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March 2020 Newsletter – What are the Most Important CFO Responsibilities and Challenges?

Newsletters

Our topic for March 2020 has been a discussion of the duties of a chief financial officer. Many smaller companies do not have a CFO on staff to advise them about day-to-day operations and financial strategy. If you wonder if your company needs a full-time or part-time CFO or how retaining one might affect its growth and stability, read on.

march 2020

 

Challenges of a CFO

Obviously, a CFO’s job is complex, but the biggest CFO challenge involves taking the information about the company’s current operation and productivity and using it to achieve future financial objectives. Under normal circumstances, this takes understanding and experience, but a good CFO will work to make sure that the company can still remain profitable even if the economy hits a bump or, even worse, goes into recession. Part of that will mean being able to accurately predict the national and international economy and how a variety of factors, like shifting politics or trade deals, will affect the economy and the company directly.

There are tried-and-true methods to try to insulate a company from a recession. These involve closer monitoring of spending, better collections processes, and the use of tougher negotiation skills. More proactive CFOs will work to improve the company’s cash flow by locating new markets and revenue streams and will try to incorporate technology where it can save the company money and increase productivity. 

Essentially, the challenge of a good CFO will be to strengthen the financials of a company in much the same way that we’ve discussed in terms of exit planning. That might include restructuring the internal finance team so that financial reporting will be streamlined and any inefficiencies are eliminated. It could mean pointing out areas of the company that are underperforming so that management changes can be made or business systems can be created and implemented

Read more.

Should You Hire a Full-time or Part-time CFO?

This is not a simple question to answer but depends on the needs of the business. The cost of luring a high quality full-time CFO in terms of salary and compensation package might be too high to bear for smaller companies. They may not need a CFO to manage many different departments or employees. That’s why a popular, cost-effective choice is to hire a CFO on a part-time basis only. 

A part-time CFO will have the same skill set as a full-time one and will manage the same kinds of tasks. These include:

  • Managing Accounts Payable and Accounts Receivable
  • Initiating or improving internal processes and automating them wherever possible
  • Ensuring the company’s full legal and tax compliance
  • Financial forecasting and budget planning
  • Gathering and presenting financial information to the board and investors
  • Finding sources of capital and investment opportunities

If the CFO can accomplish all of the above part-time, then it makes sense not to hire a full-time CFO. Some part-time CFOs work remotely, in fact. However, if the business is large enough for the CFO to manage many employees or departments in the course of performing the above tasks, it’s time to budget the money and hire a full-time CFO. You need one.

Ultimately, any business owner who is considering exiting or transitioning his company needs to get serious about demonstrating financial stability and growth to potential buyers. For many small to medium sized companies it would be wise to bring on a CFO sooner rather than later.  Feel free to call us at Prometis Partners with your questions on this or any other subject. Our job as exit planners is to discuss everything that factors into an eventual exit or sale. The sooner you begin the exit planning process, the more options you will have as an owner and the better your outcome will be.

VINCENT MASTROVITO

vincent@prometispartners.com
(616) 622-3070
250 Monroe Ave. NW, Suite 400 
Grand Rapids, MI, 49503