The CFO'S Perspective

Companies that understand how finance and HR overlap and foster a relationship between the two are better poised for long-term growth than their less informed counterparts. The reason behind this is simple – knowing when and how to leverage your CFO to assist with hiring and employee retention can improve profit margins, encouraging sustainable long-term growth. Additionally, encouraging collaboration between these two vital areas of the business improves workplace culture across the entire organization.

Business process outsourcing (BPO) allows CEOs to focus on the job of running the entire business instead of getting bogged down with the management of individual departments and teams.

Effective outsourcing allows both large and small companies alike to lean on senior skillsets outside of the company to provide accurate information, offer impartial feedback, and inform strategic decision making.

In fact, according to a recent Intuit study, 65% of business owners surveyed said they would be “better positioned for long-term growth if they could take a step back and look at the bigger picture.” These business owners also reported that they were involved in areas of the company such as sales, marketing, customer service, human resources, and accounting, instead of outsourcing them. It is no coincidence that these activities were taking away from their ability to focus on their core business functions. When they were asked what they should be spending their time on instead, their top answers included developing business strategy, making an impact on customers directly, and innovating product/service offerings.

Business process outsourcing allows business owners and CEOs to utilize highly experienced professionals without needing to hire internally, both managing costs and improving business agility. Furthermore, outsourcing allows business leaders to reduce stress, lessening the likelihood of executive burnout.

When your business gets to the point where it needs to hire a CFO, what are your options?

• Full-time In-house
• Interim Outsourced, virtual or in-house
• Fractional Outsourced, virtual or in-house

These days a lot of organizations are looking to hire virtually, which makes “hiring a virtual CFO” a hot topic. Amidst all the remote work buzz it is easy to lose your focus and forget what you were trying to accomplish in the first place by outsourcing the role.

With government assistance waning, business owners are evaluating other ways to improve cash flow.

Since slow-paying clients are one of the biggest killers of cash flow, some companies choose to sell their invoices to recoup some of that missing revenue more quickly. This strategy, known as invoice factoring, is a way for companies to get an infusion of cash from the products they have already sold or services they have already performed from a third-party that is willing to advance them the funds before customers pay.

Alternatively, companies that do not want to sell their invoices, and may not want, or can’t, pursue a line of credit with a traditional business bank, can borrow money against their invoices from a specialty lender. This strategy, known as invoice financing, not only improves cash flow but can also serve as a means of borrowing for businesses that cannot readily obtain other lines of credit.

Each strategy has differences to consider. Find out more about invoice factoring and invoice financing to determine which approach is right for your business.

Budgeting and strategic forecasting creates a business roadmap to maintain stability and achieve growth. However, for forecasting to be accurate it needs to be modified when significant changes occur either internally or externally. This is especially important to consider this year, as supply chain disruptions and changing business regulations have drastically changed corporate outlooks across the country.

If you understand now that there is a high likelihood of needing to undergo reforecasting next year, you will be better equipped to do so when the time comes. Kory Wagner explains, “Expecting your assumptions to last through an entire year is at best naïve and at worst detrimental to your business. Incorporating reforecasting into your regular budget process, as needed, will keep you on track and help you roll with the punches.”

Some companies are reforecasting-averse, so they shorten their budgeting cycles from annual or semi-annual to quarterly or monthly to reduce their chances of needing to do so. But if 2020 has taught us anything it is that every company should be prepared to reforecast as needed because it could become a necessity at any time.

So, this year as you finalize budgets and forecasts, take the approach of “planning to re-plan.”

The Role of a CFO

While a controller/accountant lives in the past, a CFO lives in the past, present and future.

An accountant manages data. A controller produces financial statements, implements controls, and may offer some analysis. A CFO helps lead the organization by overseeing all financial activities – living in the present and looking to the future through continuous scenario-based planning. CFOs take a forward-facing role by managing budgeting, forecasting, vendor relationships, tax strategy, compliance issues, and succession planning. Leaning on data and industry experience a CFO provides key insights to advise the CEO through all the company’s life stages.

Did you know that 58% of small business owners do not have a business succession plan and almost half believe they do not need one? Yet, despite the lack of prevalence, a succession plan is a foundational component for any business. The belief that your organization does not need a succession plan often stems from misconceptions around what a business succession plan looks like and what it should accomplish.

Many people think that a succession plan is a simple exit strategy document – something you put together when the owner wants to retire. As a result, companies with young, passionate, highly engaged owners often do not see the need to put one together.

Other times, business owners assume a succession plan would only be necessary if there was a catastrophic event. In this scenario, it becomes incredibly easy to put off formalizing a plan amidst the hustle and bustle of daily business demands.

However, a business transition can occur for any reason – such as retirement, M&A interest, or a changing industry landscape. In each of these scenarios, a succession plan spells out the details of selling a business to achieve maximum value for both the buyer and the seller.

Publicly traded companies get a lot of press when they commit corporate fraud, but financial fraud can happen at private companies as well. Furthermore, fraud is not solely reserved for large companies – it can occur at any size company, including small locally owned businesses. While fraud can arise in any number of unique circumstances, it typically occurs to secure bonuses for management or to appear more appealing to investors.

Though private companies are not formally required to abide by SOX (Sarbanes-Oxley Act of 2002), the requirement that companies conduct an annual audit of their internal controls is always a best practice. A business’s accounting practices and financials should be reviewed regularly (either internally or by a third-party) to look for vulnerabilities and discrepancies.