Small business owners often ask “What is the role of a CFO in my small business? I already have a bookkeeper to count my beans”.
Why big businesses employ a CFO?
Ever wondered why big and successful businesses employ a full-time Chief Financial Officer (CFO), not just bookkeepers? Because they realise that a good CFO makes a significant difference to their profitability and cash flow. This helps underpin the success of the business. A CFO is a proactive member of their team and helps crunch numbers in a way that helps strategic decision making.
Role of CFO in small business
Now you’re probably wondering, “How can I afford a CFO? Isn’t it only large businesses that can afford one?” The good news is that you can. A bigger business will perhaps employ a full-time CFO. Small business owners can hire a virtual CFO on a part-time basis to help them have a deeper understanding of their numbers.
Cloud-based accounting such as Xero and MYOB have revolutionised the accounting landscape. Small businesses can now afford the skills of having a CFO on their team. It can be on a part-time or need only basis but the ROI can be significant.
So what does a CFO do in a small business?
Here are the top 5 reasons about what a CFO can do in a small business that can transform your profits.
- Improve your Cashflow
Did you know that 90% of start-ups fail? The most prominent reasons being the ‘cash flow’, which is the oxygen for any business. This is one area that needs to be monitored proactively, as it’s hard for you to find cash on the fly once the cash flow crunch hits you hard.
Knowing how much cash you need in the business and being on top is one sure way to avoid your business going bankrupt. Your business needs to have an accurate cash flow forecast for working capital for the short, medium and long term.
Worried about cash flow? Speak to us today to discuss how we can help.
- Budget and Key Performance Indicators
Too busy with the day to day running of your business to prepare budgets and financial forecasts? Or don’t know where to start? This is where a CFO comes in. You cannot improve what you cannot measure. Therefore, if you haven’t set budgets and key performance indicators for your business, you are typically flying your business blind without navigation. A CFO will help rectify this and dive deep into your business financials. He will isolate the pain points of your business and enable regular course correction with strategic and informed business decisions.
- Increase your profits
You may already be running a Profit and Loss report and relying on the profit it says you made. But how do you know whether it’s accurate, properly reconciled and that the profits won’t disappear the next month? Or perhaps you will know at the end of the year when your tax is done? The truth is unless you are number savvy and on top of your financials proactively, you won’t.
A good virtual CFO will help you benchmark for profits and financials with industry averages and standards to identify potential gaps and areas of improvement. Usually, most businesses will see a return very quickly by reducing wasteful expenses, costs and cutting what they don’t need.
- Manage your business risks
All businesses are subject to risks such as bankruptcy, reduced profits, market downturn and business interruptions. All this can have serious consequences and may put your hard work and investment at risk. There are many strategic aspects to risk and acquiring some key insurances is just one aspect of all-important risk management. A CFO on your team will get to know your business over time and become a valuable asset for you, helping you put strategies in place and manage your business risks holistically and proactively.
- Increase the value of your business
Have you ever wondered about what your business would be worth if you were to sell it or retire?
Chances are, most small to medium business owners don’t know what their business is worth and how much value an objective buyer would place on it. Not knowing this, could leave a significant gap in your expectations and hamper your retirement planning down the line. A CFO will proactively work with you to improve the value of your business. Whilst this cannot be achieved in a day, it can be worked over some time – helping you get the best sale value for your business.
So, you see, a small business owner like you can afford and benefit from the skills of having a CFO on your team on a part-time or need only basis, without breaking the bank – and there are many reasons why.
Disclaimer: Any advice on this site is general nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs. Content in partnership with Taxpayers Australia.
