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The Value of a Small Business CFO

What is a CFO?

CFOs are a big part small business tracking and growth as they are the ones who are overseeing the accurate financials and metrics of a business, which in turn helps manage risk, improve efficiency, increases profitability and build financial relationships outside the business.

What is a CFO? CFO stands for a Chief Financial Officer. They are the senior executive that nurtures and manages the financial metrics and relationships of a business internally and externally. Mainly, their position can be broken down into major parts like financial and risk management, operational efficiency, and strategy development. The CFO is similar to Controller, but this position focuses on managing the finance and accounting divisions and for ensuring that the company’s financials reports are accurate and completed in a timely manner.

Now let’s look at this role a bit more detail.

Financial Reporting & Risk Management

The CFO takes the responsibility of protecting vital assets of the company and managing financial risk. They oversee capital structure and cash flow to determine the optimum mix of debt, equity, and internal financials required to meet the company’s objectives and goals. They analyze the financial strengths and weaknesses of a company and propose solutions and corrective actions.

Operational Efficiency

The C-level position also must keep an eye on the operations and ensuring that they are efficient. This is because it is the goal to maximize the return on the investment of the company’s assets. This is achieved through financial planning and analysis, budgeting, increasing revenue, reducing costs, and minimizing taxes. Reviewing KPIs is essential and must be developed, instituted, and monitored on an ongoing basis to make sure the company is profitable. There must also be a thorough knowledge of the organization’s business model and an understanding of how its systems and processes drive customers value in measurable ways.

Strategy Development

The Chief Financial Officer is the vital part of the long-term strategy development team and is given a substantial voice in directing the company. They are relied on for leadership and to make sure the organization’s financial and business goals are in alignment.

As you can see this position is a must have for small businesses as they have goals and risks of owning a business. They provide a level of expertise and knowledge, as well as cost advantages, even if the position is outsourced. Hiring a Fractional CFO can be hugely beneficial for small businesses who can’t afford a six-figure salary C-level executive, but want to gain in on strategy, risks, and financial advantages of having a key player like this on the team.

Why have a CFO?

Hiring a CFO is essentially you delegating as a business owner. It allows you to concentrate resources on your core business so you can be more profitable and focus on your customers to provide them with a higher level of service. Emphasize what you do best and allow others to do what they do best.

A CFO can also help in cutting costs for the business by assisting in choosing services you really need and eliminate spending on items, overhead, or employees you don’t really need. Your company needs to be able to get a return on every dollar spent and maximize the profits of the company. They also can provide higher quality accounting services and yield more reliable information so you can make better business decisions. As most entrepreneurs know, if you are not able to access the financial information or reports, it puts you at a disadvantage in today’s marketplace.

One notable advantage is that any developed strategies and processes implemented by your newfound Chief Financial Officer are yours. Your organization benefits from all the efficiency, processes, and procedures they have put in place. It will potentially safeguard your business from financial error and fraud.

As you can see, CFOs are great for any industry, especially if they specialize in it. They have the insight to combine different data from sectors of your business and provide insightful reports. It’s always a great thing to have someone oversee the business operations, pricing, POS integration, and bank transactions. This means your business will be in a better position to receive outside funds and be in prime position for growth.

Do I need a CFO?

The key question would be how do I know that I need a CFO? Well, there a few key traits that we can review.

  • Financial information and reports that helps the business make decisions is not prepared accurately or timely.

  • Having the financials of the company on time for review allows you to make timely decisions on the direction of the company and stay within the goals you’ve set.

  • Business in a busy, complex industry.

  • Depending on the business and/or industry, a company generating $10 million could be ready and another generating more than $10 million might not be. This means it will depend on the complexity of business and its frequency of annual transactions and level of susceptibility and risk.

  • Financial business relationships and trust that must be built outside the business.

  • Having financial relationships outside the business could be key.

  • Bankers, lenders, investors, partners, etc. are just a few of the people that need to have a relationship with the business when ready to seek funding for internal needs and forward motion for growth.

  • Having rapid growth

  • If your company is experiencing growth at an extreme rate, it would be wise to have someone that will be there to oversee the operations, financials, and assessing the risk of the decisions and direction of the company.

  • Doing a merger or acquisition

  • Making the decision to merge with another company? Maybe acquire a company? It would be wise to have someone review the standing of the company you’re considering as well as yours to ensure the purchase or onboarding of a company doesn’t weigh on the financial standing of the business. Have someone that can review the information and provide insight on such a major decision.

What is a CFO Salary?

Uh-oh! I know we just hit a touchy subject for every company. I can hear it now. I’m a small business owner so how in the entire world am I supposed to afford a C-level executive that does all this? It sounds mighty expensive. Well, let’s discuss.

CFO positions are definitely six-figure salaries. Around the country they typically average out to be about $135,000-150,000 per year but can get up to $250,000. This depends on the state in which you live and the industry of the company. I know this may be a frightening number for most to commit to, but that’s why there are options like outsourcing the position, so you don’t have to pay a full salary. If outsourcing, there is the option of a part-time or fractional CFO position. This means that you can pay for a just a part time CFO and receive all the benefits of having one internally, or fractional, where you can get a that piece or parts of the position for a fraction of the cost. In most small businesses, a part time or fractional CFO is better than nothing at all and the CFO can definitely advance that small business in practice and profits.

If you have questions about the CFO or hiring a CFO, give us a call at 216.213.4592 or email us at contact@hopeaccountingfirm.com.

Credits: Patriotledger.com, Missionaccountinghelp.com, Forbes.com, Ziprecruiter.com

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