Meeting with business owners on a regular basis, I am often asked how you can benefit from outsourced services in managing your company. Following are three advisory tips from an outsourced CFO perspective that have provided value to business owners.
Knowing Who to Hire and When
Hire resources with skills that complement yours as an owner, taking care to create a balance between everyone’s strengths and weaknesses. These can be employees of the company as well as outsourced contractors who have the expertise you need. Specifically, in the technical areas of information technology, human resource management, and strategic financial management, you may want to bring in an outside contractor who has the depth of expertise to assist your company. For many small- to- midsized businesses, it would be difficult and probably not prudent to spend the resources on hiring these very technical individuals on a full-time basis. For example, before making a commitment to a full-time CFO, you can find outsourced CFO services that provide the same value in a cost-effective manner that aligns with your budget.
Delegating responsibilities to team members is also a challenge, as you may feel you will be losing control of your business. However, retaining too many day-to-day responsibilities as the owner will do more harm than good, as you will lose focus on creating the vision for your company. A key to successfully delegating responsibilities is to have a robust reporting structure in place so you can easily track key performance metrics on a regular basis through a daily/weekly/monthly dashboard.
A common goal of all businesses is to grow and prosper. However, growth for the sake of growth is not always the best course of action as there is no standard rule of growth your business should achieve year-over-year. You should always grow from a position of strength, meaning your company is healthy with respect to the margins you earn, efficiently using working capital (receivables, inventory, payables) and increasing your overall profitability.
There may be times you say “no” to a growth opportunity because it does not properly fit with your long-term business strategy. You will have more success managing growth by conducting market research that identifies unserved customer needs, defining where you are in the life cycle of your products/services and how you need to innovate and invest in executing your plans. Taking this approach will lead to growth opportunities that do not negatively impact the value of your products or the financial stability of your company.
Cash Flow Management
I’m surprised to find many companies do not have a cash forecasting tool that is used and updated on a regular basis. As an owner, you must know on a daily basis whether your company is generating sufficient cash to operate. Lack of cash and an inability to raise additional funds are a common reason companies fail and close.
Implementing a 13-week cash forecasting tool will provide a forward view of your cash flows, identify periods where cash will be tight and allow you to proactively manage your company. It will provide insight where you may need to raise additional funding, whether temporary or permanent and provide sufficient time to raise the capital. The end result is you will be in control of your business instead of your business being in control of you.
What outside contractors are you considering bringing on to add depth and technical skills to your team?