Bad Decisions Can Destroy Your Business: Consider a Part-Time CFO

Every small business owner has to make tough decisions with uncertain outcomes. That is the nature of being an entrepreneur, and it is as true today as it was thirty years ago. However, present-day decision making might be a little more difficult than it was in the past for a number of reasons, and professional knowledge such as a part-time CFO may be beneficial for your business.

The overwhelming amount of data, flowing at faster and faster rates from more and more sources, often leads to poor decision making or indecision. The impact of those decisions is, to a certain extent, a function of business size.

Large businesses have checks and balances, and more resources than small businesses, but they also generally have deeper cash reserves, greater access to capital, and more inertia. This makes small businesses much less resilient than large businesses.

Unfortunately, a few moderately bad decisions can easily destroy a small business, whereas giant multi-nationals often withstand billion dollar blunders and still come back. Since small businesses can’t afford to make bad decisions, they should absolutely rely on professional expertise to assist them along the way. You may be thinking you can’t afford to hire a CFO, which is why we present the idea of hiring part-time CFO services.

What is a Part-Time CFO?

Financial leadership is often ignored by small to mid-size firms in this new business world. Most small businesses don’t believe they can afford to hire someone with the financial expertise they need. Yet, the experience of a high-level visionary can lead companies to unparalleled success and growth. Whether an organization is going through a growth spurt or growing pains, a part-time CFO can help develop strategic financial support for a variety of organizations.

The CFO is just the person to provide the vision needed. And although the traditional full-time CFO may be cost prohibitive for smaller organizations, there is another option—the part-time CFO. Outsourcing the CFO functions to a part-time CFO provides company leadership teams with a flexible and affordable alternative. Your small business can get all the expertise needed without the high expenses.

Which Areas of Your Business will they Manage?

1.Creating Your Business Strategy

In order to best determine the future direction of your business, it helps to understand where you are positioned in the market. Strengths Weaknesses Opportunities and Threats and in particular the main causes therein – are key learnings all businesses can use to evolve.

Part-time CFO services can help you determine the following:

  • How will it run?
  • What is the market?
  • How does the business compete against similar businesses?
  • What are the profit model and profit potential?
  • How much inventory and how many employees are needed to perform daily functions?

Without the strategy, a path to achieving goals is not clearly defined, and your business could hit roadblocks without any immediate solutions to move forward. Understanding your business strategy is the first step in the right direction to making good business decisions.

2.  Financial Modeling & Analysis

Your part-time CFO will use the output of a financial model for decision making and perfuming financial analysis. They will use financial models to make decisions about:

  • Raising capital (debt and/or equity)
  • Making acquisitions (businesses and/or assets)
  • Growing the business organically (i.e. opening new stores, entering new markets, etc.)
  • Selling or divesting assets and business units
  • Budgeting and forecasting (planning for the years ahead)
  • Capital allocation (priority of which projects to invest in)
  • Valuing a business

3. Performance Monitoring

Monitoring corporate performance is a critical function of every board, and an effective board monitors the overall performance of an organization, including its operational, strategic and financial objectives.

Part-time CFO services can assist in key responsibilities related to oversight of the organizational performance such as:

  • Understanding and agreeing on the company’s key performance objectives and strategy
  • Providing leadership and direction in developing the strategic, operational and financial plans
  • Developing and confirming that key performance indicators and financial objectives are monitored and achieved

Confirming that there is a policy to communicate with shareholders regarding the company’s performance that is aligned with Regulation Fair Disclosure, an SEC regulation to address the selective disclosure of information by publicly traded companies and other issuers.

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4. Budget Deviation Analysis

A budget deviation analysis is a further valuable performance management tool for any small business owner. What it does is quickly compare actual performance against projections on a line-by-line basis to reveal if and where there are any deviations.

The primary challenge is that this type of financial modeling takes time, requires an objective perspective and the capacity to act on the quality information that it reveals. This is another area where having access to an outside part-time CFO-level service can pay for itself.

5. Cash Flow Management

For small businesses, cash is very important, especially in the early stages and growth stages. Cash, or rather lack of it, is the most common reason why businesses fail in the early stages of the lifecycle of a business. Your part-time CFO can assist in measuring cash flow, improving receivables, managing payables, and help survive shortfalls.

When should a small business owner hire a part-time CFO services 

While there is no right answer, there are certain indicators.

Internal Indicators:

• When important financial statements are not being prepared on time, small businesses should consider seeking part-time CFO services. This important information helps businesses make a decision. Without accurate and timely information, your business is at risk.

• The complexity and growing number of transactions can also determine the need for a higher level of experience or knowledge.

External indicators:

• A critical external point is when respect must be gained outside the small business. That could be from customers, suppliers, investors, banks, shareholders or government regulators.

• Growth requires an expansion of automated systems and additional financing or capital to manage the growth. This is why growth is another important external indicator that outside expertise may be necessary. Part-time CFO services are best suited to handle rapidly increasing growth due to the complexity involved.

• When a business is preparing for a merger or acquisition.

Final Thoughts

Making good business decisions is essential for small firms trying to stay competitive. One bad decision could be the demise of your entire business. Part-Time CFO services enable small companies to gain the financial expertise they need to ensure everything is in order and business decisions are based on factual data from the company. Additionally, part-time CFO services are an affordable alternative to small companies that can’t hire a full-time CFO.

Limitless Investment & Capital’s Part-Time CFO Services

A strong management team of competent team members can influence a business to reach high levels of success. One such key player is a chief financial officer (CFO). At Limitless Investment & Capital, our part-time CFO’s works with you to help you run your business, interpreting your financial footprint giving you predictions on your futures profit return. Using these predictions, we develop effective strategies to maximize growth. Our role as a part-time financial officer includes finding areas to increase revenue and decrease expenses, developing plans for how to best manage your cash flow.

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