Cash vs Profit
If cash used to be King, in today’s new landscape it’s now Emperor. The Operator frees up the Business Owner from having to worry about the day to day financial operations. Cash has always been critical to every business, however, now more so than ever. Your CFO will help (re)structure your business to maximise your cash position. This involves balancing supply and demand while cutting back unnecessary costs and improving productivity, efficiencies and ultimately profit.
4 areas of focus are:
- Maximisation of Profits and Profitability
- Ownership of Cash flow
- Reduce Costs
- Increase Productivity & Efficiency
The CFO as an Operator
Being thought of as the Operator may not be the first role that a small business owner would think of for their CFO. In his blog, my colleague from The CFO Centre – Dr. Andre Van Zyl set out The Strategist role that a CFO often fills Under The Spotlight – The Strategist. While that role is critical for any organisation’s long-term existence, CFOs also have vast tactical experience in an Operator role. We are obviously not referring to operating a factory floor machine. We mean that the CFO has the ability and experience to oversee and operate a number of critical functions. A calm and reassuring Operator may be key to a company’s future.
In a more benign operating environment, the maximisation of profit may be central to a company’s strategy. In the current environment keeping a tight control of cash and costs will increase organisational efficiency.
Time, or the lack of it, is so often cited by small business owners as one of their biggest frustrations. Our clients often comment that they are spending so much time working IN-the-business that they can’t spend enough time ON-the-business. A Part-time CFO who works closely with a small business owner can free up time for the owner by sharing the load. As a result, this ensures the owner is fully focused on those very roles that were the initial catalyst for creating the business. This can be a significant ‘value add’ aspect of the Operator role of a CFO.
Our CFOs have either worked their way up through, or had executive responsibility for, the Finance functions in various organisations. They deeply understand the importance of running a tightly controlled organisation. This includes specific focus on cash flow management, profitability, and productivity. Andre wrote about developing three-way financial forecasting models which are critical for banks and financiers. It is just as important to deliver against those models.
Making Critical Decisions
Many businesses need to consider whether current business models can survive in the longer term. Critical decisions may need to be made on products or business lines to either scale-up, maintain status quo, scale-down or even shut-down completely. A part-time CFO can help small business owners as they work through that exercise.
A new or refined operating rhythm may therefore need to be designed. This could mean minor tweaking or more major restructuring. Consideration of this may be critical for survival. The Operator who has extensive business experience will greatly assist with a rapid transition to a new business model. Central to this will be the robust and disciplined forecasting exercise.
At The CFO Centre we have the relevant experience required to assist business owners in navigating and operating during the current and future challenges. The objective must be to future proof your business, and The CFO Centre is here to support you.
Written by John Paterson, Principal (NSW) – The CFO Centre.