Every small business owner knows financials are important, but even those with a good grasp of the numbers may be challenged as their company becomes more successful. Scaling your business often involves making financial decisions that fall beyond the scope of your expertise. If managing your company’s financial activities requires more support and guidance on a strategic level, it may be time to hire a full or part-time Chief Financial Officer (CFO.)

Building a Small Business Finance Team

Many small business owners grow their finance teams over time, bringing in professionals with specific skills to meet the evolving needs of their companies. While there are no set rules for when to hire, entrepreneurs often start with a bookkeeper and add expertise as managing their business finances becomes more complex. Here are a few points to consider when starting your finance team:

  • Enlisting the services of a bookkeeper can help you gain a basic understanding of the financial aspects of running your business. A bookkeeper will help you establish a good record keeping system, handle financial transactions, and produce financial statements.
  • Small businesses owners often work with an accountant to file their tax returns. An experienced accountant can also help you handle more complicated financial matters that arise when you begin to add staff, decide to change your business structure, seek outside financing, or develop an intricate account management system. The role of an accountant can range from providing advice on payroll and staffing costs to reviewing your books to look for discrepancies, analyzing sales trends, completing end-of-year financial statements, and offering ideas for improving profits.
  • When you and your management team need to focus more on strategic issues and less on managing the day-to-day financials, you may decide to hire a full-time controller to run your financial operations and put appropriate software systems in place. The controller’s responsibilities typically include financial statements, general ledger, cost accounting, payroll, accounts payable, accounts receivable, budgeting, and tax compliance.

When is it Time to Hire a CFO?

Business owners rely on having accurate and timely information in order to make decisions. If the financial data you need to make informed choices is not being prepared or is solely based on past performance, you may want to consider the services of a CFO. A CFO will do more than just make sense of your financials; they will help you understand the economics and overall dynamics of your business. They will support you when it comes to critical forward planning, bringing to the table considerable expertise in areas such as forecasting, mergers and acquisitions, in-depth analysis of financial statements, and managing your capital structure.

Businesses experiencing rapid growth or planning a major expansion can also benefit from adding a CFO to their finance team. A CFO can provide strategic advice to companies adding multiple product lines or launching new services. The complexity of the company’s transactions can also determine the need for a higher level of knowledge and financial management experience.

Growth may require upgraded systems and additional capital or financing. If you are planning an Initial Public Offering (IPO) or more complex money raising initiative, a CFO can add valuable expertise in dealing with third parties, including banks and outside investors.

A CFO Focuses on the Future

The CFO is in charge of the overall financial management of a company, including planning, projecting, measuring, and tracking financial and operational progress. They create complex financial projections to aid in strategic decision-making and partner with the company owner in managing the business.

While an accountant or controller focuses on historical transactions, the CFO uses historical information as a tool to project what is going to happen. The CFO provides big-picture strategies designed to improve profitability, such as adjusting pricing, increasing efficiencies, and identifying opportunities. They understand business risks, both financial and non-financial, and know how to mitigate those risks.

If your small business is growth-oriented, your CFO will take a magnifying glass to your numbers and examine things like staffing, manufacturing costs, and other expenses compared to revenue. This will give you the information you need to calculate an accurate return on investment (ROI), which can be used to help you make strategic decisions about where and how to invest in the growth of your business.

In many small businesses, the CFO is the key contact for financial relationships with investors, lenders, insurance companies, attorneys, and auditors, as well as with key vendors and clients. At Summit Financial Resources, we often work with CFOs of small and medium-sized businesses to provide working capital loans that involve using your accounts receivable and other assets as collateral. We offer a variety of flexible financing options, including invoice factoring, asset-based lending, inventory lending, and equipment financing, and we focus on providing the ideal solution to meet each company’s cash flow needs. From our perspective, the value a CFO brings to the leadership of your small business is reliant on their ability to serve as a trusted advisor and provide the financial, operational, and business insights you need to grow wisely.

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Can Your Small Business Afford a CFO?

Some small business owners realize they need financial leadership but cannot afford a full-time CFO. Others are unwilling to invest the resources. However, the lack of a CFO’s expertise and guidance may be costing the business dearly in terms of misspending, mismanaged inventory, lost opportunities, and lost profits.

If hiring the professional expertise you need on a full-time basis is not in the budget, consider outsourcing. One cost-effective alternative for small businesses in transition is to hire a part-time or interim CFO. An on-demand CFO will not only manage your cash flow or prepare financial statements, but they will share their wealth of knowledge and experience to help you and your team meet the challenges of growing and elevating your business.

The financials of your small business provide a performance management tool to aid you in making the right decisions to maximize profitability. Regardless of the size of your operation, it is critical to ensure the financial accuracy of daily transactions and use that data to plan for the future. As your business grows, employing the services of a CFO may be essential to your success.

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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.