Businesses will inevitably face various challenges, particularly as they grow. At times, the owner or CEO struggles with even identifying the root cause of the challenge, let alone understanding what solutions are available. And more often than not, the causes of those challenges can be found in the financials, and the solutions, in the expertise of a CFO. In an effort to shed some light, here are three common challenges a business faces that signal it’s time to onboard or outsource a CFO.
Challenge 1: Slow progress because the founder wears all the hats.
When first starting a business, especially a small one, it’s typical to see the owner/founder(s) acting in every role and performing every task in an attempt to save money. They will try not only to do their own job, but every other job, including those relating to finances. Soon, they become overwhelmed and lose sight of what they should be doing – strategically guiding the company forward to meet its goals. While the mentality behind it is understandable, this is not a sustainable business practice.
CFO Solution
Generally speaking, the person who is charged with running the company does not also possess the background and knowledge needed to financially steer it toward success. It’s no wonder this person gets frustrated and overwhelmed—not only are they trying to do everything, but they simply cannot make data-driven decisions without the actual data. A CFO can help clear the way with real numbers and explanations of where those numbers come from and how they can be used to benefit the company overall. By utilizing financial forecasting and modeling, the CFO can help ensure that the CEO is making the best decisions for the future of the company.
Challenge 2: No clear understanding of company goals.
This isn’t to say that the owner or executive board does not understand the company’s direction. They likely know exactly where they want to go. However, what they often lack is an understanding of what must happen (and when) in order to get there. Guiding a business requires milestones and goals that must be met in succession along the way. It’s imperative that the leader of a company understand how to prioritize these goals to make a long-lasting positive impact.
CFO Solution
A CFO is responsible for knowing the company’s target revenue, industry trends, and projecting the short- and long-term revenue and expenses through viable milestones and goals. And these will likely be different from the owner’s short-term goals. For example, an owner may think that simply getting more clients to generate more revenue is the answer to every problem. However, this isn’t necessarily the first step. While gaining more clients and, by default, more sales, is an important factor in company growth, a business needs to take a few starting steps before reaching that point. Namely, understanding the target market and increased demands of the business. Gaining clients is only truly beneficial if those clients are the correct ones and if the business is equipped with the knowledge, resources, technology, and manpower to handle the increase in operations. Otherwise, any increase in revenue will be short lived.
Challenge 3: A lack of financial organization.
Founders become founders because they saw a need, had an idea, and came up with a solution. But having an idea (even a great idea) and having a profitable business are two entirely different things. So much attention is focused on perfecting a product or fine-tuning a service that the intricacies of the finances often get lost in the shuffle. This lack of organization results in missed opportunities and unfounded business decisions.
CFO Solution
Keeping finances organized to help develop appropriate strategies is simply what a CFO does. Their primary objective is to help grow a company grow financially. With a steadfast eye on critical financial detail, a CFO will consistently work with projections and help increase the bottom line. But this can only be done when the finances are organized enough to tell the story they need to tell.
Ultimately, a CFO, whether a full-time hire or outsourced, takes the guess work and frustration out of all of these challenges (and many more) for the CEO. With financial stability and accurate future outlooks, the CEO can focus on strategy and lead the company forward.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
We talked last week about an important relationship in the C-Suite – the relationship between the CFO and COO, and specifically, how it can impact a company’s operational strategies. This week, I’d like to focus on the relationship between the CFO and CEO. While there are countless articles on the subject, they are often focused on what the CFO can and should do to assist the leader of the company. But truly, support in a relationship like this is a two-way street. Under that premise, I’d like to change our perspective and focus on what the CEO can do to help make this as successful a relationship as possible.
As an outsourced CFO, I’ve worked with many different CEOs over the years – each with their own leadership styles and skills that impact their relationships. What I’ve noticed is that my effectiveness at the financial helm of the company is directly correlated to the type of CEO with whom I’m working and how much support I receive, and I recently worked with one who clearly understood the difference it makes. It made me consider what CEOs can do to fully support their CFOs.
