business cash flow Archives - CFO Centre Australia

4 Signs That My Business Might Need CFO Services

4 Signs That My Business Might Need CFO Services

I have recently been talking to business owners and executives who want to build more resilience into their business. They are considering adding a part-time Chief Financial Officer (CFO) to their team.  During these discussions, two questions usually come up.  “How do I know if my business needs a CFO?” and “what does a CFO do that my Accountant can’t?”.  I would like to share some thoughts on these questions.

The primary responsibility of a CFO is to optimize the financial performance of a company. This includes its reporting and accountability, liquidity, return on investment and long-term value creation.

A CFO has a forward-looking perspective. They look at interactions of the business with outsiders, acting as a diplomat and negotiator with third parties.  Often the strategies put in place by a CFO are not short-term fixes. Some may take months or years to be fully realised.

How do I know when my business needs a CFO?

As to the question of when a business needs a CFO, the following indicators may be helpful.

  1. Internal – When information that helps in making important decisions is not timely or reliable.
  2. External – When improved respect must be gained outside the business. eg from investors, customers, suppliers, labour markets, regulators etc.
  3. Rapid Growth – Growth requires an expansion of systems, and usually additional capital to finance the growth.
  4. Exit – When a business is preparing for a merger, acquisition, or business sale.

So, when the business is at the stage of increased external engagement and growth, a CFO can add significant value.

What does a CFO do that my Accountant can’t?

A CFO always works closely with the external Accountant. Having an accounting background, the CFO is well placed to understand the role of the external Accountant.  The external Accountant’s role is mostly concerned with compliance and transactional advice.  They work from their own offices and will normally attend the client’s business premises periodically.  External Accountants often have the skill sets to provide additional services. However, they are usually not involved closely enough in the running of the business to make this a sensible use of their time.

Functions such as the below will either fall to the CFO or some other suitably qualified resource will need to be allocated:

  • Budgeting and forecasting
  • Cash flow management
  • Financial reporting
  • Scenario planning
  • Internal controls
  • Insurance
  • Bench-marking and key performance indicators
  • Incentive schemes
  • Management of key suppliers
  • Accounting policies

If the business doesn’t have a CFO, the CEO or one of the Directors have to take ownership of these functions.  This means they are taken away from other important leadership and governance roles. They also may not have the depth of experience in the technicalities of financial transactions to handle these things well.

Some of the common misconceptions about a CFO

There are some common misconceptions about a CFO that are worth discussing.

The first misconception is that a CFO may have an excessive focus on short-term financial results ie this year’s profit.  Financial success of the business is undoubtedly the objective of any CFO. This, however, does not mean sacrificing long-term value creation for short-term results.  A CFO is interested in the success of all business stakeholders. This includes owners, employees, customers, suppliers, financiers etc. All stakeholders must be rewarded to ensure the long-term health of the business.

CFOs are therefore, likely to be just as interested in the business strategy as they are in the profit and loss statement. In addition, culture, reputation, governance, and risk management will be on their radar. A good CFO recognises that sustainable financial success is only achieved when all aspects of a business are working well.

Another commonly held misconception is that CFOs think in “black and white”. That therefore, they may not be comfortable with the various shades of grey that business and life deal up.  Whilst that may be true for some aspects of a CFO’s decision-making, good CFOs will look closely at the underlying issue.  For example, CFOs are often involved in analysing the performance of a business or even individuals.  In understanding performance, a CFO will often consider a range of underlying factors. This can include; roles and responsibilities, resources, delegated authorities, remuneration and incentive systems, behavioural assessments, management approach, and organisational structure and culture.  CFOs are first and foremost experienced corporate managers. They understand that people are usually the most critical resource in businesses. From experience, most CFOs are skilled at dealing with people issues sensitively.

If you’d like a confidential discussion about whether a part-time CFO could be right for your business, please contact us.

Allan Robb, CFO at the CFO Centre

Top 7 Advantages of a Part-Time CFO

Top 7 Advantages of a Part-Time CFO

If you are an SME and want your company to achieve its goals quickly, you should consider hiring a part-time CFO.  One of our clients recently said “it’s the best money I’ve ever spent”.

That’s because a part-time CFO will provide your company with the high-level financial expertise necessary to increase profit, improve cashflow and scale up, for a fraction of the cost of a full-time CFO.

Here are the top seven advantages you can expect when you hire a part-time CFO.

