It’s a growing pain that many small businesses have. Company founders and CEOs are rarely equipped to handle financing strategies, budgets and dealing with investors. But bringing on a chief financial officer is not cheap. If your company’s revenue is growing quickly, you have new investors and/or you’ve received venture capital, it could be time to hire a part-time CFO.
Below, we have outlined some general responsibilities that every business, regardless of their size, should be able to expect from their CFO.
5 Areas A Part-Time CFO Can Help With
1.Cash Flow Management
Some businesses fail to analyze cash flow projections appropriately to identify potential shortcomings, while others suffer from mismanagement of payment terms and an inability to collect outstanding payments. New businesses are prone to spend recklessly and make poor inventory choices because they lack the awareness needed to make cash flow-centric decisions and end up in a vicious cash flow cycle.
Forecasting cash requirements and anticipated cash flow on a weekly, monthly, and yearly basis will give your business the tools to make better business decisions and head off problems before they arise. This requires a team effort between the managers of your business working with the part-time or outsourced CFO, to forecast and plan for future billings, collections, payables, costs, and expenses. Having this detailed cash roadmap will allow you to manage debt effectively, plan for the use of excess cash, and as already stated, head off problems before they arise.
Establishing these projections, along with cash dashboards, gives you the tools to be in control of your business. Being in control means keeping your line of credit at optimal levels, understanding the necessary goals of your accounting department, and planning proactively for the uses of cash.
2. Budgeting & Expense Control
Budgeting enables the business owner to concentrate on cash flow, reducing costs, improving profits and increasing returns on investment. Budgeting is the basis for all business success. It helps with both planning and control of the finances of the business
Ideally, you should have a part-time CFO help you plan your budget and customize it. A real person needs to oversee the plan and ensure that everything is implemented in the right way. Even the best software can’t offer the critical thinking and creative strategizing available from an experienced outsourced CFO.
3. Compensation Plan Development
A compensation plan is a complete package that details your employees’ wages, salaries, benefits, and terms of payment. Compensation plans include details about bonuses, incentives and commissions that may be paid to employees.
The CFO of a company should help to structure employee compensation plans that incentivize efficiency and are also aligned with the financial goals of the company. Part-time CFOs can help shape pay for performance structures by getting to know shareholders’ expectations through their interactions with analysts and major investors. This helps ensure that the company’s performance metrics reflect those expectations when shaping short- and long-term compensation plans.
4. KPI Development
Key performance indicators (KPIs) are critical to ensuring a project team has the performance data it needs to sustain improvements. With KPIs, a team can evaluate the success of a project against its established goals.
KPIs are different for every business, but it is the responsibility of the part-time CFO to work with those in operations to help develop KPIs applicable to the company and support the analysis of those KPIs on a regular basis. Making changes that directly improve KPIs can help improve the future value of the company.
5. Tax Planning
Tax planning is important for both small and large businesses because it can help them to achieve their business goals. When you have a tax plan as the owner of a business, you can lower the amount of taxable income, gain more control of when taxes are paid and also reduce the rate of tax
A part-time CFO needs to actively communicate these opportunities for tax planning and then understand and apply the CPA’s advice. Working together, the CFO and CPA can be an effective team to help management implement tax strategies and minimize taxes.
The Bottom Line:
A part-time CFO will have 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. This is a great option for businesses growing quickly, businesses that have a lot of employees, or offer complex product lines and are growing quickly.
Limitless Investment & Capital Remote Part-Time CFO Services
The foundation of any company’s accounting and finance function is to produce timely and accurate financial information for the business. Limitless Investment and Capital’s CFOs oversee these accounting and finance functions; however, the true value of our CFOs is their ability to provide forward-looking financial analysis. The analysis provided is focused on driving additional profitability and value to your company. Call us TODAY to schedule a FREE financial consultation.