The CFO'S Perspective

Rapid growth in the US economy and the lingering impact of the pandemic on global supply chains have created problems for almost every industry.

The construction industry has been impacted by shortages of certain glues used to make composite building products leading to escalating construction costs and lengthy project delays.

The automotive industry has been impacted by the well-publicized shortage of computer chips, which is caused by the shortage of chip manufacturing capacity. Underlying causes include shortages of certain critical raw materials and a very small number of chip manufacturing equipment manufacturers.

Even restaurants have been hit with shortages of food containers for to-go orders because of shortages of natural gas feedstock for container manufacturers.

Nearly every business has been beset by delays in the delivery of everyday supplies that can be traced to a shortage of workers in the transportation and distribution industries.

There aren’t enough workers to load trucks at the warehouses or drive them down the highways. If essential supplies are available, they are likely to be higher-priced and available only with extended delivery dates.

Should we pursue foreign manufacturing operations?

The last two years have shown the fragility of foreign supply chains. What were once relatively stable supply chains are now fraught with problems ranging from logistics/shipping delays, government lockdowns, material shortages, labor shortages, and changing political environments leading to increased duties and tariffs.

How do we proceed from here?

To alleviate some global supply chain problems, do we onshore our foreign manufacturing operations back to the United States?

Or are we still interested in foreign markets with low labor costs?

A large part of any Chief Financial Officer (CFO) role is strategic decision support, whether those decisions are related to staffing, pricing, selling, manufacturing, or any other area of the business. A CFO’s forward-looking point of view combined with their financial acumen makes them ideally suited to provide actionable information to their CEOs and other corporate decision makers and integral to the success of the organization.

Leaning on a CFO for strategic decision making support offers the following benefits:

• Adding value to the company in the short-term as well as the long-term
• Providing data-driven guidance during business shifts
• Aiding in weathering a crisis or downturn

The war for talent that emerged amid The Great Resignation is still going strong in the areas of accounting and finance. As Hannah Green explains,

“The accounting sector has a problem with numbers. Specifically, it’s becoming harder and harder for firms to attract top talent. Why? There just aren’t enough talented bodies to go around. In what’s come to be known as the ‘war for talent’, top firms are finding it increasingly difficult to secure and retain highly qualified finance and accounting professionals.”

One of the most complicated elements of managing a non-profit organization's finances is allocating administrative-related expenses. These are expenses that cannot be specifically assignable to the areas benefited – commonly referred to as Indirect Costs. The methodologies of allocating indirect costs are often complex and situational. Additionally, many funders of non-profits have their own rules, exceptions and limits, creating a spider web of regulations.

In 2018 we published an article titled “How a CFO Will prepare Your Business for Unexpected Events.” In it we outlined 19 types of unanticipated events that could negatively affect your business and provided advice on how to develop a contingency strategy that would help your company prepare for any kind of disaster or disruption it might encounter.

Do you know what was not included in that list? A pandemic.

This was not simply an oversight. It was an indication that a global health issue was not on anyone’s radar. It was unthinkable in 2018 that one highly contagious illness could sweep through country after country, shutting down economies and causing destruction. No one was preparing for a global pandemic.

And yet, another interesting observation stands out to us. While the word “pandemic” was never used to address that specific kind of business disruption, the many outcomes of the pandemic were addressed. Loss of a business owner, financial hardship, loss of customers, new government regulations, political unrest, supply chain disruptions, loss of salespeople, and transportation issues were all named as possible unexpected events that could have a significant impact on a company.

Our CFOs get asked about business exit options a lot, especially these days. Business owners that are looking to step away to pursue other endeavors, interested in cashing out to get the full value of their hard work, or nearing retirement all wonder when they should make their move to maximize their gain.

While last year’s expected Federal tax rate increases did not happen, there is still lingering apprehension around the timing of exiting your business. So, though the urgency we witnessed last year has dissipated, the ongoing question still remains: should you sell your business this year, next year, or not at all?

Every conversation I have these days starts with hiring woes and worker shortages, whether when having coffee with a banker or discussions in line at the airport. They steer towards how we are all affected by shortages, delays, and uncertainties. It isn't easy to remain optimistic when there are no new ideas around what we can do to fix it.