Sometimes for business owners, pushing your business into growth mode feels like being stuck in the mud. You think you're gaining traction but suddenly you find yourself sliding right back into the muck.
Oftentimes gears start slipping because you don't have the financial forecasting and insights to guide your decisions.
For example, in hindsight, you understand that new product launch didn't provide the boost you were expecting because costs were too high or customer demand was too low. But it's too late when that information comes in hindsight. You needed better financial strategy & analysis to support your go to market plan before you made the decision to launch a new product.
If your financial statements are being kept primarily for tax compliance, you're never going to get the type of guidance you need from financial professionals to drive your company ahead. To achieve that aim, you need financial experts with expertise in your industry to mine your financial data, parse out the competition and evaluate the market to help steer you out of the mud and into growth mode.
More and more, small to mid-sized businesses are finding they can shift into growth mode by contracting for outsourced CFO services, rather than trying to hire a single Chief Financial Officer to lead their financial team.
If you're unsure what outsourced CFO services are and whether you need them, you can learn more from this previous post, but if you're feeling frustrated with your financial statements, we can guarantee you will benefit from CFO services.
Without getting better financial statements and guidance to make strategic decisions, you're burning precious cash and inviting your competitors to gain an edge over your firm.
But you can turn all of that around if you consider the benefits provided by outsourced CFO business advisory services:
1. Strategy: Plan to Compete AND Win
According to Michael Porter, founder of the modern strategy field, "Strategy defines the company's distinctive approach to competing and the competitive advantages on which it will be based. A good competitive strategy is one that creates unique value for a particular set of customers."
On rare occasions, a company can stumble into a truly unique niche and find sudden success. But the vast majority of successful companies have thoughtfully and deliberately crafted their business strategy and business model, taking into account competitive positioning, a firm's current and potential resources, industry realities and detailed financial forecasting against which progress can be measured. In other words, steady, substantial, long-term growth doesn't just happen, it's a direct result of developing and then executing against a plan.
CFO outsourcing fills a critical role in the creation of that competitive strategy by bringing deep industry experience and a broad perspective to business leaders. A CFO service adds an outsider's view with the ability to do more in-depth internal assessment and help you locate your unique place in the market.
A CFO service team's first concern isn't how your accounting software functions or how you handle data entry (of course, they will get all accounting services straight). Rather, they want to know your business goals and dreams.
The right Chief Financial Officer then can help you break down your overall goals into quantifiable and measurable goals to lead the company along its strategic path. The team then establishes systems to measure and track the metrics and key performance indicators toward those goals to ensure you are staying on course. And when you stray from your company's performance goals, they're there to help you understand the root cause of the deviation and how to correct the course. It's worth noting this approach is a complete flip of the traditional small business accounting process which is primarily built upon recording transactions so your CPA can file your tax return.
2. Reporting: Your Most Vital Planning Tool
You're beginning to understand that useful financial reporting involves more than reviewing the net profit on your income statement. As a business owner, you need to be able to look beyond the bottom line and grasp all the little nuances that got you there.
Let's say you notice Product A is performing significantly better than Product B. But without the numbers to understand why, how can you know if you need to ditch Product B and make more products like Product A... or specifically what needs to change to enhance the performance of Product B?
An outsourced CFO service can identify and digest the data in your company's financials, understand the factors affecting both products and provide you with the type of small business financial insight you need to make decisions about where you want your future focus.
Beyond looking just at special situations and one-time decisions, a CFO service also will set up a financial dashboard designed specifically for your company that will continuously present key metrics, for your quick reference.
3. Oversight: Driving a Well-Oiled Machine
As your business has grown, accounting needs have become more complex and in need of greater security and oversight.
When a CFO service takes over your financial management, they will implement a system of internal controls to ensure compliance, avoid errors and fraud and manage the privacy of information for your staff and customers.
A CFO service also will make sure all the finance work is done in a timely fashion to manage cash flow forecasting and optimize financial processes.
Additionally, some CFO services offer an integrated approach to meet business needs by providing bookkeeping and controller services, in addition to fractional CFO services. In other words, these services provide your entire finance solution in one package.
4. Cost/Time Savings: One 'Hire' Does It All
By taking advantage of this integrated approach, with one "hire," you cash in on a great savings of time, money and, maybe most importantly, headaches.
You never lose traction if an employee is out sick, on vacation or leaves for another job. There's never a lag time in hiring a replacement and training to get that new hire up to speed. Your outsourced CFO services already have back-ups in place for any contingency so you keep a steady flow of data you need for your operations.
Compared to hiring an in-house CFO, you also save money with outsourced services as you're not covering the costs of hiring full time staff. Staffing costs such as vacation, benefits, retirement, taxes, etc.
For a very reasonable fixed monthly cost, you have all the financial expertise you need - at the level of your current business needs - to accelerate your business growth.
5. Grows with You: One Less Headache Down the Road
As we mentioned in the previous section, you can hire an outsourced CFO service to meet your current needs with the vision of that CFO service scaling up to meet the future needs of your growing business.
You might not be in a position to buy out a competitor at this point. But if that opportunity arises down the road as your business grows, your CFO function will have you covered. They should have meaningful expertise in mergers and acquisitions, a skill you might not think to look for if you opt to hire a full-time CFO today.
Or maybe you envision a round of fundraising in your future and you need a financial expert to help build your financial story to attract investors and to coach you through fundraising process.
Or you hit a rough patch of financial challenges and need a steady hand to guide you through a cash-flow crisis.
Outsourced CFOs stand ready to offer expertise and guidance through these scenarios - and hundreds of others - as they've seen small businesses face these challenges before.
Does Your Team Stack Up?
As you kick around these issues, you're going to want to evaluate whether your current team is up to the task. We can even offer you some advice on how to approach the analysis of your controller and bookkeeper.
And ask your senior member of your finance team these three key questions to give you a sense if they truly can help you drive business growth:
- What are the 3 primary KPIs we need to monitor for our next growth stage and why?
- Can you outline our ideal customer profile and why?
- What are the top 3 initiatives on your shortlist for driving cash flow growth and what is their projected [quantifiable] impact?
If you feel you get good solid answers to these questions, great! Go forward.
If not, outsourcing CFO services could answer the bell. However, not all CFO services are created equally.
Through its integrated approach, Driven Insights provides the traction you need to surge past that stuck-in-the-mud feeling and steer your company onto the highway to success. Take advantage of our sample dashboard offer to gain a better understand of how financial reporting helps you win.
