The CFO'S Perspective

Business process outsourcing (BPO) allows CEOs to focus on the job of running the entire business instead of getting bogged down with the management of individual departments and teams.

Effective outsourcing allows both large and small companies alike to lean on senior skillsets outside of the company to provide accurate information, offer impartial feedback, and inform strategic decision making.

In fact, according to a recent Intuit study, 65% of business owners surveyed said they would be “better positioned for long-term growth if they could take a step back and look at the bigger picture.” These business owners also reported that they were involved in areas of the company such as sales, marketing, customer service, human resources, and accounting, instead of outsourcing them. It is no coincidence that these activities were taking away from their ability to focus on their core business functions. When they were asked what they should be spending their time on instead, their top answers included developing business strategy, making an impact on customers directly, and innovating product/service offerings.

Business process outsourcing allows business owners and CEOs to utilize highly experienced professionals without needing to hire internally, both managing costs and improving business agility. Furthermore, outsourcing allows business leaders to reduce stress, lessening the likelihood of executive burnout.

With government assistance waning, business owners are evaluating other ways to improve cash flow.

Since slow-paying clients are one of the biggest killers of cash flow, some companies choose to sell their invoices to recoup some of that missing revenue more quickly. This strategy, known as invoice factoring, is a way for companies to get an infusion of cash from the products they have already sold or services they have already performed from a third-party that is willing to advance them the funds before customers pay.

Alternatively, companies that do not want to sell their invoices, and may not want, or can’t, pursue a line of credit with a traditional business bank, can borrow money against their invoices from a specialty lender. This strategy, known as invoice financing, not only improves cash flow but can also serve as a means of borrowing for businesses that cannot readily obtain other lines of credit.

Each strategy has differences to consider. Find out more about invoice factoring and invoice financing to determine which approach is right for your business.

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?

Effective cash flow management requires careful control of both money coming in and going out. While practices like shortening payment terms, offering variable pricing, and pursuing collections can increase the timeliness and amount of money coming in, delaying payments to vendors can slow cash outflows, providing the float needed to sustain operations during difficult times.

In an article about re-opening your business, Jeff Dunn explains succinctly, “Determine which vendors are critical to your day-to-day operations and pay them as timely as possible; which are important but can be paid slowly; and which are not important going forward that will be paid when able.”

How do you decide who to pay now and who to pay later, and how do you abide by vendor management best practices while doing both? This quick guide will help you answer those questions to improve your cash flow position right away.

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. According to a U.S. Bank study, poor cash management is the cause of 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.

The Perks of Being Royalty

One of the best things about being the sole owner of a privately held company is that you have a great deal of discretion as to how your business is operated.  You get to make the rules.  It’s like being the King or Queen.

This includes deciding on the form and content of the financial information your accounting staff prepares. Particularly if you have no debt or outside investors, you can decide what you want to see and how often you want to see it.

Don't ever let your business get ahead of the financial side of your business. Accounting, accounting, accounting. Know your numbers.” - Tilman J. Fertitta

When it comes to financial statements, one size definitely doesn't fit all. In fact, as your business grows and evolves, your financial statements should too. Their primary purpose shouldn't change, which is to provide business owners with actionable information. However, as a business matures, and potentially becomes more complex, with an increasing number of opportunities to pursue (or not) the statements need to be able to keep up.

There isn't a hard and fast rule about what you should look at, and at what stage those needs will vary. What should be true, however, is the owner's commitment and rigor around the process of what is reviewed and when. For businesses that lack the full-time need of a CFO, a part-time or project CFO will provide the expertise necessary to produce financial statements that are appropriate and relevant to generate information (not just data) that helps solve real business problems.

I happen to lead an organization made up of those financial executives and can offer that I face the same challenges you do when evaluating what I need to run the firm. Primarily, how do I make sure I have what I need to make good business decisions?