Skip to content
3 min read

Everyone Needs a CFO

Where is my cash going?  What will my next year look like?  What will happen if I lose my largest customer?  How do I find the right people to grow my business? Why are we not growing?  What if we grow too fast and our service falters?

Do you have any of these questions?  I personally think that all businesses struggle with these questions but I am going to focus on the small businesses. Why only focus on the smaller businesses?  Because these businesses typically do not have the personnel that can help them strategically plan their business from a financial perspective. They may not have a Controller or a forward thinking Controller and most likely they can’t afford a CFO.

Recently, I have done some research on fractional CFOs who provide services part-time to businesses usually up to $20 million in revenue.   John Ball is Managing Partner at SeatonHill in the Dallas/Fort Worth area. SeatonHill partners provide CFO services to small and middle market companies on a part-time, interim, or project capacity.   He sees a large market for these types of services and maintains that there are some services that experienced finance personnel can do that make a big impact on the business.

Having drawn discussion with others and my own experience as a Controller, Director of Financial Planning & Analysis and VP, Finance, below is a list of the 5 five ways that Finance can help any small company grow quickly:

1. Cash Forecasting  

Businesses for the most part do not forecast cash at all. They may not even have a financial forecasting model to accurately forecast their Income Statement, Balance Sheet, and ultimately the Statement of Cash Flows. Without accurately forecasting cash, it can be a challenge to know when a business will run out or need financing. John Ball mentioned that his firm usually gets the call when a business is already in crisis such as violating a bank covenant, which diminishes their cash flow.  Cash forecasting can only be accomplished after understanding revenue and expense forecasts, the balance sheet, taxes, and capital expenditures. This subject could be a blog post by itself. Also, commingling personal and business finances together is another issue that complicates this forecast, and I highly recommend not doing it.

2. An Empowered Executive Team

It is important to find the right people to grow the business. As a business grows, a strong executive team that has clarity of purpose, is empowered, and has individual goals aligned to the business goals can push any business to the next level.   A Finance person can work with the Executive team to measure and track actual key performance indicators (KPIs) and compare these to the planned KPIs. This, of course, starts with alignment and agreement to the plan and focus to stay on track. Once there is alignment, then Finance as well as an Advisory Board or investors can provide the accountability to ensure everyone meets or exceeds the business goals.

3. Good Information

Most business leaders lack the financial background to know what information is important. John Ball believes that the best KPIs are the ones your customers find important and that will lead to success for everyone.  Also, Finance has access to the accounting, payroll, inventory, time, etc. systems, and they should be a source of truth in the organization. This information should be compiled in an easy to read report that Finance explains to Executives on a regular basis.

4. Work on the Business

In the book “The E-Myth Revisited”, Michael Gerber has a chapter on “Working On Your Business, Not In it”. The entrepreneur and other executives must build a consistent model that will be scalable as the business grows. I am not saying I agree with all aspects of what Gerber mentions for all businesses, but I do agree that businesses should develop consistent processes, which in turn will provide consistent results for their clients and customers. Finance can be an important part in documenting and reviewing processes on a regular basis so the company can be more efficient and prepared for additional customers, sales, revenue, and profit.

5. Change Management

Nothing seems harder for people to do than change. If companies are to grow to the next level, they are going to have to change processes, systems, technology, and personnel.  Finance can be an integral part to driving change as long as the Executive team is on board and supportive of the change. One of the best books on change management is “Switch” by Chip and Dan Heath. The Executive team must have direction, motivation, and a specific plan that is communicated frequently. They must communicate the goals and explain to everyone why it will be positive for each employee.

Businesses of all sizes deal with the challenges of forecasting cash, an empowered executive team, generating good information, working on the business and not in it, and change management. It is the small businesses that usually can’t afford to have the personnel to help confront these challenges straight on. That is where hiring part time (fractional) CFO services can provide a huge impact to your business.

I would like to hear from others on this topic and their viewpoints. Do you agree with these challenges?  What are some other challenges that have hindered growth in your business?