How CEOs Can Support Their CFOs
1. Always have their back.
There is nothing worse than feeling like you are out on an island, especially when it comes to preparing and presenting on the financial outlook of the company. Knowing you have the full support of the CEO behind you helps present a united front to the rest of the team.
2. Manage conflict with external and internal stakeholders in a healthy manner.
Conflicts are a necessary evil for CEOs and for most in the C-Suite. But managing those conflicts ineffectively only leads to additional conflict. Instead, CEOs are more effective handling each conflict with direct and timely communication and respect.
3. Communicate with radical candor.
Leaders continuously second guessing themselves and wondering if they did something wrong based on the CEO’s attitude takes unnecessary time and energy away from the tasks at hand. However, when the CEO is direct, even if it’s negative, it helps them fix what they need to and move on quickly.
4. Follow up and review information timely.
Timeliness is crucial in running a company, especially as it relates to data-driven decisions and finance. When the CFO sends an important report, it likely needs to be reviewed sooner rather than later.
5. Spend time and ask questions about the financials in a manageable manner.
The goal here is to communicate without delaying progress and not spend time on frivolous matters or micromanage others.
6. Receive bad news by asking clarifying questions and coming up with an action plan.
CEOs throwing up their hands and storming out not only does nothing to solve the problem, but effectively crushes team morale. Once again, the key is support. Neither the CEO nor anyone else in the C-Suite will make progress playing the blame game. Instead, the CEO can make sure there is a project plan and actionable items so it will not happen again.
7. Work to make sure those who work hard are rewarded properly.
More than ever, strong relationships matter, and at their foundation are respect and appreciation. CEOs who show that they appreciate team members and reward their work realize that if they don’t, someone else soon may.
8. Have high ethics and expect the entire C Suite to operate in the same manner.
CEOs should never ask a CFO (or anyone) to change numbers to make things look better. And sadly, many will. In my opinion, integrity and ethics are faltering entirely too much in our world. Working with a leader who clearly prioritizes these values is a welcomed relief for anyone working in the C-Suite.
Ultimately, a CEO should consider the value of having a CFO who becomes a trusted strategic business advisor and support them in their role. Without their expertise, they would have a difficult time making financially sound decisions to move the company forward with long-term success.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Growing Wealth … It’s Not Just for Companies What We Can Take from the Office
When you’ve been acting in some type of CFO capacity for as long as I have, you can’t help it—growth strategies, numbers, maximizing revenue, minimizing expenses, and leadership are a part of your DNA. And that DNA stays with you whether you are in the office, on a Zoom call, or taking care of your personal finances.
I started thinking about the correlation between what we do in our “official” CFO role and what we do in our personal lives. I asked myself what we can learn about what we do in the office to take it home and help us build our own wealth. And the more I thought about it, the more I thought that many of the same principles apply whether we are strategizing for our companies or for our families.
Unless you’re independently wealthy or have been left a huge inheritance, you have to build your own wealth, just like a company has to build its revenue. While inflation and growing debt may make it seem like this is futile, with the right principles, strategies, and habits in place, your financial growth will strengthen. So, I’ve compiled the top five habits to help you grow your wealth … from a CFO perspective.
1. Don’t spend more than you earn
This may seem intuitive, but for many individuals, it’s anything but. It’s critical to be aware of our spending habits and have discipline to live within our means. This does not mean depriving ourselves of full lives, as some may think. Rather, it comes down to making choices.
A few tips to help along the way:
Take advantage of automated savings (i.e., pay yourself first).
Eliminate frivolous spending.
Create a budget and stick with it.
Stop comparing your spending with others (especially from social media posts).
2. It’s never to early (or late) to invest and save
Far too many younger individuals just entering the workforce think they don’t have to worry about saving for retirement or investing. They figure they have years to think about all of that. But I would argue there is no time like the present. Investing is a great tool to help build wealth, but to truly do so takes years. So, the sooner we start, the better.
