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What to Expect When Hiring a Part-Time CFO

Hiring an interim or part-time CFO can immediately help small and midsize business owners and CEOs focus their attention on key strategic and financial elements rather than get lost in the day-to-day operational details of their business. Part-time CFOs are cost effective and will offer expert perspective that delivers invaluable input and insight into strategic decisions. If you’re considering outsourcing a part-time CFO, here are four things you can expect:

1. Get to know you, your business, and strategy

Part-time CFOs will want to know what’s bothering the business owner most. To help a company get on track, a part-time CFO needs to be aware of the key issues the company is facing financially and operationally. The CFO will want you to do most of the talking and will start by asking some basic questions about your company’s financial situation. Your financial statements will tell the interim CFO the ‘what’, but not the “why”. This will also be necessary for the CFO to uncover and understand. This is crucial in order for the CFO to be more than just a bean-counter but, rather, to provide crucial strategic and operating insights which drive significant increases in profits and cash flow.

In addition, the CFO will want to get acclimated with the office environment and establish a trust factor as a foundation for the relationship with the business owner.

2. Understand your break even point

The amount of units, products or hours of service your company has to sell to cover all expenses is the break-even level of sales or revenue. Although break-even points are critical to a business model, not many company owners pay much attention to it. It is tricky to understand all of the necessary parts of the formula to determine at what point there are enough sales to cover expenses, let alone determine profitability. This is best tracked on a shorter term basis, such as weekly or monthly. If a company is not operating at break-even, every day that goes by, the company is losing money. This will be one of the first places an interim CFO will want to target.

When looking at a Profit and Loss (P&L) statement, you can quickly see that there may be some line items that are misclassified. They’re going to need to be above what they call ‘the line’ or ‘below the line’; that’s the Gross Profit line. Once that’s understood and addressed, then the CFO will discuss scenarios for funding strategic growth initiatives. For example, to spend $10,000 on a marketing initiative, the same formula used to determine the break even point, will answer the question ‘how much in sales do we have to generate to cover that cost?’ Understanding expenses in terms of sales, helps a company comprehend their decisions and it its financial and operational impact before executing it.

3. Narrow the gap between receivables and payables

Another important business process that part-time CFO’s examine, is the difference in the number of days of sales in the Accounts Receivable (AR) and Accounts Payable (AP) of the company. The larger the gap, the tighter it makes the cash flow. If a business is collecting receivables in 70 days and paying vendors in 30, that’s a wide gap. The part-time CFO will take action by recommending and implementing more efficient billing processes, bringing down receivable accounts receivable to 45 days or less, while appropriately lengthening the payment time to their vendors. This is critical to cash flow management.

4. Improve your margins

Understanding the implications of your profit margins is grossly underestimated in many companies. It takes an experienced CFO to accurately calculate and help business owners and CEOs understand the significance of these numbers. For example, if a company has $10 million in annual sales and profit margins can be improved by 1 percent, that one percent is worth $100,000. By improving the profit margin by as little as 1 percent, you can add $100,000 to your bottom-line income.

Managing and increasing a company’s profits is undertaken by the part-time CFO. They closely watch profit margins, strategically manage them and educate other top level executives on what it means. The surplus amount can then either be used for business needs or invested elsewhere if not immediately needed.

Entrepreneurs and emerging companies don’t want to think like small companies, especially when it comes to financial matters. Having an expert interim or part-time CFO focus on financial and operational strategies, allows the rest of your team to focus on growing the business and taking care of customers.

If you are a business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced part-time CFO to help your company improve profit margins, cash flow, business process design, as well as accounting and billing process management, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.

CFO Growth Advisors (CGA) specializes in unique and highly effective growth strategies that are tailored to help companies grow more quickly and efficiently while improving sales & profit growth. Contact us to learn more.

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