You’re a small-to-medium-sized company owner, and the monthly accounting records are late… AGAIN! Your accountant will not respond to your emails until you can actually look at them, and you’re more than annoyed. You know, in the back of your mind, that the accountant is squeezed too thin to suit your requirements; and worse, he does not have the awareness needed to keep up with your changing company.
You have a fast-growing, medium-sized business – and that’s the privilege and the challenge. You’re not sure whether you need funding, an investor, whether you’re trying to sell your company, have another business, or whether there’s a better alternative you don’t even know how to think!
You require answers, and you simply can not make errors at this critical time in your business.
In an early pre-funding startup, you’re enthusiastically putting in 30 hour days and you need somebody to join the management group to persuade investors you’ve got your act organized.
Is really a CFO correct for you?
If you replied, “I don’t know that! “Don’t worry, you’re right. You’re not getting enough details from all those disappointed examples.
Since hiring a CFO isn’t monochrome for most companies. Firstly, you need to take the time to find out just what financial help you need. And there’s a blueprint below to decode that will shed more light on whether or not it’s time for you to press the button.
We’ve outlined 12 important questions that we’re working over for all of our future customers. In order to protect their hard-earned assets, we want to be completely confident that the CFO is the right option for them.
Go through them and write down your responses. If you answered “yes ” to more than 40% of these, it might be time to speak to us as to whether or not you must appoint a CFO to your company.
Question 1: Would I really require a CFO?
This is a perfect time to isolate your emotions from your needs for your company. Often we’re just exhausted, angry and irritated, and it happens to be the day when we look at our monthly financials. (We did not say it was going to be simple!) Distance yourself for a minute from the emotion and just inquire objectively: Is my company expanding in such a way that I invest more time than I can spare on finances?
Question 2: Am I wasting a lot of time on finance?
If you waste more than 10-15% of your productive time coping with accounting difficulties and communicating with your accountant, that’s TOO MUCH!
Evaluate that – if you’re working 8 hours per day, this is 4-6 hours of time you’re not establishing a company, optimising your activities, and concentrating on revenue-driving behaviour that only you can carry out. When you function 12 hours a day, that’s 6-9 hours a week of your time spent on accounting and finance. They just make sense if you’re at the point in your company at which you’re searching for financing from one source or another.
Question 3: Have I faced multiple problems with my accountant?
Normally, the main problem is that the bookkeeper’s work has gotten too big. When external, the customers are likely to be stretched too thin. If the accountant is an internal employee, he/she could be equally stretched, but could also be working beyond his/her usual environment.
In this scenario, you do not need a CFO, but you may be able to use someone with a clear knowledge of the whole process to determine which of these conditions is causing your anger in order to identify precisely what help you need to add (or replace).
Question 4: Am I losing any sleep over the balance of my bank account at night?
If you don’t feel well about what your cash flow will be for the next 13 weeks with a fair degree of faith, you certainly need a financial lead inside your company, and probably a CFO.
Question 5: Does my organisation have on-site procedures for reliable and timely monthly financial reports?
If the financial records are regularly sent to you later than planned, this can also mean that the company does not supply the accountant with what he/she wants to document financial transactions. Is there a mechanism in effect to ensure that all receipts are given in a timely manner? : Is there a simple mechanism for submission and acceptance of invoices? Are we paying consumers as soon as the goods and services are delivered? Can everybody recognise who has the right to do what?
If you don’t, it could be a hint you need a CFO.
Question 6: Am I confused about how I charge for my goods and services?
You spend valuable time, resources and cost in marketing your goods and services and generating income for your business. Yet income alone does not raise the bank balance. If you do not really know the true viability of your particular goods or services, there’s a risk that you might lose revenue due to leaky processes, imagined business pressures, or traditional habits.
You need to know what gives you the most money with the least contribution. If your goods and services have evolved to the point that you no longer appreciate their individual viability (Revenue minus associated costs) than you will need a CFO.
Question 7: Have I got a letter from the Government?
When you get a bill of payroll tax indebtedness from the state or federal government, treat it as a wake-up alarm.
If you attempt the incorrect triggers for one of these officials, you will receive severe fines and other punishments from a state or from the IRS. Irrespective of whether you really need a CFO – get legitimate and competent accounting assistance if you land up in this mess.
