As a small- to mid-sized business owner you wear many hats in managing your company, which is a common dynamic that exists for a variety of reasons. It generally occurs as you tend to be a do-it-yourself person because of financial circumstances or you think no one else can manage as well as you.
Regardless of the reason, taking this approach can have some significant drawbacks. Over time, there are a number of detrimental warning signs that arise in your business which can be avoided by investing in a part-time CFO. Let’s explore the warning signs.
Lack of Time
You likely started your business because of a unique skill set in a variety of disciplines (e.g., engineering, marketing, manufacturing, etc.) and a desire to run your own company. As your business evolved, time spent in your core expertise began slipping away as the demand to administer and run the business grew. In addition, the planning and execution of the business is in constant flux and the time required to strategically think through how to navigate the changes has become more limited.
Poor Cash Flow and/or High Debt Levels
An old adage is a growing company needs cash. It is not uncommon for you to wonder why your income statement shows you are making money yet you suffer from poor cash flow. There are many reasons why this may be occurring. You need to be able to connect the dots between your margins, working capital (e.g., inventory, receivables, payables) and cash flow to your sales and net income. A part-time CFO has the analytical tools and processes that will create sustainable cash flow drivers. If you lack forward-looking projections predicated on accurate assumptions and drivers, you run the risk of falling into a downward spiral that is difficult to stop.
Management of Professional Advisor Relations
You tend to put off or ignore regular contact with your professional advisors such as your banker, CPA, insurance broker or attorney. Dealing with day-to-day problems inside your business consumes your time. You place greater emphasis on meeting a customer order, lending your expertise to an operational issue or dealing with a personnel issue. As a result, you aren’t always on top of whether you are meeting your loan covenants, or providing forward-looking information to your CPA so they can be a tax planner as opposed to a tax processor. The negative consequence is that by the time you do reach out to your professional advisors, you do so in a reactive manner instead of taking a proactive approach in those relations.
Do you see any of these warning signs in your business? If so, you should explore engaging with a part-time CFO. They will become your top advisor and confidante, provide forward-thinking strategic insights, and deliver results by establishing predictable, repeatable behaviors that enhance your company’s value.