Your company is growing.
You’re getting too busy and you know you need high-level analysis and advice to make the most out of your financial information.
But is it the right time to hire a full time Chief Financial Officer? Or should you bring in a part-time CFO?
My name is Billy Katelnikoff and I am an experienced Chief Financial Officer who is passionate about helping companies make the best possible decisions to drive overall profitability. I am also the owner of Power Forwards CFO Services.
I have written this article to help business owners understand the value of bringing in a part-time CFO at the right time.
But before we get into the article, let’s take a moment to define what a part-time CFO is.
I have written this article to inspire you, and give you a detailed 6-Step process that will help you increase your chances of success when it comes to securing funding for your idea.
But before we learn the six steps, let’s start with a definition of what start-up funding actually is.
What Is A Part-Time Chief Financial Officer (CFO)?
A part-time Chief Financial Officer is an expert in interpreting financial information and making recommendations that can be used by the Chief Executive Officer (CEO) and other key decision makers to help them increase the probability of success for their company.
What A Part-Time CFO Is Not
Sometimes CFO resources can be a bit confused with controller or bookkeeping type functions like reconciling the bank account, accounts payable/receivables, and payroll.
However, a CFO resource in its truest form will be focused on using that type of information to analyze scenarios that feed into strategic decision making.
When Do Companies Bring In A Part-Time CFO?
Typically, a company will work with a temporary CFO in three ways which can be just as a consultant, or on a project basis, or on an ongoing basis.
Sometimes business owners only have a few key financial matters that need to be addressed. If this is the case, then they can hire a part-time CFO to bring in high-level finance and accounting expertise to help solve the issue.
Part-time CFOs can also take on specific projects that a company needs to accomplish within a defined period of time.
For example, I worked with a client who needed to build a new manufacturing facility and the management of cash flow and working with multiple lending institutions was going to be vital to getting the facility built.
I provided relevant information during this period of time while ensuring the operating budget was doing what it was supposed to be doing.
Not only did my work help the company to get the facility financed and built, but I also ended up providing ongoing support.
Some companies need support on an ongoing basis.
For example, one of our most successful clients achieved a 1000% increase in earnings over a 4-year period of time.
The founder was overwhelmed and requested our help.
They needed our ongoing support because the founder simply could not handle the financial complexity that came along with this type of growth rate.
So we helped them deal with the banks, suppliers, their customers and the onboarding of new staff. We also helped them develop new systems to manage everything from production to inventory management, and of course how the way the financials and budget were being done.
There wasn’t enough work to justify hiring a full-time CFO, but it was much more cost effective to hire a part-time CFO in this case.
Another advantage of hiring a part-time CFO is because they have specific industry related experience.
For example, I have a lot of experience with retail and light manufacturing and the different aspects that go into those types of businesses, so I can give solid guidance about what works and what definitely does not work.
Now that we understand what a Part-Time CFO is and how to work with them, here are 5 Reasons Why You Should Hire A Part-Time Chief Financial Officer (CFO).
5 Reasons Why You Should Hire A Part-Time Chief Financial Officer (CFO)
5 Reasons Why You Should Hire A Part-Time Chief Financial Officer (CFO)
1. Interpretation Of Financial Results
Receiving a financial report at the end of the month from the company bookkeeper or controller is valuable information for all key decision makers in a company.
The interpretation of that information and what the implications are on decision making in particular how it relates to the strategy of the business is most critical.
There are three key elements to a financial report:
- Balance Sheet
- Income Statement
- Statement of Cash Flows
Additionally, there are notes and a general overview of notes explaining key elements of the financial statements.
All of this can get a bit overwhelming at times as some financial reports can exceed 10 pages very easily.
So how do you use this information to your advantage?
This is the point where interpretation starts to come in.
One consideration is that some of the information is merely historical by the time it is received and may actually be useless with respect to future decision making.
