The tasks handled by a CFO in any company are many and varied, but can be categorized into three basic sections: keeping accurate records of past finances (controllership), staying on top of current finances (treasury), and creating rolling forecasts and plans based on the knowledge acquired by the first two (Part of the Strategic Planning Process).
Of course, it is far more complex than such a simple explanation; the financial foundation and forecasting done for a company can make or break future success. A lot rides on having a good CFO with the expertise to predict trends and challenges and make sure the company stays in the black.
A CFO plays a controllership role in the company by keeping accurate records of past finances. This information is used to make future decisions, and is reported to everyone from shareholders to the CEO to create a picture of how the company has performed in the past, and how financial decisions affected profit and loss.
It is a vital part of the job to report this information accurately and in a timely manner to make sure all of the decision-makers in the company can make good use of it.
The present state of finances is also under the CFO’s control. Keeping track of cash flow, capital structure, and investments in light of the past financial information and with an eye to the future is all part of the day-to-day work of a good financial officer.
As with the past records, accuracy is vital to the continuing success of the company; the CFO must make decisions for today that will have an impact on the future, and these decisions can really set a great CFO apart. Of course, they also depend on how well the CFO can forecast into the future.
Much of what a CFO will do involves financial forecasting and planning for the future. In the modern world these are called rolling forecasts because they are updated at least quarterly if not monthly. This is to ensure that any operational or sales changes that take place during the year are immediately reflected and a new goal is set. This prevents “Budget Indifference” in years where the budget is significantly off early in the year (good or bad) Without a clear view of the company’s financial goals, future expenditures and challenges, and expectations, it is hard to make good decisions in the present for the best results in the future.
A CFO will create a plan based on research, trends, and experience that will hopefully put the business on the best possible path into the future. It is also vital that the CFO has the communication skills to work with all of the other departments heads – Sales, Marketing, Operations and HR. Their input and collaboration is vital to the success of any forecast This financial modeling requires a lot of expertise that can only come from years in the financial planning arena.
This is especially important when it comes to growing a business. When there is not a lot of past financial information to work with, the expertise that is developed from years of working with similar companies can help a CFO develop a basis for a strong financial plan.
CFOs and Small Business
There is no doubt that all businesses can benefit from the expert assistance of a good CFO. But for many small businesses the cost of hiring someone in that role can be prohibitive. The best in the field demand high salaries because they are well worth the money, but that’s unrealistic for many small businesses.
A part-time or outsourced CFO can be a great solution to this problem. Bringing in a CFO to create a financial plan that you can then follow into the future is a budget-friendly way of gaining the financial expertise of someone with many years in the business. Small businesses can bring in a part-time CFO on an as-needed basis, whether it is to create an initial budget and forecast or during a time of transition for the company when the financial picture needs a set of expert eyes.
Hiring a part-time person to help when needed avoids the difficulties of bringing in a new executive – someone who will expect things like stock, benefits, and of course a position of control and importance in the company. Particularly in a business where one or two people are used to being at the helm, outsourcing the financial duties can give you all the knowledge without handing over the reins to a new person.
A CFO does a very complex job that requires an incredible amount of knowledge and experience with a wide variety of financial pictures, company sizes, and industries. A great CFO can really make the difference between failure and success, and more than that, can push your company to a new level of growth and success. Every company can benefit from this expertise, and even if you are not ready to bring someone on full-time, the option of a part-time financial officer can make a big difference for your business. For more information, Contact Your CFO Solutions.