You might have wondered how to increase profits by adding a CFO to your C-Suite. First off, you likely view your business as your baby. It doesn’t matter how you acquired it, whether you built the company from the ground up or purchased it after it was making some profit. You have spent countless hours training employees, improving processes, and making adjustments to keep your customers happy. And as your company grows and matures, you realize it has many needs such as new skills, resources, and roles to make it the best it can be.
What if after putting in all the hard work, your business doesn’t perform as well as you would like? What if profits aren’t where they should be? What if you don’t have the leadership that the company requires?
A chief financial officer (CFO) might be the person you consider bringing on to your team. This role can help turn your company around and make other significantly impactful changes. Below, we break down how a CFO can add value, provide leadership, and ways to increase profits doing all this at your company.
1. CFOs Can Offer Value to Your Team
If this is the first time you have considered adding a CFO to your leadership team, you should know they can provide immense value. If the CFO has been successful in previous financial or leadership roles within your industry or using similar technologies, then they are likely an ideal candidate to help your business. You should expect the CFO’s daily tasks to improve cash flow and the balance sheet. As a bonus, if they make all of these improvements, the amount of money they save the company should cover the cost of their salary and more.
The following are just a few ways that a well-versed CFO can add value to your company:
Cash Flow and Management: Every business has cash flow and needs to understand how to manage it. A CFO can assist in this area by making recommendations and putting in place an effective system. The management of cash flow ultimately means the company will be able to make improvements to all-cash resources and increase liquidity. Now you no longer need to worry about who is overseeing the management of capital, debt obligations, and the opportunities to invest in new projects.
Restore Order to the Balance Sheet: The balance sheet is the number one indicator of a business’s health. This critical part of the CFO’s role will essentially allow other company leaders, as well as bankers and investors, to understand how the liabilities and equity compare to the assets. If the balance sheet isn’t balanced (and a strategic CFO will know), then likely there are specific areas causing inconsistencies. For example, these areas may include retained earnings, loan amortization issues, paid capital, and inventory changes.
Read More: Operational or Strategic CFO
2. CFOs Provide Financial Leadership
When a CFO comes into a new business environment, they often face numerous challenges. Deciding what red flags to tackle first is a critical component of their daily tasks.
Often, sales and operations departments distance themselves from company finances. But, an effective CFO will bring financial insight and leadership to help maximize profits through the increase of cash flow and minimization of costs.
These are a few ways that a CFO will provide financial leadership to the company:
Act as a Liaison: The knowledge and experience a CFO will bring to your business can be incredibly valuable. It means they have credibility within the finance community and may be able to act as a liaison with the bank to secure funding for your growing company. Not only will a CFOs expertise help them make financial decisions for the company, but it will help them give insight into the advantages or disadvantages of operational and capital expenditures. Mostly, they will have a stronger position when negotiating with vendors, which at the end of the day, is an asset for your business.
Implement New Technology: The main difference between a CFO today and 20 years ago is the amount of technology that is available. By adopting new platforms, the company will be more streamlined, reach higher levels of success, and upskill team members to take on new roles. If automated financial technology is available, why not use it? Work smarter, not harder.
Read More: Signs Your Company Needs to Hire a CFO
3. CFOs Can Increase Profit Margins at the Company
There are proven and dependable ways a CFO can increase profit margins at a company by improving productivity and analyzing pricing strategies. Not only can these strategies affect the bottom line, but they provide oversight for the CFO and allows them to manage critical roles within the financial department.
Improve Productivity: There are a few ways that a CFO can improve and hopefully increase productivity. By executing an initial review of employees and their job descriptions, the CFO can tell if everyone is in the role that will be most beneficial to the company. If not, they may put training sessions in place to ensure all employees are up-to-date on best practices and information systems. Another standard process for a CFO to implement is working with other team members to come up with Key Performance Indicators. These can help the company to measure and track KPIs through reports and set goals based around these company-specific metrics.
Read More: Understanding Key Performance Indicators: KPI Examples & Their Importance
Analyze Pricing Strategies: Improving a pricing strategy is much more than tracking the pricing performance at a 10,000-foot view. An effective CFO will be able to evaluate the current pricing strategies and couple that with their knowledge of both the customer and product at an economical value. With this information, the CFO can then propose an updated plan (cost-based, value pricing, teaser pricing, strategic pricing, or other kinds) for the business. Remember, the pricing strategy may change more than once, which is normal and expected as the market also makes changes.
If you are looking for a gross profit increase at your company, a CFO will be able to help. Today, the role of the CFO is so much more than a number cruncher. While their experience in the books will be beneficial, their financial vision and strategic advice can benefit the business as well. These traits, alongside their ability to work with the operations team, will have an enormous impact on the business’ profitability.
While you may believe that a CFO is out of your company’s budget, there are options like outsourced accounting services and fractional CFOs through Signature Analytics. Not only can you get your company back on track, but you won’t be paying a full-time salary either.
Read More: Benefits of a Part-Time CFO
If you are interested in hearing more about either of these services, please contact our team today.