On the other side of things there can be some very important information that needs to be factored in moving forward such as future commitments, fixed costs that will continue, sales trends, input costs, customer cash collection trends, vendor payment trends, etc.
A part-time CFO can help you understand how factor in financial information so you can make the best business decisions, which can help you move forward in the most effective possible way.
2. Managing Relationships And Conveying Information To Key Stakeholders
Companies deal with a myriad of outside parties that depend on receiving financial and non-financial information from them.
Distributing information that is proprietary to the company requires oversight as to what information is being distributed and to whom it is being distributed to.
Some Key Stakeholders that require information:
- External Accountant
- Bank and/or other Lenders
- Other Shareholders
- Insurance Companies
The above list is not an inclusive list by any means but gives a bit of a sample of different stakeholders that may require financial and related explanatory information for that information.
Often a temporary CFO will need to look at the appropriate format the information needs to be delivered in but also the explanations of key accounts and why the information is relevant.
For example, dealing with banks they will require year-end financial statements as a starting point but also can require explanations of financial results as it pertains to what the business is going to be doing in the future to support future loans.
Also, insurance companies particularly on the general insurance side of things will request information that relates to key assets that they are insuring.
3. Objective Review Of The Decision-Making Process
One of the main feedback points working with clients over the years has been the appreciation of an outside objective view of certain key decisions.
A part-time CFO is compensated directly from your company on a flat rate basis to provide the best possible advice in your interest and yours only.
Often when decisions come up if something is a benefit for the company the other party almost always has something to gain from getting your company to agree to the terms.
As a CFO resource one of the tasks is to assess if decisions make sense not only financially for the company but also if the decision has other implications that will affect other areas of the business.
4. Support For Human Resources And Accounting
Both the human resources and accounting functions in an organization are more closely related than at first appearance, especially as companies grow.
Accounting and human resources both have common features in that they are compliance-based, largely by legislation, and also have an overlap in staff budgeting and payroll matters.
Human resource departments are required to be completely up-to-date on all staff budgeting, payroll, and benefits-related matters which inevitably run through accounting.
Staff budgeting and benefits is an evolving area especially as companies are growing and scaling so it can almost be a daily conversation on employee performance pay, benefits, recruitment, hiring, and terminations.
A part-time CFO in these instances not only will have knowledge of the overall payroll actuals and budget but also how certain decisions in these areas impact other areas of the organization.
The accounting department typically has questions every day on various items from accounts receivable to how a new sales channel should be presented in the financial reports.
Accounting departments are often bogged down by a high level of transactions and complexity in certain transactions.
Having an outside, a high-level resource that allows them to at least have a starting point to discuss challenges that arise can help save time and possibly avoid errors at a later date.
There is a shift from accounting departments as a cost center to being an area of the company that not only helps save costs but also helps produce revenue by providing information in a manner that sales and marketing can identify opportunities quickly.
5. Reliable Source Of Information And Sounding Board For All Key Decision Makers
A part-time CFO needs to have a sound understanding of the financial information of the company and at least a general understanding of the operations and industry the company operates in.
The piecing together of the various parts of a company such as operations, marketing, human resources, and security is crucial to getting a holistic view of the company.
Key decision-makers, for example, at the operations level when making choices understand they need to get the financial perspective to understand the pros and cons of any decision they stand behind.
From the CEO level, often decisions will depend on what things look like from a business growth perspective and if that decision actually can add value given the financial model.
In this article, we gave you Here are 5 Reasons Why You Should Hire A Part-Time Chief Financial Officer (CFO).
- Interpretation of Financial Results
- Managing Relationships And Conveying Information To Key Stakeholders
- Objective Review Of The Decision-Making Process
- Support For Human Resources and Accounting
- Reliable Source Of Information And Sounding Board For All Key Decision Makers
After going through the key areas where a CFO resource can help your business not only handle obstacles but also take advantage of growth opportunities you can evaluate how this could potentially take your business to the next level.
If you have any questions, please get in touch.