Additionally, when we start younger and don’t yet have a family or other major expenses to account for, we can invest more and solidify some strong financial habits before incurring additional, often larger expenses. On the opposite side, others think it’s too late, so why bother. It is never too late. You may not have exactly what you had hoped for as you approach retirement, but at least you will have something.
Financial planning should always include both short-term and long-term goals. This includes having an emergency fund, so when those inevitable life experiences come up, our savings accounts do not get exhausted. It also includes taking advantage of matching retirement plans, such as 401(k)s.
3.Use debt strategically
Many financial experts will say to avoid debt at all costs (pun intended). However, I urge my clients to first consider the type of debt they have and also the importance of having some debt. To start, in order to build credit, it must first be established by incurring debt. This does not mean you should max out credit cards and pay insanely high-interest rates (actually an example of the bad debt we want to avoid). But if you are responsible with the debt you have, and make payments in full on time, you will build credit. With regard to the type of debt, consider lower rates on mortgages, home equity loans, and federal student loans. This can help establish credit and free up cash to invest.
4.Diversify income
Just like a company needs more than one product or service to offer, we need more than one source of revenue to truly build wealth. Now, you may be thinking that you already work a full-time job or have a business to run, with no time for anything else. However, there are many passive income opportunities that can help generate additional revenue with little time and effort.
When we diversify our income sources, we minimize the risks associated with losing our jobs or closing our businesses. Other benefits to having additional sources include:
saving more and investing,
paying off bad debt, or
taking a long overdue vacation.
5. Remember knowledge is power
This is a leadership principle that pertains to any industry and organization, and it applies equally here. We must always make a commitment to continuous learning. While expanding financial knowledge can be overwhelming to some, continuously educating yourself is the key to becoming more financially stable—from new tax laws to interest rates to investment opportunities.
Resources can be found almost anywhere—blogs, videos, podcasts, webinars, mentors, and coaches. How you do it is up to you. The important piece is to be prepared, ask questions, and learn something that will help you navigate the path to reaching your financial goals.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Beyond the Numbers – More Than Ever, CFOs Need a Strategic Mindset
I don’t think anyone would doubt the importance of the CFO role (or at least I hope they wouldn’t!). But what many don’t understand is the magnitude of this role’s transformation over the past several years. It’s not just about financials. And it’s much more than tracking and compliance, as some may have thought. At the base of this transformation is an increased emphasis on having a strategic mindset.
Organizations are facing unprecedented challenges in supply chains, labor supplies, and overall skills gaps that must be rectified, or at least minimized, at every level and in every department. CFOs are plagued with the continued uncertainty these challenges bring, as they attempt to align the organization’s current and projected finances with the organization’s growth goals and strategies.
So, how can CFOs exceed expectations and sustain organizational growth? What separates the good ones from the great ones, especially in light of today’s challenges? What are the successful CFOs doing differently? Simply, they have the required financial acumen and leadership skills of most, but also a strong, developed strategic mindset.
Strategic Mindsets Lead to Success
CFOs look at the drivers of business growth to deliver both short-term financial gains and sustain long-term organizational growth. But to be successful at both requires a strategic mindset. In a recent Forbes article, a strategic mindset is listed as one of the top attributes of successful CFOs. “A strategic CFO understands that success tomorrow depends on creating the right financial structure today. The right person will work alongside the CEO to create a viable financial plan that will carry the business through future growth stages. This includes thinking several steps ahead to minimize risk.”
With a strategic mindset, CFOs often consider these types of questions:
How much cash do we need on hand at any given time?
How much should we have in reserves?
Where can we reduce costs?
What actions should we take to increase revenue? Short-term? Long-term?
Are our financial processes ready to scale? If not, what do we need to do so they are?
At what point will we be able to position ourselves for a merger or acquisition?
Seeing beyond the numbers to both the opportunities and risks that can only be found “in between the lines,” a successful CFO becomes a trusted strategic business advisor to the CEO. And a strong relationship between the two helps the financial and operational strategies stay aligned. “Strategic leadership from the CFO’s office in these scenarios can keep the company moving forward. When the chemistry between the CEO and CFO is right, their unique leadership traits will sharpen each other and work in tandem to get the best possible results for the company.”
