If you’re the CEO of a company that does not have a CFO (and does not outsource CFO services), the following scenario may sound all too familiar. You’re looking at your books and records, frustrated and discouraged that all the progress you thought the company was making doesn’t show in the numbers. You’re stressed realizing you aren’t even close to achieving the goals you had set and have never felt more trapped. It doesn’t make sense – you couldn’t work any harder or any more than you already do.
This isn’t what you signed up for, but you’re also unsure about who could help you turn things around. You think about your accountant, and while they are great with taxes, their strengths rest in compliance, not in finance and operational strategy. You think about your bookkeeper, but while they excel at telling you all about the formulas and how they arrived at certain numbers, they don’t truly know how the initial numbers got there in the first place.
What’s missing in this scenario is the expertise of a CFO. Simply, a CFO helps propel a business from merely treading water to new levels of success. While this can happen in many significant ways, below are the top five in which a CFO transforms a business:
- Driving Financial Strategy
One of the primary differentiators between CFOs and the other “financially focused” professionals in your life is that they possess a critical awareness of the company’s finances, not merely the numbers. They understand how to transform those finances into an asset by optimizing cash flow, reducing the cost of goods sold, improving profit margins, and maximizing funding opportunities.
They will also drive the strategies surrounding capital raises, with an inherent understanding of the proper mix of debt and equity financing that is best suited for the company at that particular time. A CFO will help prepare the documents required for due diligence and negotiations, and provide financial expertise to all stakeholders.
The key is that CFOs don’t strategize on an individual basis. Rather, they are constantly looking at the big picture to elevate the company’s total financial strategy, helping to secure long-term success.
- Directing Financial Decisions
As a part of the overall financial strategy, CFOs use financial forecasting and modeling to ensure that the CEO is making data-driven decisions, especially as those decisions impact finances (and nearly all do). CFOs play the primary role in managing revenue and expenses, restructuring and realigning resources, business modeling, and creating financial reports and priorities. As such, they will assist the CEO in making the best decisions at that time given priorities and the available budget.
- Improving Cash Flow
It’s a pretty straightforward principle – without cash there really is no business. With a cash flow forecast, CFOs will manage cash flow to maximize revenue and reduce spending. It helps them see where money is being spent to better determine where adjustments can be made. This enables the CEO to better understand when to expect cash to come in and when to expect it to go out, increasing their ability to make more informed financial decisions.
- Optimizing Product Lines
We’ve all heard of the Pareto Principle. And with business, it means that 80% of sales come from 20% of products or services. To be successful, it’s imperative to know which products or services not only generate the most revenue, but also which ones are most profitable. It’s also important to recognize that some may even be costing money.
Far too many CEOs look only at top-line revenue, but that’s not enough. They think it is merely about raising prices or determining how to sell more. But if they don’t know what is actually increasing profit and when, simply adding dollar signs won’t help. They have to know what causes it all – the good and the bad.
A CFO will conduct this analysis to determine how to resolve the issues and minimize any negative impacts. They will look at which sides of the business are most profitable, not just bringing in the most revenue. At the same time, they will make sure the operations on the other sides have the funding to continue uninterrupted.
- Preparing for Exit
A CEO may have a general idea about how they will exit the company one day. They likely have thought about a succession plan, a sale, or maybe a merger, but they often don’t think about the financial impacts of each. This is another instance where the CFO provides invaluable insights. With a clear understanding of the CEO’s long-term goals, a CFO can devise a strong financial strategy around the desired exit plan.
Through these transformations, a CFO helps the CEO understand what actions are leading to success and equally as important, which are not. They also help to prioritize where the CEO should be focusing their time and develop the steps needed to continue to hit the right goals. Ultimately, the CFO takes the guesswork and frustration out of it all for the CEO, creating not only a more profitable, but also a more fulfilling business.
At Agile Planners, we provide strategic guidance and outsourced CFO services to companies of all sizes. We can help provide the strategy your organization needs for the growth you want. We understand that no two organizations are the same. And with our experience and financial knowledge, we can help develop the right strategic plan for your business to grow and reach its goals. Simply, we’ll be your trusted partner, so you can focus on running your organization. Contact us today to learn more about how we can help.
