Entrepreneurs wear many hats but also tend to have focus areas they are best at. As a result, they must trusted partners on whom they can rely to handle various aspects of the business, especially regarding finance.
Every business reaches a juncture when it can use the expertise of a finance chief. Whether offering advice on expansion, strategy, or risk, chief financial officers (CFOs) provide a service that extends beyond just crunching the numbers.
With an ability to take a holistic view of a business, CFOs influence the key decision-making process that supports short and long-term goals. The CFO writing is on the wall for businesses facing any of the following situations:
Business Expansion
No matter what type of business growth you want to pursue, the last thing you want to do is go it alone. Fortunately, with access to a CFO, you will never have to.
Whether you seek to grow your business organically or through acquisition, enter a different market, or launch a new product, a CFO’s input and expertise are invaluable.
They will test the waters of a market expansion or ensure that a product launch is profitable while assessing whether the timing makes sense. A CFO’s ability to analyze financial statements relative to current market conditions will ensure the business does not bite off more than it can chew or miss out on opportunities.
Ideally, a finance chief will partner with you to direct the business through the expansion process while ensuring that the financial strategies implemented support the end goal.
Cash Flow
No matter the size of a business, a CFO is instrumental in helping to manage cash flow, which, as Richard Branson says, is the “lifeblood” of business. For example, if working capital dries up, business owners may need to steal from Peter to pay Paul, e.g., fail to pay suppliers to cover payroll, which could lead to greater challenges.
Having a CFO allows the founder to focus on running day-to-day operations while handing over the financial reins to an expert in the field for things like payroll, product pricing, credit needs, supplier negotiations, and more.
Risk Assessment
As a business owner, the last thing you want to do is mismanage risk, as it could cost you dearly in more ways than one. If your business has liquidity needs, as any business looking to stay relevant does, you require a CFO.
Having a CFO aboard your ship means that someone is watching the bow and the stern to ensure your business has sufficient liquidity to weather any economic storms, including a recession.
Stakeholder Communication
Another sign that your business needs a CFO is your desire to engage with stakeholders, whether investors, employees, partners, or suppliers.
CFOs may view the business through the lens of the numbers, but through analysis, they also can see the bigger picture. This high-level perspective becomes transparent in their communication, which could go a long way with stakeholders.
If your industry has changing regulations, a CFO could be vital to your business’s ongoing viability. A finance expert will help keep your business compliant before any new reporting or accounting rules start, saving you from fines or, worse, having to shut your doors altogether.
Takeaway
Whether your business is successful and ready to scale or has not yet achieved the market penetration it is capable of, a CFO’s skill set could be the key to reaching those objectives as successfully and efficiently as possible. Businesses are increasingly flocking to the fractional CFO model, through which they can strategically harness the expertise of an experienced financial executive on an as-needed basis.