As with much else in life, this comes down to strong relationships. Without the ability to communicate and collaborate effectively with others, a strategic mindset alone will never move the needle. We are at a time where everything in business is seemingly connected. Leaders can no longer operate in silos—there is simply too much at stake.
For example, the CFO should take that same strategic mindset to collaborate with the Chief Information Officer with respect to technological advances and data, with the Human Resources Director to manage the organization’s culture and employee experience, and the COO to decide where the most effective operational investments can be found. In this way, CFOs are about entirely more than the financials. In fact, they are the drivers of organizational transformation.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
The Top 3 Tips to Increase Your Team’s Financial Literacy this April
Financial literacy is an essential skill for navigating the worlds of both personal and business finance. However, many Americans have not received proper financial education, if any at all, leaving them extremely vulnerable to the pitfalls that can occur when one lacks requisite knowledge.
Lack of proper financial knowledge can be damaging for both individuals and businesses. That’s why April has been designated as National Financial Literacy Month – a time to focus on financial education for both adults and children. Financial Literacy Month began as part of the National Endowment for Financial Education (“NEFE”) more than two decades ago, as Youth Financial Literacy Day. In 2000, it was expanded into Financial Literacy for Youth Month, and when the Jump$tart Coalition took over for NEFE, it was eventually retitled “Financial Literacy Month.” In 2004, it became nationally recognized by a senate resolution.
Financial Literacy for Your Team
Financial literacy does not begin and end with the finance department. Whether we like to admit it or not, money is at the foundation of much of business. In fact, without it, we wouldn’t have businesses at all. But when it comes to your team, it’s not just about their financial decisions within your company. What about what they’re doing when they go home? The financial wellness of your individual team members is just as valuable as the financial wellness of your company. Setting them up for success when they get their paycheck by giving them the tools to relieve financial stress and achieve their goals is more important than ever.
Employer financial wellness programs have become increasingly popular in helping employees reduce their overall stress by forming better financial habits that lead to financial wellness. And less stressed employees equate to more productive teams. Additionally, creating a financially literate team can aid in flailing recruitment and retention efforts, serious problems facing many businesses today. Letting your team know that you care about their overall wellbeing, including finances, has become progressively more valuable. Simply, their personal success is your business success.
Top 3 Tips for Employees
Financial Literacy Month is a great time to introduce financial education to your team. Here are our top 3 tips to get started:
Assessing Finances
Introduce financial assessments to your team, but switch the focus from business assessments to personal ones. A personal financial assessment is a useful tool for team members to begin thinking about the strengths and weaknesses of their finances. It also provides a framework for team members to take action to improve their financial health and achieve their goals. You should be aware that this exercise can spark anxiety in some, as they fear learning the reality of their situation. However, once they realize that ignoring it will only make it worse, they will begin to have comfort in gaining knowledge and making small steps to induce big changes.
Setting Up Online Financial Education Programs
Once your team has targeted their financial weaknesses, it’s time to give them the financial knowledge to implement change. Online video education is the easiest way to help them learn financial principles that they can use for the rest of their lives. Give them some time during the day to make use of tools like Udemy, Coursera, and YouTube – all of which have high quality training and educational videos. Or provide a few lunch and learns with speakers. These types of courses will give them the strategies for navigating their finances on a variety of topics from learning to create a budget to investing in the stock market to saving for retirement.
Making Financial Resources Available
The members of your team will invariably have different goals. Similarly, financial resources are rarely a one-size-fits-all solution. Creating a weekly/monthly email or a team document where you can show various resources for different goals, such as debt elimination, homeownership, family planning, or retirement, creates a system where every team member has access to resources that are helpful in achieving their individual goals.
We can do better, as a country, in helping others understand their finances better. And business owners can play a large role in increasing this financial literacy by taking some time to educate their teams. Remember, the more your employees understand their own finances, the better they will handle yours.
