The CFO'S Perspective

For those not familiar with the term, a decision tree is a flow chart that works through all possible response options in a scenario to analyze resulting outcomes. Basically, it is a visual version of an “if this then that” statement across all possible alternatives.

The “branches” off each decision alternative that result use data analysis to forecast the most likely outcome of each decision. When one decision leads to another decision that must be made, that branch splits to continue extrapolating the effects of each subsequent decision. The result is a tree-like diagram (hence the name) that is easy to understand and interpret.

Decision trees can be more conceptual in nature or have numbers to back up decision scenarios, as is the case of pricing changes affecting revenue figures. For decision trees with complicated calculations, a software program can assign values and probabilities to streamline decision-making. A decision tree is a critical part of strategic planning because it allows decision makers to analyze the effects of a significant change throughout different areas of the business.

“How do you build a three-year financial model?” It’s a question we get (and answer) a lot.

A financial model is a type of financial projection that pulls together important data to allow organizations to analyze their current financial position and predict their future financial position. While effective financial modeling takes significant time and expertise to complete, the considerable benefits provided make it well worth the investment. Financial modeling is an essential tool used to manage risk, allocate resources, make smart investments, secure funding, and develop long-term growth strategies.

Some projections are over a longer time horizon while others only cover a short time horizon. However, whether your financial model covers two, three, five, or ten years, it’s important to understand what it should accomplish, why you should do one, and what it should include. Find out now why you need financial modeling and how to build a financial model for your organization that will offer the insights needed to make key strategic decisions.

The relationship between business owners and their bankers is critical to maintain to ensure both short-term and long-term business health, and yet it's not talked about very often. How do you collaborate with your bankers during times of uncertainty? How do you make this critical relationship work to your benefit over the long term?

Never take your eyes off of the cash flow because it’s the life blood of the business.
- Richard Branson

Staying on top of your cash flow is vital to running a small business smoothly. The U.S. Chamber of Commerce cites that cash flow problems are responsible for 82% of business failures. Cash flow is critical to the survival and success of your business. Without it, you cannot hire or pay employees, buy inventory, expand your operations, or secure a line of credit or financing.

Building good cash flow management habits will help your small business weather rough terrain and double-down when opportunity strikes. To help your business avoid becoming just another statistic, here are six best practices to manage your cash flow and help you grow your business at the same time.

One of your most important tasks as a business leader and manager is mitigating risk. Understanding what kind of risk exists, planning for the impact of this risk, and executing continuity plans to keep the organization operational during a disruption is of paramount importance. The earlier risk can be identified, assessed, managed, and integrated into strategic planning, the better.

Typically, this burden falls on the C-Suite, but leaders at all levels should be included in the planning stage to ensure buy-in across the company. While it is easy to task an individual with overseeing risk management, ideally, it should not roll up to a single person. An emphasis on risk mitigation should be ingrained across the organization with alignment and compliance at every level. CFOs leading the charge can get their organizations on board to share the responsibility by taking a four-step approach to business continuity planning.

According to the 2024 Report to the Nations by the ACFE (Association of Certified Fraud Examiners), organizations lose 5% of their revenue to fraud annually. That equates to a more than $5 trillion loss to fraud globally every year. And while we tend to hope that this kind of thing is happening somewhere else instead of in our backyard, the bulk of this fraud isn’t occurring overseas. In fact, the US and Canada are responsible for 38% of all reported fraud cases worldwide, which gives them the unfortunate distinction of leading the world in fraud.

We’ve known for years now that business fraud is on the rise dramatically across most categories. According to the ACFE, asset misappropriation schemes are the most common but least costly, while financial statement fraud is the least common but most costly. Falling somewhere in the middle of both spectrums are other forms of business fraud like billing schemes, check and payment tampering, and theft of non-cash assets. But there are also far more sophisticated fraud schemes emerging these days as well. A Cybersecurity Dive article from last year revealed a new startling trend – the uptick in financial scams using deepfake technology. While this may sound more like Sci-Fi movie than a business news headline, consider the fact that a recent report by Deloitte speculated that fraud losses may hit $40 billion by 2027 due to generative AI magnifying the risk of banking fraud.

At this point, it isn’t a question of whether your organization will become a target of fraud anymore, but when. Of course, that begs the question: How are you protecting your organization from fraud?

Here’s the scenario: You’ve discovered a problem with your books. It has rippled through into your key financial reports and possibly also affected corresponding tax filings for that period. Your mind starts spinning.

How can you tell if this bookkeeping problem is fraudulent activity or just a simple mistake?

Executive Summary: Tariffs, particularly those on imports from key trading partners like Canada and Mexico, can have a far-reaching impact on U.S. businesses and the economy. While they may provide some protection for domestic industries, they also introduce significant challenges including higher costs, disrupted supply chains, and the need to make difficult decisions on pricing and profit margins. The ripple effects of tariffs can stretch across the broader economy, influencing consumer behavior and currency strength. Navigating these challenges successfully often requires the expertise of a CFO who can help businesses adapt, manage risks, and maintain financial health in an ever-changing economic landscape.

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With tariffs being recently imposed on U.S. imports from Canada and Mexico, it is important for business owners to understand the risks to their business, both directly and on the economy at large, and how engaging with a skilled financial leader may help minimize the impact.