The CFO'S Perspective

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.

Like any other c-suite hiring process, hiring a CFO can be a daunting process at any organization. Whether the role is a newly opened position at a burgeoning startup, or a replacement for a long-standing CFO that is looking to retire, bringing in a CFO is a complex endeavor.

For companies that are accustomed to using recruiting services, the idea of using an executive placement agency to hire a key leadership role is a logical extension. However, businesses that typically handle hiring in-house may not see the benefit to using an executive search firm to hire a CFO. Some business owners may not even know that there are niche executive search agencies that specialize in finance roles.

However, using an executive search firm that focuses specifically on hiring key finance positions offers numerous benefits, which typically include:

In the last six months, we have seen unparalleled increases and decreases in sales and production volumes. Are you getting enough information (and the right information) from your Financial Statements to make good management decisions in these turbulent times?

The most complex segment of the financial statements for manufacturers and the most volatile in these changing times is the cost of goods sold. The different income statement formats and content significantly impact its usefulness for managing significant volume changes.

Let's look at the various formats of financial statements from using a small manufacturer as an example and review how they might or might not help in decision making.

The current economic climate, combined with the fact that September is National Preparedness Month, has many of us thinking about how we can prepare for possible threats and business disruptions. This kind of strategic planning allows a business to approach a worst-case scenario with a growth mindset instead of fear – increasing the likelihood that your business will come out of a crisis stronger for having gone through it.

During a worst-case scenario, leadership must decide whether the organization will make the necessary adjustments needed to continue with business as usual or change how the company will operate. And while the conversation will undoubtedly include operational and capacity considerations, it is primarily a discussion about financial capabilities.

Accounts receivables are a hot topic for business owners because they are the primary driver of cash flowing into the company. Unfortunately, in the US 39% of invoices are paid late and 52% of businesses have been asked by clients to extend their payment terms. This creates a difficult situation for business owners because late payments not only hurt cash flow management but may also serve as an early warning sign that payment is not coming.

Typically, the longer invoices remain outstanding the less likely they are to be paid. When invoices cannot be collected on, they become bad debt and are written off, erasing the revenue they would have generated for the hardworking businesses that earned them. Bad debt hurts short-term cash flow and long-term profitability. In fact, every year an average of 4% of accounts receivable are written off as bad debt, which equates to $400,000 in lost revenue for a company with $10M in sales annually.

So, what can you do to reduce your accounts receivables problems?

We are now seven months into the Covid-19 pandemic, and it is clear we are far from returning to “normal”; however, that may be defined. What is clear is the pandemic pushed the concept of work-from-home (WFH) from being a motivational tool and employee benefit to a way of life. Work-from-home will undoubtedly remain an essential part of company operations well after the pandemic is under control. REI, Zillow, Twitter, Square, and other companies announced a plan to work remotely indefinitely.

Moving to a remote work environment in March with little or no notice was extraordinarily disruptive and often haphazard at best. We did what we needed to operate in the so-called “new normal.” By now, most of us have settled into a regular work cadence and adapted to working apart from the rest of our teams.

According to the U.S. Census Bureau, nearly one-third of the U.S. workforce and half of all “information workers” can work from home. Though the number of people working partially or fully remote has been on the rise for years now, the COVID-19 pandemic may have pressed the fast-forward button on this trend.

With millions of people taking part in this work-from-home experiment, now is the perfect time for companies to take a fresh look at their internal control environments, especially as they relate to their WFH team members. What once worked with everyone in the same place may not be effective with a distributed workforce.

A critical self-examination of your company’s internal control environment begins with an assessment of the segregation of duties.

It might seem like a matter of semantics in a small to mid-sized company to use the Controller and Chief Financial Officer (CFO) job titles interchangeably. After all, don’t they essentially do the same thing?

The fact is there is a difference between the two. A CFO is not simply a more experienced and higher paid controller – the roles are different and require a different level of experience and a different way of operating.