Barker Associates provides strategic guidance to companies of all sizes. We provide the higher level of strategy your company needs to grow, especially as it relates to your team development in financial literacy. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Inflation is About More than Higher Prices for CFOs
Go to any grocery store, restaurant, hotel, or gas station and it’s clear that 2022 is giving new meaning to the word inflation. In fact, inflation in the United States has soared to its highest point in 40 years. Between the supply chain disruptions, labor shortages, unprecedented government stimulus, and shifting consumer spending that have occurred around the world, and particularly in the United States, companies are feeling the crunch (and some may say, seeing the opportunity).
In Deloitte’s recent survey,CFO Signals™ , inflation was listed as a top concern for three-quarters of CFOs. And a vast majority, 76%, indicated that raising prices would be at least part of their response to offset increases in costs. This seems logical, of course, but there’s much more to it, with ramifications that can extend far beyond this year.
For CFOs, it’s not merely about paying more for products and services or raising prices in an attempt to counteract those increases, it’s about reprioritizing strategies in an incredibly volatile environment. Specifically, many will not only adjust prices, but also look for cost-saving opportunities and prioritize the sale of high profit margin products. While the uncertainty creates challenges, it can also create opportunities when the company is open to them.
There are a variety of strategies that CFOs can utilize. According to an article in CFODive, “[i]n addition to raising prices, companies are adjusting to higher inflation by cutting costs, negotiating with suppliers, diversifying their supply chains and relying more heavily on advanced technology such as data analytics.”
The strategy deployed will likely depend on the size of the business and how many products or services they offer, among other factors. For example, smaller and medium sized businesses haven’t been as willing to raise prices. They are more often on the forefront with their customers and, with regular interaction, are trying to keep prices the same for them. Yet, they are experiencing the drastic increase in their cost of goods sold, as well as their payroll to get top talent in this highly competitive market, just like everyone else. And if they don’t increase their prices, they may soon find themselves unable to keep up and out of business.
Additionally, most businesses have different profit margins for different products. It only makes sense to try to sell the higher profit items sooner rather than later. This can be accomplished in a number of ways from merely suggesting the other product to the customer or explaining that the original product will be delayed, but they have an alternative for it. Companies do this all the time to get the high-profit product out the door faster and by extension, get more money into the accounts faster.
Navigating the uncertainty around this extraordinary high inflation will be a priority for business planning in upcoming quarters. For CFOs, they must consider the following questions:
How long will the supply chain disruptions last?
How is consumer spending shifting?
How much are wages increasing?
After careful consideration of these questions, CFOs can analyze future scenarios (inflation levels out, continues to increase, or drops as drastically as it has risen) and develop strategies under each. They can then determine the impacts to operational strategy, human capital, supply chain, pricing, restructuring, real estate, and taxes for both the short and long term.
Barker Associates provides strategic guidance to companies of all sizes. We provide the higher level of strategy your company needs to grow, especially as it relates to the issues affecting the bottom line, such as inflation and the strategies used to combat it to keep your company running. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Cash Plus Cultural Literacy What Private Equity Needs in Lower Middle Market Deals
Last year was a record year for private equity. With pandemic related stimulus, there was an increase in dealmaking and exits, as well as new records in deal values. But the drastic increase in inflation, along with extensive supply chain disruptions throughout the world, left many wondering what would happen in 2022.
Much of that speculation is the continued shift in attention toward growth equity and middle markets. Lower middle markets (defined as $5m – $100m in revenue) offer innovative solutions and compelling business models, and they are ripe for private equity investments. Yet, there appear to be some challenges – namely, cultural literacy – holding back some of these deals.
We’ve all been hearing about the importance of organizational culture recently. It has seemingly never been as important in trying to attract top talent and offer an engaging, fulfilling employee experience. But long before the Great Resignation left leaders scrambling to fill vacant seats, lower middle market companies placed great value on their culture.
These are companies that more often than not still have their founders involved, working toward their vision to move their companies further along. There is a sense of pride and accomplishment. There is often a sense of family when it comes to employees – these are the people who helped the founders realize their vision in the first place. And this strong sense of culture is not taken lightly.
