Are You Your Own CFO?
Many small businesses and startups handle their business finances without leveraging a chief financial officer (CFO). Many owners often wear both hats balancing strategic thinking with financial efficiency. Both roles require effective decision-making based on sound analytics.
But if you are wearing the hat of the CFO, what should you focus on? We’ve got a list of priorities, and best practices startup businesses can utilize to manage their financials accurately and effectively.
Tasks You Need to Prioritize
According to a Deloitte survey, the top three priorities of a CFO in 2022 are talent, financial performance, and growth. As the business’s CFO, you need to balance these priorities while performing these critical tasks regularly to make effective strategic decisions:
Record Keeping and Reporting
As the CFO, you need to maintain accurate bookkeeping and records to accurately assess your business’s overall financial health and make effective decisions to grow your business. You’ll want to utilize efficient accounting software that can integrate with your online banking to generate real-time reports.
You’ll need to understand your overhead and operational costs to determine the best pricing strategy to improve financial performance, growth, and profits. You also need to generate financial reports that evaluate your most profitable products. Understanding these numbers will help create more effective marketing strategies and streamline product lines.
As the CFO, you need to set realistic budgets for each business function to ensure profit margins. This requires realistic estimates of yearly costs and revenues based on prior financial reports and estimated growth. There are several software tools to create budgets and monitor expenses to ensure budgets are met.
Forecasting & Strategy
A CFO needs to be able to generate reports and analyze financials to help forecast future growth that meets or exceeds expectations within the outlined budgets. The CFO also needs to be able to prioritize and fund the business strategies to reach business goals.
This means building predictive models, analyzing economic trends, and synthesizing non-financial information to validate growth forecasts and strategies.
To effectively make decisions and make accurate financial analyses, a CFO needs to understand the company’s business model, industry, and operations. This way, they can identify opportunities to improve operations, control costs, and incentivize growth.
Being your own CFO also means knowing any industry regulations, legal requirements, and compliance regulations to ensure the business is compliant internally and financially. This includes assessing any risks that may arise from regulation and creating a plan to mitigate the risks.
Best Practices of a CFO
When you’re operating under several executive responsibilities, you’ll want to leverage these best practices to act as the CFO effectively:
- Bridge the Gap Between Strategy and Finance: Utilize the information you gain from knowing and tracking financials to help guide and check strategic decisions. Outline the financial effects of strategic decisions and provide logistical clarity.
- Focus on Analytics and Utilize Numbers-Based Decision-Making: Utilize the data and reports generated from the financials to help with decision-making. Numbers don’t lie. Use them.
- Be Savvy About Communication: When discussing financial information, be careful about how you communicate because it can have legal ramifications. Be very detail-oriented when communicating through emails, calls, messages, etc.
- Utilizing a Robust Bookkeeping System: You’ll want a bookkeeping system that organizes and categorizes your receipts, expenses, statements, and transactions effortlessly. Pick a software system that can allow real-time monitoring and reporting and embrace systems that leverage automation, AI, and new technology.
- Leverage Online Banking: Online banking is an easy way to pay bills and payrolls, send invoices, and monitor cash flow. Pick a bookkeeping system that integrates well with your online banking for maximum efficiency.
- Outsource Some Financial Tasks to an Accountant: Know your limitations and bandwidth. Outsource tasks and seek advice from accounting professionals that can help ensure your books are clean, compliant, and maximized for tax deductions.
When to Hire a CFO
For small businesses and startups, the CEO or President can often manage CFO responsibilities until the business expands from growth. Here are some of the signs when you need to hire a CFO:
- You lack the bandwidth to generate financial reports that will impact decision-making.
- You are making mistakes or lack the ability to maintain financial reports, banking relationships, cost control measures, capital acquisitions, or regulatory controls.
- Need to gain financial respect outside the company from suppliers, banks, customers, shareholders, or regulators.
- Your business is preparing for a merger or acquisition and needs a full c-suite.
- Your business experiences rapid growth and needs to expand its systems and financials to meet the demand.
In these situations, you may want to hire an accounting firm to help bridge managing your business financials until a suitable CFO can be found.
Tax Hack’s in-house comptroller team can take these high-level accounting tasks off your plate with its full-range of CFO services. Think of us as your CFO-as-a-Service provider! Talk to a Tax Hack rep today to learn more about our CFO services, available to larger businesses and enterprise clients.
You Can Wear the CFO Hat
By following these best practices and prioritizing these tasks, you’ll be able to run your small business or startup wearing the hat of the CFO until your business requires additional help. Be sure to leverage robust software and banking systems to automate and organize many of the financial tasks to generate effective reports for strategic, numbers-based decision-making.
Tax Hack has the CFO expertise you need at a fraction of the price of hiring a full-time executive. Our talented team has decades of Big Four experience, and we can help you tackle your toughest tax challenges. Get started today with a one-on-one strategy session with a Tax Hack pro to see how much you can save.