The CFO'S Perspective

The thought of needing to hire a CFO often doesn't come before there is some sign of trouble. Most companies try to operate using the “bank account formula” for as long as possible and then make a change only when the pain becomes too great. “Let me look at my bank account… if I have money, I must be OK!”

Fortunately, this no longer a black and white choice. The most successful businesses are built on a collaborative foundation, and a growing number of companies are embracing the concept of hiring a part-time CFO. Instead of being just a sunk operating cost, this move is now widely viewed as a smart business investment that is delivering positive returns.

As a CFO, one of the common reasons I am brought into a manufacturing organization is to solve the mystery of “Why our sales are growing, but profits low?”  Most of the companies I work with have rigorous quoting processes that they assume will protect them financially, but in the end their actual monthly profit margins often fall short of quoted (and anticipated) profit margins.

Before diving into an examination why profit margins lag behind sales growth projections it is important to take a look at accompanying financial reports. These are categories from a simplified manufacturing income statement:

In this article we will discuss materials, direct labor and manufacturing overhead as they relate to gross profit.

Top business owners and CEOs know that having a well-run finance department is vital to their company's success. Being able to process and analyze payments coming in and going out is paramount. Likewise, your company's financial team should keep you in compliance with regulations, such as tax laws, and help drive some of the strategic decisions for your business.

But, what is the right size and make-up of a financial team relative to the scale of your business operations? If you are a start-up or small business, should you have a CFO? If you don't, who will handle these essential financial functions? At what point should you start scaling up your financial team. The answers to the questions could have an impact on the success or failure of your business.

The Chief Financial Officer (CFO) position is an important component in the success of any company. A capable CFO takes the time to understand the financial operations of his/her own company, as well as the company’s position in the industry. That knowledge informs vital strategic financial decisions that are often the primary drivers of business growth.

However, the costs associated with a CFO role typically put it out of the reach of many small businesses and startups. Some companies choose to forgo a CFO altogether, opting to let the head of the business make the financial decisions with the help of a CPA, accountant, or other less experienced financial professional. Much like taking a road trip without turn-by-turn GPS directions, this route may result in poor financial management that leads the company astray.

We recently covered the cost of tax compliance in this recent article.  The costs are a direct result of how companies face a myriad of tax compliance issues, even in the wake of tax reform that is supposed to boost bottom line results. The top ten federal tax compliance issues for businesses haven't changed much in the wake of this reform. These are:

We are privileged to provide our clients with the best finance experts in the region. Not only are they experts in the field, they are also authentic, caring and generous people. We want to honor them by giving you the opportunity to get to know them a bit better.

Our firm is well known for our philanthropic contributions to our communities.  One of our core values centers on philanthropy.

Even small companies have an obligation to re-invest in the communities where they earn their living,”  
- Tom Varga, CFO Selections Founder

What you may not know is how our team goes even further by giving of their own time and talent after hours. The stories of their causes are below.

We are continuing on the topic of tax compliance from the previous article.

If there is one thing most of us can agree on, it is that this nation's tax code is complicated! In 1955, the Internal Revenue Code was just 409,000 words, which already sounds daunting. By 2017, it had ballooned to nearly six times that size, clocking in at over 2.4 million words. According to the Tax Foundation, there are also roughly 60,000 pages of tax-related case law that are vital to understanding this nation's tax code.

The hardest thing in the world to understand is the income tax."
- Albert Einstein

Every business is required to file tax returns and make payments on income at the state and federal level. While each organization has its own requirements, ignorance of the rules is not an excuse for non-compliance.

Not only is it vital that a company dedicate resources to federal tax compliance, it is also costly. Since tax rules tend to change frequently, there is a high risk of mistakes as well as the potential to miss opportunities, both situations that could hurt your company's bottom line.

Make sure you pay your taxes; otherwise you can get in a lot of trouble."
- Richard Nixon