I was talking to a business owner at a networking conference last week. Like most people that I talk to, he did not really understand what I do. More importantly, he did not know why his business would benefit from the upgrade to someone acting as a CFO. With his company size (annual sales just over $6.0 million) I gave him these six reasons why he needs a CFO:
- He’s out of touch. I asked him if he knew his business as well today as he did when it was smaller. At first, he said he did. But then I asked him who his top 10 customers were in order? Who are your top biggest suppliers? When does your lease expire? What are the annual rent increases? Which of your products sales are growing the fastest? It quickly became apparent that he does not have his finger on the pulse of his business. Here is a bold statement: No business owner knows the details of his business once it crosses $5 million in sales. He needs a reporting system that will keep him informed. How can you make good decisions if you don’t have good facts? The answer is you can’t.
- His banker is always giving him a hard time about his financials. There is always a disconnect between the top accounting person in your company (controller, bookkeeper, etc) and you the owner. You don’t want to have to deal with all the accounting details, that’s his job or her job. The problem is your accounting staff is not trained to think like a banker or think like a vendor issuing credit. Your accountant’s role is to process all accounting transactions – write checks, invoice customers, keep track of inventory. Financial reporting and analysis has never been a part of his job duty. So he prepares a set of financials and sends it over to your bank. This is the only document your bank has to justify the loan he has made to you. No analysis, numbers that don’t make sense, glaring errors. Your banker does not have confidence in you.
- Sales are growing but my cash flow is getting worse and worse. How can this be? My business is kicking butt but I just don’t seem to have the cash I need and it seems to be getting worse. Here is my question to you: how long has it been since your accountant gave you a cash flow statement and cash flow forecast? If you are like the majority of business owners, the answer is never. It’s true: CASH IS KING. If you don’t have good information, you will suffer. Every business decision you make will affect your cash flow. You have to know these effects before you make any decision.
- He has no clue how his company is doing compared to industry standards. You’ve heard this before: life is fluid. Like a river, it is constantly changing. If you don’t know how you are doing compared to how you should be doing, there is a huge threat to something going wrong that destroys your company before you even notice it. Your financial statements have to be compared to industry averages. Not only does this reduce threats but it also tells you where you can improve your own financial results. And I’m guessing that you have never seen this comparison report.
- His banker won’t lend him any more money. Your business is growing, thriving in fact. But with that comes the need for additional working capital funding. You are very busy running your company and don’t really have the time to deal with the bankers. Besides, isn’t this the job of your controller? The result is “no” to the loan request. The reason is your banker is a commercial loan officer and does not really understand your business. He has to sell your loan request to the loan committee – people that have never met you before. Your controller is not trained to help your loan officer sell your company to the loan committee. In today’s lending environment, that probably means no loan.
- A downturn in his business will threaten the very existence of his company. You, the business owner, are a forward looking person. Developing new relationships, customers and product lines. You should have almost nothing to do with the day to day operations of your company. If you do not have a robust reporting system and someone to watch over it, you will not notice trouble until it’s almost too late to fix. Every business has its troubles. You want to know about yours as soon as it rears its ugly head – the time when you can do something about it. Business owners are great problem solvers. You just have to know about the trouble so you can address it.
This is why you need someone to bring your company CFO services. We are very cost effective – in fact we are oftentimes a profit center the first year because we find efficiencies that always save you money.
There are over 220 B2B CFO® partners across the United States. We help you, the business owner, grow your business successfully. We find the problem areas before they become big problems. We are a support person in your company that will help you grow your company.