When a private equity firm is interested in a lower middle market company, they must first understand this culture – and that it is different from larger companies. Cultural literacy creates the level of trust required for a successful deal. It’s as important as speaking the same language (or having a really great interpreter). But too often, that’s not the case. They are simply not accustomed to dealing with each other … and they must learn each other’s languages.
Why the Disconnect?
There are many reasons the “languages” differ among lower middle market and private equity firms. However, finding common ground is crucial to making these deals that will ultimately benefit both parties.
Education. A majority of investors at private equity firms hail from top universities, with advanced degrees, whereas successful lower middle market founders and leaders may not have pursued graduate degrees. In some cases, they may not even have undergraduate degrees. Degree or not, their success often stems from their incredible innovation, hard work, and perseverance.
Experience. Many in the lower middle market have little or no experience in mergers and acquisitions, while, clearly, private equity firms have plenty. That, in and of itself, can be an entirely new language to learn.
Values. The founders of lower middle market companies typically have strong employee retention rates. In fact, some of their employees may have been there since Day 1. They are a family, and founders want to protect their families. Many will care as much, or even more, about their employees than a big payday. Private equity firms must shift to understand that the purchase price may be only one piece of the total value to them.
These are not insurmountable challenges. And with consideration of each party’s perspective, these deals can, and will, go through successfully. But just like in any deal where different cultures exist, it takes time, patience, and understanding.
Barker Associates provides strategic guidance to companies of all sizes. We provide the higher level of strategy your company needs to grow, especially as it relates to the support needed in a merger or acquisition of any size. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Credit Check – It’s National Credit Education Month
March is National Credit Education Month. If you’ve ever applied for a credit card or a car loan, you know the importance of having good credit. At its foundation, it demonstrates to a lender how likely it is that you will repay your debt on time. Having good credit benefits you in countless ways, while having bad credit can challenge you in just as many.
This month serves as an important reminder for us all to check our credit scores and implement tools and tips to help improve it, if need be. Overall, it’s about increasing our knowledge around credit, including the amount of debt we carry, the age of our credit history, reports to collection agencies, the effect of late payments, high interest, and hard inquiries, and the number of accounts we have.
While this monthly designation is focused on personal credit, both maintaining it and improving it, it also presents an ideal opportunity to look at the importance of business credit. Just as with personal, its significance lies in showing a lender your reliability in paying back debt on time. Simply, consistently monitoring the financial health of your business is a crucial part of running a successful business.
What is a Business Credit Score?
Similar to a personal credit score, a business credit score (also known as a commercial credit score) is the primary indicator of your business’s creditworthiness. It’s a number that indicates if a company is a good candidate for a loan or other extension of credit by vendors or partners. One difference from a personal credit score is the numbers themselves. Instead of the 300 to 850 on the personal side, a business credit score ranges from 0 to 100 and will be reported most often on Equifax, Experian, and Dun and Bradstreet.
To determine if your business is financially risky or stable, consider the following factors:
a company’s credit obligations;
repayment histories with lenders and suppliers;
any legal filings, such as tax liens, judgments, or bankruptcies;
how long the company has operated;
business type and size; and
repayment performance compared to that of similar companies.
Why is Business Credit so Important?
If a company wants to take out a loan to purchase equipment, lease property, or obtain better terms on a supplier contract, the lender/supplier will consider its business credit score. The lender will also consider the company’s revenue, profits, assets, liabilities, and collateral value of the equipment or property, if applicable. Essentially, you will need your profit and loss statement and balance sheet ready for review. In some instances, particularly with small businesses, lenders often check both business and personal credit.
Having good credit for your business will help you qualify for financing faster and easier to purchase an asset or help cash flow issues. It may also help you secure lower interest rates, saving you money over the life of the loan. Another benefit is the likelihood of getting better repayment terms with suppliers, helping your cash flow remain positive. Further, having a strong business credit score can help protect your personal credit score. Without business credit, lenders will have to rely on your personal credit. You should try to avoid this situation, if at all possible, as it increases your credit utilization ratio, and consequently, increases the likelihood of a negative impact on your personal credit. And if something happens with the business, it could take you years to fix it.