Moreover, you could consider outsourcing your payroll. The amount of time required to handle payrolls and to stay consistent with and comply with all related state and federal reporting standards is tremendous. It’s not your main expertise. (Unless you are a payroll corporation, in which case I’m sure you have not really read too far.) There are very budget service companies out there, and you can consider your overall payroll cost as covering payroll administration costs (even though you prefer to do so from within).
Question 8: Am I measuring my current financial results to the budget and/or the projection that is connected to my market strategy?
What do your monthly profit and loss sheets look like? Do you build it and look at it every month? Are they structured in such a manner that you can quickly see monthly patterns and correlate them to your monthly accounts and/or forecasts? Will the budget and/or outlook fit specifically with your market plan in such a way that you know and appreciate where the expectations exist in your numbers?
If your company is such a scale or scope that you can no longer clearly grasp and see from financial records the improvements you are making against your strategic objectives and annual objectives, then it might be time to determine the level of financial ability that can be applied (or outsourced) to the organisation.
On the other hand, if you believe like the figures correctly represent your market philosophy, you may just need to include the provision that your accountant have monthly financials in such a manner that you can quickly see patterns and observations.
Question 9: Will my company need funding?
It is almost assured that you must have someone you trust fully in your corner when it is time to take on more money to support your progress. This need for expertise raises the standard of the CFO, whether part-time or full-time, who can evaluate the costs and advantages of various sources of finance, and the incentives and disadvantages of equity versus liability financing; and plans and introduces the business case to potential buyers or lenders.
You recognise that you will have to either pay interest to a bank or give up equity to a lender in order to get capital into your business. While it might appear like an investor’s equity is better when you don’t pay tax on it, giving up equity has considerable longer-term compensation costs. The cost of funding will be exponentially high relative to debt rates if the company succeeds.
Along with your own risk and reward choices, both pros and cons need to be thoroughly weighed, and a trustworthy CFO is the one to do this with you.
Question 10: Are my financial statements overdue continuously?
When are you getting your financial statements? We should chat if you’re not having them until after the fifth working day of the next month. Multinational, $1 billion corporations will close the books (without going back on estimates) in as little as 2 days after the month-end of several subsidiaries. And I’m not even going to start outlining the complexities involved with these closing procedures now. So if your business is domestic, has one currency, one office, and has fewer than 200 workers, it’s more than generous for five days!
In this post, this will be the most controversial paragraph. I’ll leave it to you to determine the merit of your bookkeeper’s claim whether he or she objects. But continue to respond to query #5 above when he/she does object. He/she has a right to object, perhaps but it can all be corrected.
Each day that you delay to see the prior month-end financial results, it’s one more day that you can’t make a crucial adjustment that can be implied by the details in those reports. That’s going to cost it. To see your financial reports within 3-5 days, push hard. You deserve it because it’s attainable.
Question 11: Am I drained by having to study all these accounting terms?
If the answer is sure yeah, the CFO will be responsible for interpreting accounting words such as debit, credit, valuation and GAAP into the vocabulary that suits your corporate plan and the levers that you use to manage the business.
A good CFO finds the best way to learn and process the information, the best way to think about your business, and the best way to connect with you. They make sure the material is given to you in the manner you best comprehend it; and as for the layout: if you prefer text, they’ll send email; if you’d like a phone call, they’ll call. And if you try to talk to them in person, they’re going to come tapping on your door.
Question 12: Do I feel lonely at the top?
You’ve got a lot of pressure on your shoulders. Your employees, your suppliers, your clients and your family are relying on the decisions you make every day. That’s the strain.
A major part of the burden is financial; ensuring that the company is and remains financially viable; or, better still, financially vibrant. It isn’t something you should share with all the people you’re concerned about.
You need to have a trustworthy person in someone you can trust your business concerns as well as your aspirations. You need to have a reliable sounding board; someone with you in the fetal position who can help you figure out some way to handle without scaring the rest of the company, your customers, your suppliers or that valuable family
We hope these questions will help direct you around the decision to “CFO” or not to “CFO.” Over the 40% mark in the “YES” column, you may want a CFO – or preferably someone to speak to about what degree of financial ability you need to sustain your company.
For more tips and tricks on how to be a successful entrepreneur, keep reading The Money Gig!
Also Read – Why Every Entrepreneur Needs A Mentor0