing overhead as they relate to gross profit.

Topics: Analysis Budgeting Manufacturing Profit Margin

The Difference Between Financial Teams for Small vs. Mid-Sized Businesses

Top business owners and CEOs know that having a well-run finance department is vital to their company's success. Being able to process and analyze payments coming in and going out is paramount. Likewise, your company's financial team should keep you in compliance with regulations, such as tax laws, and help drive some of the strategic decisions for your business.

But, what is the right size and make-up of a financial team relative to the scale of your business operations? If you are a start-up or small business, should you have a CFO? If you don't, who will handle these essential financial functions? At what point should you start scaling up your financial team. The answers to the questions could have an impact on the success or failure of your business.

Topics: Planning Leadership

Advantages of a Part Time CFO

The Chief Financial Officer (CFO) position is an important component in the success of any company. A capable CFO takes the time to understand the financial operations of his/her own company, as well as the company’s position in the industry. That knowledge informs vital strategic financial decisions that are often the primary drivers of business growth.

However, the costs associated with a CFO role typically put it out of the reach of many small businesses and startups. Some companies choose to forgo a CFO altogether, opting to let the head of the business make the financial decisions with the help of a CPA, accountant, or other less experienced financial professional. Much like taking a road trip without turn-by-turn GPS directions, this route may result in poor financial management that leads the company astray.

Topics: CFO

Top 10 Federal Tax Compliance Issues for Businesses

We recently covered the cost of tax compliance in this recent article.  The costs are a direct result of how companies face a myriad of tax compliance issues, even in the wake of tax reform that is supposed to boost bottom line results. The top ten federal tax compliance issues for businesses haven't changed much in the wake of this reform. These are:

Topics: Taxes Legal Planning

This is Us! - Community Impact

We are privileged to provide our clients with the best finance experts in the region. Not only are they experts in the field, they are also authentic, caring and generous people. We want to honor them by giving you the opportunity to get to know them a bit better.

Our firm is well known for our philanthropic contributions to our communities.  One of our core values centers on philanthropy.

Even small companies have an obligation to re-invest in the communities where they earn their living,”  
- Tom Varga, CFO Selections Founder

What you may not know is how our team goes even further by giving of their own time and talent after hours. The stories of their causes are below.

Topics: Community CFO Selections This is Us

What Does It Cost a Business to Maintain Tax Compliance?

We are continuing on the topic of tax compliance from the previous article.

If there is one thing most of us can agree on, it is that this nation's tax code is complicated! In 1955, the Internal Revenue Code was just 409,000 words, which already sounds daunting. By 2017, it had ballooned to nearly six times that size, clocking in at over 2.4 million words. According to the Tax Foundation, there are also roughly 60,000 pages of tax-related case law that are vital to understanding this nation's tax code.

The hardest thing in the world to understand is the income tax."
- Albert Einstein

Topics: Taxes Legal Expenses

The Importance of Federal Tax Compliance for Businesses

Every business is required to file tax returns and make payments on income at the state and federal level. While each organization has its own requirements, ignorance of the rules is not an excuse for non-compliance.

Not only is it vital that a company dedicate resources to federal tax compliance, it is also costly. Since tax rules tend to change frequently, there is a high risk of mistakes as well as the potential to miss opportunities, both situations that could hurt your company's bottom line.

Make sure you pay your taxes; otherwise you can get in a lot of trouble."
- Richard Nixon

Topics: Taxes Legal

A Finance Leader's Support of the CEO Directly Impacts Your Business Success

In years past, a company's financial leader was largely disregarded when it came to strategic planning. In fact, many CEOs believed that a solid group of accountants could negate the need for a CFO altogether. Fortunately, these ideas have evolved.

Your company may have the most ground-breaking products or services and eye-popping marketing campaigns, but this is not enough to ensure financial success. This requires a closer relationship between the CEO and CFO, as well as the supporting roles within your company's finance team.

Topics: CFO Leadership

How a CFO Will Prepare Your Business for Unexpected Events

When business disruptions occur, it can be expensive. Most business owners and CEOs have a model for success in mind, but what about the other side of the coin? Failing to prepare or put contingencies in place for unexpected events can turn a potential blip into a catastrophe.

Increasingly, business owners and leaders are leaning more on their financial teams to help prepare the company for uncertainty. Specifically, the business's CFO is taking on a broader role that includes making sure that your firm will be able to weather unexpected events.

Topics: CFO Planning Financial Projections Forecasting

Your Business May Not Need a CFO

Many businesses don’t need a CFO.  Yours may be one of them.

To be clear, pretty much every business needs some form of finance lead, or at least a solid accountant.

But if you are the owner or CEO of a privately held, reasonably successful small to mid-sized business, it’s pretty unlikely you need a CFO.  Certainly not a full-time CFO.

Now, depending on some of the challenges your business is facing, you may have the need or desire for some form of interim, part-time or “fractional” CFO.  But a full-time permanent CFO?  There’s a good chance that just doesn’t make sense.

Why not?  Because in this type of business, the primary responsibilities of the true CFO are either not required or they are handled by the business owner or CEO.

Topics: CFO Hiring Controller

What Your CFO Should Do to Prepare Your Business for the Impact of the New Tax Laws

In the final days of 2017 the Tax Cuts and Jobs Act was enacted. Considered the most sweeping U.S. tax code overhaul in recent history, there are changes to individual tax rates and deductions, but the most dramatic changes are for businesses. 

5 Keys to Accurate Cash Flow Forecasting

Running out of cash is not only a sign of poor planning, but it's also one of the biggest reasons that businesses fail. Forecasting your company's cash flow can be tricky because of the many variables that determine how much cash you will need for operations versus the amount available.