Five Steps for Establishing and Improving Your Business Credit
The following five steps can help establish and then improve your business credit score:
Open a business bank account
Open a business credit file (for example, on Dun & Bradstreet)
Get a business credit card
Establish a line of credit with your suppliers or vendors
Pay all of your bills on time
Barker Associates provides strategic guidance to companies of all sizes. While we provide the higher level of strategy your company needs to grow, we also never minimize the basics, including the importance of business credit. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Remote CFOs – Is Success Really Possible? It’s All a Matter of Trust
More people are adjusting to the idea that our “new normal” includes remote work in some capacity. And this realization brings along new considerations, including which positions are better suited for remote work and the opportunity to attract additional top talent in various geographical areas. But when you’re talking about a leadership role, there are a number of other factors to consider, especially when that role is based in accountability and highly sensitive, confidential information, like a CFO. As such, many wonder if it is possible for a CFO to have success remotely.
As we all know, the CFO holds the top financial position of an organization. Some focus more on financial planning and strategies, while others focus more on budgeting, accounting, reporting, and risk management. In either case, the CFO ensures that the organization’s numbers fairly reflect its performance. Also, in either case, the foundation of the CFO role is relationships, which are generally viewed as stronger when individuals are physically together.
The key to working remotely is developing solid relationships with your direct reports. You need them to feel comfortable reaching out to you, as they would if you were in the same office. Previously, when we all worked together, you could see fear and anxiety in someone’s face and body language when they were nervous about something. It was palpable because, in large part, it was right in front of us. Now, we no longer have that ability, as it is far easier to hide nervous tendencies when you are in front of a computer camera. As the CFO, it is your responsibility to build trust in any situation, including when you are not physically present.
Remote CFO … In the Beginning
If this is a new role and you are just coming into an organization, spending one-on-one time with each team member is crucial in developing a strong foundation. If you do not live in the same area, that will essentially mean more travel in the early stages, but it will pay dividends in the long run. Simply, there is no better way to establish trust in a relationship than being face-to-face, sharing a cup of coffee (or your beverage of choice), and empathetically listening to the other person with whom you work.
In these meetings, learn their strengths and weaknesses, their aspirations, and their fears. Further, be abundantly clear about how and when you will be available when you are working remotely, as well as your expectations. Setting boundaries and clearly communicating them from the beginning will save you headaches down the road.
Building Trust as a Remote CFO
Continuing to incorporate relationship-building and trust as you perform your day-to-day responsibilities is key. Schedule weekly one-on-ones with your team and other stakeholders, and keep that time sacred. These meetings should be non-negotiable for anyone, including the CEO, to continue to build trust. One tip on virtual meetings is insisting on the use of cameras, despite everyone’s fatigue of them. Seeing the person with whom you are working, even though a camera, is better than not seeing them at all. Finally, when your team members reach out to you when you are not available, make sure you respond to them as soon as possible.
Another tip with virtual meetings is to be cognizant of differences in time zones. More than ever, you could be working with team members and clients across the globe. It is not always easy to accommodate others due to their various locations, but in your position as CFO, and to continue to garner trust, you must be flexible. If that means getting on a call at 5:00 am or 10:00 pm, that’s what you do. However, be nimble only where it counts. If other stakeholders or team members are reaching out to you off-hours (and time zone is a non-issue) regarding ordinary work activity, then put a stop to it immediately. Determine how to proactively communicate to them to keep it from happening again.
As always, boundaries are a key piece of trust, and they are never more important than with remote work when we are seemingly available at all times. Of course, if there is an emergency, all bets are off. In your position, you must answer that call and help find a solution. But be aware of the distinction between the two scenarios.
Your team members are not the only ones with whom you need to build trust. To build trust with other C Suite members, take time to understand their issues and challenges. For example, if you find out that an SVP is spending hours a month on a manual task that the accounting or IT department could easily automate, offer the solution, and help make their lives easier. These instances become huge wins all around, as you build stronger relationships within the organization.
