Is your company growing at a rapid pace? Do you have new investors? If you answered yes to either of these questions, it may be time to think about hiring a chief financial officer (CFO).
But how can a CFO help a small business? Aren’t they expensive? Could you do it yourself?
Let’s take a look at the role a CFO performs, when you should look for a CFO, and your options for hiring a CFO on a small business budget (as opposed to doing it all yourself).
What does a CFO do?
A CFO can help you plan, model, forecast and make better business decisions. A CFO looks at your business holistically–this includes people, processes and systems–and ensures that together you have accurate financial information to plan for the future.
A CFO also considers external factors such as the marketplace, your industry, and any socioeconomic, regulatory, tax, and industry issues that could have an impact your business strategy.
Using this information, CFOs help business owners and executive teams make informed decisions. They interpret results, assess and recommend cost cutting measures and more.
In a nutshell, CFOs help steer companies by looking at the big picture.
When should you consider hiring a CFO?
You may be wondering, when in the life of your business, is the right time to hire a dedicated CFO?
There’s no one right answer to this question. It can depend on the industry you’re operating in, and the nature of your business.
For example, if your business has many frequent or complex transactions, this might signal a need for fiduciary and strategic oversight.
Or perhaps your financial data just isn’t detailed enough to give you the insight you need to make important decisions. A CFO can help you decide whether you can afford to take on new employees, expand your business plan, or invest in new technology.
Rapid growth is also another point where small businesses might consider the need to hire a CFO. Hiring a CFO can help drive expansion across the business and make sure that operations are optimized to handle growth. They can also help make a case for securing capital for growth.
What are your options?
If you think you need to hire a CFO but don’t have the budget to hire a full-time body, you can outsource the function to a management consulting firm.
Alternatively, if budget is really an issue, consider SCORE. Sponsored by the Small Business Association, SCORE connects small businesses with business mentors. Many are experienced CFOs who want to give back to their local business communities, and they can provide advice and counseling, for free.
Just visit the SCORE website and search for “chief financial officer” in your zip code for a list of potential candidates in your area and industry.
Can you “do it yourself”?
In a small business environment a CFO is a trusted adviser. Accepting this role yourself, especially if your business is scaling and growing, is a serious challenge.
Even if you’ve mastered the basics of accounting, to be a good CFO you need broad technology, strategic skills, and finance skills. Perhaps more important, you need a broad view of all your business operations that will help you take your business to the next level.
Stepping away from the day-to-day job of running your business to manage CFO tasks isn’t easy. As your business grows and becomes more complex, would you trust yourself to assess the real risk of your actions, whether financial or regulatory? The role of CFO is often best left to someone who has experience in the field and completely focus on it.
That’s not to say you can’t employ many of the principles that CFOs use to better manage your business and personal finances.
Here are just a few tips to help small businesses and freelancers be savvy with their business and finances:
Track every expense: This is common sense for business owners and a necessity if you’re to claim the correct tax deductions. A CFO goes one step further, not just tracking expenses but analyzing them as well. Whether you use a spreadsheet or accounting software, a complete snapshot of your spending habits can help you better manage debt.
Budget: Once you know your expenses you can create a budget that lets you plan ahead. This blog offers tips on how to get the most out of a business budget.
Be lean: Controlling spending is half of the equation for better managing your business cash flow. If you’re not doing so already, focus on lean business practices. That doesn’t mean being cheap, it’s about creating more value for your customers using fewer resources. Read more about how here: How to be a Lean, Yet High Growth Small Business.
Use financial statements to know your worth: These include the income statement, balance sheet, and cash flow statement. Each serves a very different purpose but each statement is interrelated and viewing them holistically can help you make smart financial, investment and management decisions. Online accounting software can help create these for you.
Are you thinking about hiring help that’s more tactical in nature? For example, a new accountant or bookkeeper?
Here’s a good primer on what an accountant can do for your business.