1.   Increased Profit

The number one thing most business owners want!  Having a part-time CFO on your team, with their years of commercial experience across many industries, they can increase profits of most businesses by tweaking the levers every business has to increase profit.  For this reason alone, it’s worth considering a part-time CFO.

2.    Strategic advice

Your part-time CFO will provide you with strategic analysis and support on every financial aspect of your business. A report from the Financial Executives Research Foundation (FERF) found CFOs play key roles in not only managing a company’s finances but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones.  What’s more, part-time CFOs can highlight potential threats or risks of which you and your team may be unaware or perhaps don’t know how to deal with.

3.    Flexibility

You can use the services of your part-time CFO for what you need, when you need it. That could be for a variety of different financial functions or a specific project. This means you and your CFO can tailor the role to suit your company’s needs at any time.

4.    Multiple industry experience

Although you can choose to work with part-time CFOs who have direct experience in your given industry, you can also opt to work with those that have experience across multiple industries. The advantage will be that your CFO will provide you with access to networks and multi-layered insights that you might not otherwise have.

5.    Sounding board

Running a company can often be a lonely and stressful experience for CEOs, according to the CFO Centre’s Chairman Colin Mills in his book ‘Scaling Up How to Take Your Business to the Next Level Without Losing Control and Running Out of Cash.  He’s seen first-hand what pressure does to business owners.

“I’ve sat in sales meetings with entrepreneurs who had literally been brought to tears by stress and frustration and the feeling that it’s all too much.”

That’s where a part-time CFO can help. He or she can act as an independent sounding board for the over-burdened, stressed-out business owner. With their ‘big business’ experience, it’s more than likely CFOs can provide solutions to what can seem like overwhelming problems to the CEOs of growing businesses.

6.    Access to a national and international network

If you choose a part-time CFO from an organisation like the CFO Centre, you’ll benefit from the expertise from all the CFOs in its worldwide network. That’s hundreds of years of experience in every aspect of finance—all for a fraction of the cost of employing a single full-time CFO.

7.    Enjoy life through your business, sooner

With the help of a part-time CFO, your business will start delivering on what’s really important to you so you get to live the life you choose (eg. more time with family, more time on rather than in your business).

To discover how the CFO Centre will help your company, please call us on 1300 447 740, go to our website, or watch our short video How it Works.

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Understanding Your Cash Flow Position

Understanding Your Cash Flow Position

If you are having cash flow issues, it is essential that you know the current position of your business finances. Be honest with yourself and make sure you know if or when your business needs help.

To do this you need to create your cash flow forecast, you need to make sure you know what cash is coming in and what payments need to be processed, this can be constructed in a simple excel spreadsheet.

Tips that can assist in preparing an accurate cash flow forecast:

  • Call all your current clients/customers and speak about their current situation and find out when the funds will be received. Don’t hold back from entering into a payment plan with them; this will give you a clearer picture of your cash flow.
  • Hold off on larger payments that are not yet due.
  • Assume a reduction in your revenue; you must be realistic. If you know that your business will be impacted over time, adjust your revenue to reflect this in the cash flow.
  • Eliminate discretionary spending. What can wait!!
  • Employee bonuses, if there are bonuses due and the employees are depending on them, you should pay them if possible. If you can hold off on paying them for 60 days, then do so.
  • If there are any tax bills requiring to be paid, speak with the tax office or your Accountant about a payment plan.
  • Be transparent with your employees.

Having a rolling cash flow forecast and updating it weekly, will help you make sure that you are staying on top of any issues that may come to a head.

Once you have listed all known transactions, you will then need to stress-test the scenarios, for example what will happen if your top customer can no longer pay their account?

Questions you should ask yourself – be truthful

  • Do I know where my business is at financially?
  • Are we insolvent already?
  • Have I spoken to my suppliers and customers and do I have a clear understanding of where they currently stand?
  • Have I spoken to the ATO?
  • Do I need help? If so, make sure they are qualified.

Many cash flow problems are related to “working capital cycles” and the timing of cash inflows vs outflows.  For example, the business pays its staff weekly and suppliers on 14-day terms, but offer its customers 30 day terms.  Therefore, the business needs to fund the gap.  A part-time CFO will explain your own working capital cycles and present a solution to improve your cash position.

The CFO Centre has been assisting SME’s over20 years, offering highly experienced Chief Financial Officers on a flexible, part-time basis. As CFO’s we are qualified Accountant’s with the added benefit of extensive commercial experience across multiple sectors, so we know what to look for and how to respond.


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