Signs It's Time to Hire a Part-Time CFO
Updated: Jul 31
No matter how small, every company can benefit from someone organizing their finances and tracking performance. In most small to mid-sized firms, this hat is worn by either the CEO or someone with limited experience in accounting and finance. As the CEO you may keep finding yourself getting pulled into financial issues when they are not your area of expertise, nor your passion. This diverts your efforts from where it is most effective (growing your business) to where it is only moderately effect. Many small firms employ a bookkeeper to solve this, but eventually, you need someone who has a deep, holistic understanding of your firm's financial health and can help align that with your strategic plan. That key person is a CFO.
But how do you know when it is time to bring a CFO on-board? The exact timing will vary depending on your industry, and growth stage, but there are some common signs your firm is in immediate need of a CFO:
1) Your financial activities are becoming larger or more complex and continue to require more and more of your attention
Many business owners have a passion for their primary product or service. Rarely are they experts at the financial activities required to make their firms tick. Below a certain size, most owners can handle the limited financial requirements themselves, but it is often not the best use of their time, nor is it their realm of expertise. If the CEO is continually being pulled away from critical revenue generating activities or other key responsibilities to handle financial issues, it is likely time to hire a CFO.
2) You are experiencing rapid growth
There are many challenges associated with rapid growth, both financial and non- financial. Growth requires scaling up systems, implementing additional internal controls, monitoring cash and obtaining additional capital. A CFO is key for developing the required systems, analyzing, and planning for the company's cash flow and working capital needs.
3) Profitability is not at a desirable level
CFOs are excellent leaders in cost control, productivity improvement, and product profitability analysis. They help you understand your product margins by analyzing all costs associated with product or services lines. Their analysis can provide valuable insight into your firm's operations, identifying inefficiencies, and uncovering opportunities for additional cost savings.
4) You need a partner to develop and execute strategy
A good CFO is the right hand of the CEO. They work with the CEO to fine-tune, support, or provide a critical review of proposed strategies and decisions. Once the strategy is agreed upon, they can help develop and track performance of Key Performance Indicators (KPIs) to verify if the firm is on track to achieve its strategic objectives. Furthermore, they will incorporate your strategic plan into the annual budgeting process and incentive structure, ensuring your entire organization is aligned with your strategy.
5) You need help with financial forecasting
CFO can help you build financial models to work through various scenarios you are considering such as raising prices, opening new offices, or hiring new employees. Having a model that shows you the financial impacts of these decisions can be an invaluable tool for decision making. They then keep you updated on your performance compared to the plan. Additionally, CFOs help you model and forecast your cash flows helping you avoid a cash flow crisis.
6) You lack critical financial data needed to make sound business decisions
In addition to financial modeling and forecasting, CFOs are excellent with their analytical abilities. They will help dig deeper into your business to understand the real drivers of costs and profits. By analyzing your customers, suppliers, products, projects, and productivity they'll help you gain valuable insights into business. They are familiar with multiple techniques for evaluating returns on potential projects assisting in long-term business decision making.
7) You need help raising capital and understanding the associated requirements
CFOs are well positioned to help you raise all sources of capital and comply with associated requirements, whether trying to secure a bank loan, a line of credit, or an equity infusion. The CFO also plays a key role in investor relationships, as they are keenly aware of the overall picture of company performance and health.
8) You have no formal risk management system
Risk is inherent in any business venture. CFOs are tasked with understanding the risks associated with your business and taking steps to manage and mitigate these risks. They will review, improve, and develop internal control processes and contingency plans to reduce risk in your business.
CFOs perform a number of critical tasks, which can include: acting as a right hand to the CEO, managing cash & collections, nurturing relationships with sources of capital (including investors and lenders), providing analysis and key insights into your business, and taking responsibility for financial modeling, accounting, and budgets. They are innovative problem solvers who also possess the skills required to implement the required changes. Bringing on a full-time CFO is prohibitively expense, but an on-demand CFO is a cost-effective, flexible option for small businesses looking to take a proactive approach to their finance and accounting functions. Please contact us at Augelli Consulting, LLC to schedule a free consultation to see how much an on-demand CFO can help your business. Send an email to email@example.com.