What Should Small and Mid-Size Businesses Expect From Their CFO?
The CFO’s role within an organization depends on several factors. These components may include the expectations coming from the CEO and board of directors, and may also vary depending on the industry, corporate strategy, and the goals of the business. A company’s size can also have a significant influence on the CFO’s role.
Below, the Signature Analytics team has outlined some general responsibilities that every business should expect from their CFO.
Start the ConversationThe Importance of Forward-Looking Financial Analysis
The foundation of any company’s accounting and finance function is to produce timely and accurate financial information for the business. The CFO oversees these accounting and finance functions, but their true value comes from the ability to provide forward-looking financial analysis. This analysis should be focused on driving additional profitability and value to the company.
Read More: Outsourced CFO Services – Benefits of a Part-Time CFO
Whether you have a full-time, part-time, or outsourced CFO, below are some examples of the forward-looking financial analysis you should expect from the CFO role:
1. Cash Management & Forecasting
Can you predict when your business will have a surplus of cash that needs to be managed or when you will have a shortage of money that requires financing?
Cash flow problems can kill businesses that might otherwise survive. Your CFO should be monitoring cash flow and analyzing cash flow projections regularly to ensure your business does not run out of cash.
2. Budgeting & Expense Control
Does your business have a budget? Do you receive an analysis comparing prior year actual, current year actual, and current-year forecast on a regular basis?
Your CFO should own the budgeting process by incorporating input from each department for the most accurate and complete projections. They should also be monitoring budgeted versus actual results on a quarterly or monthly basis and reforecasting accordingly.
Read More: How CFOs Add Value To Your Business
3. Compensation Plan Development
Is the compensation of your employees aligned with the goals of the company?
The CFO of a company should help to structure employee compensation plans that incentivize efficiency and align with the financial goals of the company.
4. KPI Development & Analysis
Are you maximizing margins? Are profits analyzed by revenue stream? Are employees being utilized appropriately to maximize profitability?
KPIs (Key Performance Indicators) are different for every business. They should act as the company’s compass, and the CFO serves as the navigator.
It is the responsibility of the CFO to work with those in operations to help develop KPIs applicable to the company and support the analysis of those KPIs regularly. The CFO should be using the data from the KPIs to assess business performance in real-time. Making changes that directly improve KPIs can help build the future value of the company.
Read More: What Are Key Performance Indicators and Why Are They Important?
5. Board & Investor Communications
Are you providing valuable financial information to your Board of Directors so they can review the trends of the company’s operations and assist in making appropriate decisions? Is the information presented professionally?
Your CFO should be preparing presentations for your board members that effectively communicate the company’s financial information in an organized manner. The information should illustrate trends to visualize projections so the data can help drive business decisions.
6. Securing Financing & Raising Capital
Do you review your banking relationships regularly? Are you confident you have access to financing on the best possible terms for your business? What are the capital needs of the company now and in the future? What is the best way to meet those needs?
Your CFO should play a key role in identifying and securing investment and financing. They should identify capital requirements before approaching financial institutions and investors to ensure you raise the appropriate amount of capital required to support your growth plans.
A successful CFO should also prepare presentations of the company’s financial information, allowing potential investors or lenders to understand the data and the companies performance.
7. Tax Planning
How often are communications occurring with the company’s tax advisor to maximize all tax-related strategies?
Your CFO should maintain consistent communication with tax preparers to minimize your company’s potential tax liability.
8. Ongoing Analysis & Review
All of these responsibilities should be considered ongoing processes that are revisited on a regular pre-determined schedule and modified based on the most recent financial information available.
Furthermore, all of the results should be measurable to track the success of the performed analysis.
A Solution That’s Right For You
If your CFO is providing forward-thinking analysis, they are providing infinite value to your company.
Each of the outlined goals above can help maximize profitability and value for the business, and, if managed appropriately and adequately, companies with the correct financial infrastructure can witness significant operational improvements and growth. Having this kind of efficiency will allow you to think about your business in new ways and likely uncover new possibilities for what’s next.
If your business requires any (or all) of the forward-looking financial analysis mentioned above, but you’re not in a position to hire a full-time CFO or may have a team that just needs additional support, the team of experts at Signature Analytics can help.
Our highly experienced accountants can act as your entire accounting department (CFO to staff accountant). If that solution isn’t the right fit, our team can complement your internal accounting staff, to provide the ongoing accounting support, training, and forward-looking financial analysis necessary to effectively run your company, analyze operations, and guide business decisions.
Have questions about our process? Contact us today for a free consultation.
