The most cost effective and productive way to use a CFO is on a part time basis. In other words, as a business owner the thing to do is find yourself a CFO Consultant. Back in the day, Chief Financial Officers were commonly called controllers, and controllers would pay a lot of attention to monthly closings, financial statement preparation and profit planning. With today’s operating systems and more sophisticated accounting modules, CFOs can share their attention with areas that are more productive to the business owner. For example: CFOs can focus on business forecasting, inventory planning and reduction of risk. These aforementioned productive CFO duties and CFO services do not take full time manpower. You can even add a number of other CFO services and it still will not require a full time CFO. When you hire CFOs on a part time or temporary basis they will not require benefits as most are of independent contractor status. Part time CFOs are also your CFO as long as you want to keep them. The Business Owner will not get a two week notice because they found another job. In closing, CFOs who work on a part time basis are more valuable than a CFO who is a full time employee because they will tackle the most important issues in your business while being extremely cost effective.
I’ll take a CFO who has owned a business before over anyone with a lot of practical experience and a lot of diplomas. My reasoning: the chief financial officer who has owned businesses actually understands the risk involved in being a business owner. Why? Because they too have been there. Choosing an outs sourced CFO with an owner’s perspective is a good move not only because they understand the risks and feel the risks of owning a business, they can identify those risks easily and quickly, making them much more valuable to the business owner than any CFO for hire who has never actually run a business themselves.
Until you feel how it feels to have an unsuccessful sale in retail, or know what it’s like to not be able to fill manufacturing orders because you did not have the right inventory or have not had enough cash flow to make payroll, or experience the pressure of employees underperforming you do not really understand. These are just a few of the issues that only business owners worry about and stay up nights thinking about, and no amount of practical experience or diplomas can replace it.
Employees and vendors do not worry about these issues nor do they have the owner’s perspective of these issues. If you’re looking for a CFO or temporary CFO, look for one who has owned a business before. Not only does this CFO have the financial and business acumen to be productive, but also a mind set that only a business owner has. In short, they can really perform like a business partner without owning stock. The CFO who has owned a business gives the business owner another set of business owner eyes and that is invaluable.
One thing business owners hate is surprises (unless, of course, it’s one of those elusive pleasant surprises, but when is that ever the case?). The much more common unpleasant surprise is enough to give a business owner a gray hair or two. Chief Financial Officers, or CFOs, need to tell the business owner when it is cloudy, not when it is raining. This is a key role of the CFO: reducing the element of unpleasant surprise. Identifying cash flow problems before they occur and identifying inventory overstocks or shortages before they occur are just a few of many trouble spots that can be identified with the help of an outsourced CFO.
Today’s business owner wears so many hats and needs to be able to make decisions quickly. A temporary CFO can be brought in to identify and assess the risks involved in those quick decisions in a timely manner, so the business owner won’t miss a beat.Today’s CFO can also do many things to help reduce the business owner’s risk. One such example is looking into the Corporate American Express Card. Qualifying for certain classifications of corporate American Express Cards will just have corporate liability and no personal liability.
When two or more people get into business together there is risk that needs constant assessment. Partners in business together must have the following characteristics:
- Must be logical in their thinking. It is not all about one partner. Sometimes the logical business decision can disadvantage one partner over the other(s). It is critical that the partner being disadvantaged is logical in their thinking to separate what is right for the business from what is right for the disadvantaged partner.
- Must eventually be at peace with all decisions. Although it is healthy to have different opinions and constructive arguments, eventually all partners must understand that a decision needs to be made and although it may be contrary to one partners opinion the dissenting partners must be at peace with the decisions.
- Partners cannot be bitter if they get diluted. There are many times when a business needs more money and the partners have to ante up. Sometimes there are partners who do not have the money or do not want to invest in their business at the particular point in time when money is needed. These partners who do not participate financially cannot be bitter when their stock ownership gets diluted. If it only fair to the partners who are risking the additional capital that they get stock for the risk they are taking.
- Partners must understand the rough and tumble world of commerce. Partners must be prepared for troubled times in the business. Exemplified by, lower salaries, difficult cash flow problems and personal guarantees. The character of the partners must be in harmony during these periods.
- Only one person can run the company. It is a good idea for one partner to take the lead role in the business. Be viewed by the suppliers, customers and employees as the point person. Sometimes this can make the partners not taking the lead role feel inferior and bitter.
- Not all partners are created equal with regard to salary. Partners must understand that different partners take different skills to the table. Some of those skills are more valuable to the business than others. The business needs to pay more money to the more valuable skill sets. You would not pay a store manager the same as a CEO. If one partner brings store management skills to the table that is valuable, but can be replaced with another store manager if the salary is out of hand. This is difficult for many partners to understand.
Sometimes business partners will call upon the CFO to be their mediator when they’re having a dispute, but partners need to keep their eyes open when they enter into business deals.