Being an entrepreneur is demanding, exciting, and rewarding all at once. It’s like boarding a ship for a long voyage to a faraway destination. You may know where you wish to go, but you’re not 100% sure how to get there. The role of a CFO is to help with that. You may have to navigate through the mist of uncertainty, the choppy waters of operational challenges, and the rainstorms of change, but your crew helps navigate you through it all. Just like ships have expert crews, entrepreneurs need people to help guide them toward their goals.
Entrepreneurship isn’t a one-person show, and you’ll need assistance from other trained professionals, especially when it comes to money matters. Money is what fuels business and financial experts can help manage money and assist entrepreneurs in achieving their goals. Because money is at the center of business, without a plan or “map” for it, many entrepreneurs may find their businesses headed toward the rocks instead of the welcoming shore. To make your business sail, you will need a financial expert to chart your path, create a map, and guide you along with it to the business destination of your dreams. That’s where having a CFO comes in.
Understanding the role of a CFO and making a them a core member of your team is the answer to all your financial planning needs. CFOs are in place to draw meaning out of your books of accounts, create sound financial planning, and evaluate and propose objectives in line with the company’s financial strengths and weaknesses. Without a CFO on the team, you’ll be like an explorer without a map. A CFO can assist you in putting strategic plans in place to guide you into a world of possibilities for your organization.
Now that you know you will need a CFO for your business, you will have tons of questions:
- But what exactly is their role?
- How do you find a great CFO?
- Can you afford a full-time CFO if you are just getting started?
- Will a CFO look into the finance function of the whole company?
- Can a CFO help with strategic planning?
Let’s get these questions answered and explore how a CFO can help your ship fare the choppy waters and guide your business to the shore with ease, tact, and finesse.
The role of a CFO
Many believe that a CFO’s duties and responsibilities are limited to maintaining a company’s books of accounts. This is as far from the truth as it can get.
A CFO’s principal task is to improve the financial performance of the business by preparing meticulous financial reports, undertaking liquidity analysis, and putting policies in place to maximize return on investment. A CFO can be especially helpful in pointing out how to avoid financial errors that can make or break a company. It’s easy to think of it this way, accounting is about your history or where you’ve been, finance is about your future and where you can go.
Responsibilities of a CFO
A CFO’s responsibility starts where the accountant’s work ends. They are responsible for interpreting the accounting data presented by the bookkeeper. A CFO’s work is more forward-looking, meaning they will strategize for the future of the enterprise based on past accounting data. The financial strategies they design will have a significant impact on the business’ top and bottom line.
Companies cannot survive and thrive without this money expert, who’s responsible for the following:
Drawing Meaning Out Of Your Accounting Numbers
Once your accounts are done for the year, do you put them away or do you use them as a base to plan for the coming years? If your answer is putting them away, you need a CFO. A CFO will interpret your books of accounts for you and advise you for the upcoming year. They will be responsible for maximizing returns and minimizing losses.
‘I have a good business model and strong sales, but my business is still cash strapped.’ If this dilemma is keeping you awake at night, a CFO can help. A CFO will assess your numbers, evaluate different streams of your business, study your cash flow statement and point out the pain points that are bleeding cash. You can then address those areas to improve your cash position.
Maximizing The Return On Investment
CFOs assist the company in achieving the maximum return on its assets and capital. The CFO is in charge of forecasting the company’s future cash flow and comparing actual results to what was budgeted. This plays a vital role in the analytics and decision-making process.
Role of a CFO in Formulating Strategic Planning
To grow and achieve your objectives, every company requires strategic planning. It is a complicated process that cannot be handled just by the CEO. It’s a group effort, and the company’s CFO is an important member of that group. The CFO’s experience and skills will help develop not only the financial plan but the overall strategic plan for the business.
In-Depth Look at Strategic Planning
Strategic planning is a process in which the core team of the enterprise will state their vision for the future of the enterprise. It is a sequential process that gives a stepwise roadmap that needs to be followed to reach the stated objective. While this is a group activity, it is incomplete without the CFO’s input. The money expert of the company will be responsible for the financial strategy needed to support the expansion.
Strategic planning typically relates to mid-to-long-term goals with a time horizon of three to five years, but it can be longer. It is your roadmap charted to take you from point A to point B and from point B to point C. When strategic planning is done correctly, employees, business partners, and other stakeholders will be able to easily discuss, comprehend, and implement these strategies for optimal results.
Why Your Company Needs A CFO Regardless Of Its Size
Many business owners might mistakenly believe that a CFO is a luxury add-on to their team or a future hire since the company is just getting started. However, a CFO should be in place as soon as possible to get the strategic road maps and blueprints in place.
If you feel that you are too small to hire a full-time CFO, you can simply outsource your CFO function. By doing this you will get the benefit of an experienced CFO at a very cost-effective rate. You can have a look at Keep Financials’ outsourced CFO service and get expert financial advice from an experienced CFO.
A CFO will design and support strategic planning to see your company avoid common pitfalls and provide a clear vision of what is expected and where it is heading.
When executed properly, your company’s strategic plan can be extremely valuable. Strategic planning is effective because it supports healthy business practices that lead to better results. Having a CFO on board to help with strategic planning should be a priority.
Strategic planning results in:
Quality Data and Smarter Decisions.
A strategic plan involves keeping track of certain key performance indicators to track your progress. This data can be then utilized to make effective and timely decisions that affect your employees, customers, and business at all levels. Understanding the cost of your debt, how expensive debt can affect your cash flow, and how you can leverage debt for business growth are areas of expertise a CFO can bring to your leadership team.
Improved Focus and Planned Execution
Having a strategic plan in place eliminates any uncertainty regarding your company’s or team’s focus. If someone suggests an alternative course, you won’t have to waste time evaluating data that doesn’t line with your strategic strategy.
Better Resource Allocation and Resource Waste Reduction
Your CFO knows the significance of distributing resources efficiently. The strategic plan for your firm can help you frame your budget around essential components of your strategy and prevent spending cash on activities that will have no impact on your bottom line. Keep in mind that when your budget is directly linked to your goals, it is easier to adjust your priorities.
Help With Fund Raising
Finally, let’s not forget about one of the most stressful tasks of company leaders, the fundraising process. During fundraising, we usually think about the dynamic CEO sharing their story of how the company came to life. However, the CFO serves an extremely important role during the fundraising process. A great CFO must be structured and consistent, as well as prepared and vigilant. Most importantly, they are expected to use data to communicate a compelling company story. When a CFO does their job right, closing an investment opportunity becomes much faster and easier, with fewer unknowns and questions from your prospective investors.
We hope that with this information, your team will have a new approach and tackle strategic planning with a fresh perspective. During the strategic planning process, a CFO is a key contributor. CFOs sit at the strategy planning table and assist the company’s future path. They are critical in providing financial leadership and integrating business and finance strategies to help the company flourish.
Many entrepreneurs are made to believe that they should know and do it all, be it finance, strategy, or marketing. You may find yourself in this boat. Although it’s important to be actively involved in your business, you cannot do it all. You will need expert help when talking about finances. A skilled CFO can not only make entrepreneur’s everyday work easier, but they will also guide your company to where it needs to go faster, with fewer errors, and with improved communication. Don’t leave the shore without your map and an expert crew. If you’ve already done so, it’s not too late to head back to shore to make sure your team has everything and everyone they need to succeed.