Written by Scott Nabozniak, CPA, CA from Mowbrey Gil
As a small (to medium sized) business owner/operator, you must wear many hats, especially with a growing business. You have to manage operations, sales, human resources and the finances of the business. Some of these things you’re an expert at, others you’re not. You may not have to be an expert at everything to operate a successful business but with growth comes complexity and it can be difficult staying on top of everything, especially in a rapidly changing world.
What do you do when you know there’s something wrong with your business but can’t quite put your finger on it? Like having an infant or a pet that’s sick, you know that something is off, but they can’t tell you where it hurts. Businesses can go through poor health spells too. How can you tell when they’re sick? After all, they can’t tell you what’s wrong either… or can they?
Businesses can speak to you, but their language is numbers. You can examine and diagnose what’s wrong with them by analyzing their financial information. However, not everyone is fluent with this language. It takes years of education, experience, and professional development to get proficient at this kind of interpretation.
With this education and experience comes a cost. Financial experts, unlike sales or operations personnel, don’t typically generate revenue for a business. Sure, the accounting function of a business is important, but can’t it be done by a bookkeeper?
Well, if you have a feeling that something is wrong or that your business is just not reaching its potential then the answer to that question is “no”. Having financial information that is materially correct, summarized and able to give you accurate information about your business’s vitals can help you make timely decisions that will, in turn, help you navigate this changing world. A financial expert may not generate revenue but can help you avoid pitfalls when your business is struggling and help you develop strategies to grow even when everything is fine.
Still, your business may be growing and could benefit from input from a financial expert, but you may only need the heavy lifting for a few days (maybe a week) a month and it’s just not at the place where you can justify the cost financially. What if there were options to hiring someone full-time? After all, it’s common to outsource other administrative functions, like Information Technology (“IT”). What about accounting?
More and more, you can find a financial expert, like a Controller or Chief Financial Officer (“CFO”), that will offer their services in fractions of time. They are able to generate a market rate by spreading their compensation out between several clients. Also, some professional services firms may offer these “Fractional Controllers/CFOs” as part of their suite of services. In fact, the benefit of a larger firm is that as part of a larger pool of experts, you may also have access to expertise in specialized areas that may be difficult for individuals to offer.
How can a Fractional Controller/CFO help your business?
- Develop, prepare and interpret monthly reporting to keep your business on track
- Ensure that your business is in compliance with regulators (usually tax compliance but can also be beneficial with filings for industry specific regulators)
- Develop processes and monitor transactions to help reduce the risk of fraud
- Prepare and file bank reporting as required
- Build and coordinate budgets and forecasts
- Build financial relationships, typically with banks, but there are other forms of financing that CFOs can help you gain access to; Analyze and recommend changes to business processes to help you get to industry best practices
- Help analyze business opportunities – entrepreneurs are typically creative people and seek out growth opportunities, but may not always adequately gauge risk. A CFO can analyze these opportunities and put guardrails around them to help pick which opportunities are good and which aren’t
- Help develop growth strategies. Where does your business fit in your industry? What are reasonable growth targets for your business? A CFO can help guide you to answers and to pick a path to growth
- Help you get your business ready for sale or help guide you through a succession to the next generation