The Role of a CFO in a Small Business

You may be wondering whose job it is to make sense of all the financial data in your small business. It usually isn’t a bookkeeper or accountants job who is mostly responsible for ensuring bookkeeping is accurate and financial records are completed on time. The role of a part-time or contract CFO, on the other hand, is to analyze data, develop proactive strategies, and track performance outcomes for your small business.

Businesses are asking for more advice

Small and medium-sized businesses, and high-growth businesses, now feel the need to have a sounding board – someone they can reach out to before a big business decision is taken. Accountants and legal advisors are becoming that sounding board.

Part-time CFOs can help answer questions such as:

  • “How do I grow from a $100,000 a year business to a $1 million a year business?”
  • “Where can I improve internal processes?”
  • “Are we ready to hire our next team member?” Does Your Business have a Debit Ratio of .04 or higher?

Do You Need a CFO?

How do you know if your small business needs a part-time CFO or CFO services? Below are some general guidelines to follow for your business:

• Bookkeeper – Manages your books manually or through some accounting software such as QuickBooks, can give you a balance sheet, gives you your P&L. They categorize items for you to track. They’re great if you only have a few employees and sell only a few products, you’re growing slowly and there aren’t many changes year to year.

• Accounting Manager – Oversees a bookkeeper or staff accountant, might help with tax planning and payroll, and can provide basic financial reporting. They’re great if you’ve got more than five employees and you might have a slightly more complex structure where you’re selling multiple products and/or services and are growing moderately.

• Controller – Oversees all accounting practices of the company and implements some policies. You’ve probably raised money, you’re growing moderately to fast and you’re adding new product lines quickly. He/she can help you understand what the numbers mean by providing a level of financial analysis and more robust financial reporting.

• CFO – Refines and has a deep understanding of your business model, has your banking relationship, works with banks for financing, works with your board of directors, prepares detailed financial and management reporting, works with auditors, performs tax planning, sets policies around controls, sets policies around payroll, does budgeting and forecasting, deals with mergers or acquisitions, handles any compliance issues. Great if you’re growing fast, have a lot of employees, offer complex product lines and are growing quickly.

Three Signs You Need a CFO

1. Your growth (or lack of growth) is out of control

Here are two scenarios:

• Your revenue has increased faster than you were prepared for. You’re quickly realizing that your financials are becoming too complex for your company’s accountant to handle.

• You’ve seen a downturn in a successful enterprise. You need to make a turnaround to assure the business’ survival.

These scenarios are as different as different can be. But they have one thing in common: your growth is out of control. Either scenario is a sign you need a CFO.

If you’re a victim of your own success and are seeing your growth spiraling beyond expectations (e.g. 20 to 25 percent year-on-year increases in revenue), a CFO can put the policies and strategies in place to ensure that you remain legally compliant with your new revenue streams as well as capitalize on your expanded turnover. If you need a quick turnaround for your business, part-time CFO services identify where you are leaking capital and, more importantly, helps you devise a strategy to plug those gaps and ensure your enterprise isn’t driven into the ground.

2. Your business has become too complex to handle

You have too many staff. Your revenue streams are too complicated or too numerous. You are investigating new markets, perhaps overseas, and you need tax and legal advice. In any business life cycle, there comes a point when complexity becomes a burden.

A CFO lifts that burden. They have the skillset and experience required to ensure company efficiency. They can revamp your accounting processes, develop reports and forecasts to make sense of the variety of data now available, and perhaps most importantly, they can take command of the financial aspects of your business at every level.

3. Your strategy is no longer keeping up with your business

Many businesses start by hiring a bookkeeper. Eventually, they move on to a company accountant, and then on to a financial controller. The progression at these levels is quite simple: bookkeepers close books, accountants provide additional complexity, and controllers can provide reporting. But there’s one thing that a CFO does that these financial professionals don’t: strategy.

Rather than relying on lag metrics alone, CFOs can forecast and budget; they can strategize and provide insights into your business: what you need to do to keep growing.

Final Thoughts

In particular, CFO services in Phoenix are especially useful because they provide timely insight so that companies can make positive changes. This is not to say that a CFO can completely save a dying business. Or that you can’t succeed without one. But, what we are saying is that your business can be more successful and profitable if you have a better strategy for spending and saving your resources.

Limitless Investment and Capital’s Part-Time CFO Services in Phoenix

If your business could benefit from a Part-Time CFO in Phoenix, contact Limitless Investment and Capital and we would be happy to discuss our outsourced CFO services. We will set up a free consultation to learn about your specific business needs and can discuss the best-outsourced CFO services for you!