The current economic uncertainty has many businesses closely evaluating their current and future staffing needs. While some positions are being cut, especially in the hospitality and travel sectors, many businesses are strategically hiring financial professionals into executive leadership positions during the downturn.
Companies that previously had tasked their CEOs with handling finance functions are now hiring dedicated CFOs (or outsourcing CFO roles to reputable third parties) to ensure they will be able to weather the new economic storm. With ambiguity over how long businesses will need to keep their offices and storefronts closed paired with unpredictability in the stock market, business owners and CEOs are feeling increased pressure to make critical strategic financial decisions for the health of their organizations.
An experienced CFO can provide multi-scenario modeling to aid in tactical decision-making, offer an unbiased financial perspective, act as a confidential sounding board for the CEO, and handle negotiations with essential parties to benefit the overall organization.
Modeling & Planning
Unlike accounting, which is fundamentally about the past, finance is focused on planning for the future.
Seasoned CFOs can use current financial indicators and their previous experience to model and plan for the various scenarios that a business may face in the coming months and years. These plans can inform critical decision-making related to spending cuts, rightsizing the labor force, and timing planned business investments. CFOs can forecast the short and long-term impacts of these decisions to better position the company in response to economic shocks.
With new federal and state business relief packages being rolled out, new employee protections being passed, and additional financing options being offered by payment processors and vendors, an experienced CFO can help navigate the myriad options available to aid businesses in this difficult time.
In this way, a CFO not only mitigates the effect of a downturn of a business proactively but can also help right the ship when the company is struggling in a sea of a difficult financial conditions.
A consulting CFO is a neutral, independent voice in the room. Experienced CFOs typically follow the facts without pushing a personal agenda or engaging in office politics anyways, but consulting CFOs are even more likely to provide an unbiased perspective. Business owners and executive leadership teams can be reassured that a CFO consultant is acting in the best interest of the company and its stakeholders (owners, employees, and investors) rather than for job protection or other personal agendas.
Outsourcing the CFO role also provides an experienced and confidential sounding board for the CEO, which is especially important in family-owned businesses. While all business owners and CEOs feel some measure of emotional isolation, family businesses exacerbate this situation by adding personal relationship dynamics into the mix. Business leaders at family-owned companies may find themselves needing to balance family relationships and business success, especially in times of crisis. In this scenario, a CFO can provide the confidential conversational space that a CEO needs to make difficult decisions and prioritize the health of the business. Additionally, a consulting CFO can even act as a scapegoat for unpopular but necessary decisions, allowing the CEO to preserve existing internal relationships.
Third Party Negotiations
Because of their experience a CFO can also add credibility to the perceived quality of management and build bridges with capital providers to gain acceptance of forecast projections and strategic plans. The result is a company with less perceived risk and a higher perceived value, which is crucial in establishing mutually beneficial financial solutions while working with external parties.
A consulting CFO has credibility with lenders and personal relationships with banks to facilitate negotiations with these key players. The scope of a CFO’s experience will also aid in negotiating with third parties like landlords, vendors, and customers through difficult times when financing and payment options may need to be changed.
About the Author
Bill Palmer has experience with the finances of businesses and nonprofits from multiple perspectives. He was a senior commercial banker in the Seattle market for over 20 years. For the past 13 years he has been a consulting CFO for over a dozen companies and organizations in the Pacific Northwest. For more than eight years, he has acted as the part-time Director of Finance & Operations at a private school where he has a broad range of responsibilities.
Bill also serves as Board Treasurer for a local charity focused on children’s health issues. Previously, he helped found and served ten years on the governing board of a private school, where he built the business model, led the initial capital campaign which enabled the commencement of the school’s operations, negotiated long term loans, and set pricing policies.