More than ever, after a global pandemic and resulting economic crisis, organizations understand that a CFO is an investment and not an expense. And to have the best fit, that may mean hiring someone as a remote CFO. While this will require a different type of critical thinking and creativity in addition to the ordinary technical knowledge and risk mitigation skills of CFOs, many will find it more challenging and fulfilling. Their success is not only possible, but likely when trust is established from the beginning.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
I often get asked about why companies should outsource CFO services. As small- to medium-sized businesses grow, they need additional financial resources, including data and expertise to help them better understand the company’s financial health, plan where they can feasibly go based on that health, and improve performance overall. In the past, many companies reaching this phase would bring on a full-time Chief Financial Officer (CFO). But, as we all know, times change … and so do needs and resources. Now, more businesses are deciding to forgo the large salary expense and still get the expertise by outsourcing those financial services.
You may need high-level financial strategy, but you may not need, or maybe you can’t afford, a full-time employee. Essentially, the finance function of your company can be outsourced to a third-party service provider who acts in the same capacity as a CFO. You gain expert financial insights, advice, skills, and resources that will help you grow your business, without the huge paycheck that historically goes with it.
Why Outsource to a CFO? The reasons you may decide the time is right to get someone in your financial corner are plentiful. However, as I touched on above, your company experiencing rapid growth, such as the development of new products or market expansion, is one of the most common reasons. Growth like that needs cash for manufacturing, distributing, and marketing. Does the company have enough? Where will it get the money from over time? These are the questions a CFO can help you answer.
Other reasons to bring on an outsourced CFO include resolving a financial challenge (cash flow, inefficient processes), scaling systems to handle the complex transactions aligned with rapid growth, and needing an accurate, up-to-date financial forecast for budgeting, restructuring, or funding purposes. These major decisions and company crossroads require a financial expert that many companies do not have on staff.
How an Outsourced CFO Helps An outsourced CFO will take their knowledge and broad experience to analyze the company’s financial picture and provide strategic planning and solutions to move forward with the best financial footing. Equally important, they will help ensure the company has the checks and balances needed to keep stakeholders accountable as the company grows. For example, if the company needs to secure additional funding, prepare for a merger or acquisition, or increase oversight to minimize the risk of fraud.
While each set of circumstances and needs vary, an outsourced CFO can:
Develop a financial roadmap to navigate the company’s future
Help make the numbers more understandable
Help overcome obstacles to business growth
Implement reporting for financial and accounting functions
Oversee financial controls
Identify weaknesses and capitalize on strengths
Develop KPIs and metrics
Develop forecasting and budgeting models
Provide strategies to move forward
Put accounting and reporting systems into place
Provide regular financial reporting
Manage cash flow
Help acquire funding from investors
The End Benefits of Outsourcing a CFO It’s appropriate that the largest benefit of outsourcing a CFO is cost savings. And while many people believe that the costs are actually higher, according to an article in Forbes, the idea that outsourcing is too expensive is a fallacy. In the article, they compare the salaries of full-time CFOs (companies with approximately $10 million in revenue) to the costs of outsourcing. The full-time CFO earned about $200,000 to $250,000 per year as a base, plus bonuses, benefits, taxes, overhead, and long-term incentives (equity), adding up to $300,000-$400,000 per year or more. However, an outsourced CFO for the same size company averaged $7,500 per month, or $90,000 per year (assuming they were retained every month, all year, which is not always the case). The outsourced CFO was about a quarter of the cost of the full-time CFO (at the higher end).
In addition to the cost savings, an outsourced CFO provides access to a financial expert with various experiences, and the flexibility to utilize that expertise only as needed. The relationship can start part-time or be project based and, as the company grows, so can the services and time. But in either case, you can get back to the business of your business.
Barker Associates provides outsourced CFO services to companies of all sizes. We can provide the higher level of financial analysis and strategy your company needs to get to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.