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Many SME business owners believe only large businesses can afford or need a Chief Financial Officer (CFO).  I like to hear that because it gives me an opportunity to explain exactly what a CFO does and why every business needs one.  In simple terms, a CFO is a highly experienced financial executive who will help refine your strategy, drive your business to achieve greater profits, improve cash flow and the value of your business.  A virtual CFO provides this expertise on a part-time basis at a fraction of the cost of having someone employed full time.

Rather than thinking “I can’t afford or don’t need a CFO”, the reality is the opposite is true.  Not having access to the financial wisdom of an experienced finance profrsssional can stifle, or worse, kill off your business.  If you don’t have timely financial information available – how can you begin to manage your business?  If the financial information you are using isn’t reliable it may be telling you the wrong things!  A recent Sydney Morning Herald article quoted ASIC data on the reasons for business failure.  ‘Poor financial control’ was a factor in one third of all business failures, only just behind ‘poor strategic management’ (43%) with ‘inadequate cash flow’ rounding out the top three.

“The takeout from this analysis is simple: if you want to avoid business failure, focus first on strategy.  Implement strong financial controls and record keeping, and keep a close watch on cash. That sounds like obvious advice, yet too many small business owners I know don’t have detailed strategies.  They often have poor records and weak cash flow controls”.

Aside from helping avoid failure from ASIC’s top 3, a Chief Financial Officer offers a rounded set of skills that are invaluable to all business owner:

Accountant – the obvious one, a CFO knows accounting and will ensure your financial records are accurate and available when you need them (not months or even a year after the fact).

Fund Raiser – they will understand the banking system as well as other sources of capital and be able to assist you in accessing capital when you need it.

Sales Closer – your virtual CFO can be a key member of the sales team assisting with the negotiation of deals and closing the sale.

Operator – your virtual CFO should take a lead role in improving operational quality in your business.  They understand processes and are skilled at identifying opportunities for improvement that will save time and money.

Lawyer – only larges business will need their own in-house counsel but there are numerous legal agreements, contracts etc. that need signing.  Your virtual CFO is someone who has experience reviewing legal documents.

Information Technology – the day-to-day maintenance of your IT system is the domain of your IT provider but your virtual CFO is skilled and knowledgeable in information technology to lead the IT strategy for your business.

Cheapskate – being frugal with money is part of the DNA of an accountant.  Your virtual CFO can stretch your expenditure dollars by knowing where to cut expenses without harming your business.

Advisor – your virtual CFO is a true trusted advisor.  Running a business can be lonely and your virtual CFO is a trusted, objective source of sound advice and counsel.

Of all of these traits, only the first one has anything to do with accounting.  Despite their accounting origins, your virtual CFO has invaluable skills far beyond this foundation.

Author: David Officen CPA. MBA.

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