A good CFO is a core part of any executive team. The CFO monitors the financial health of the company, prepares public financial disclosures, and guides the company at critical moments. Most small businesses cannot afford an experienced CFO and make do with an incomplete finance team. Fortunately, you can now hire world-class CFO talent on an interim or part-time basis to provide the exact support you are missing. Here are the critical services that an outsourced CFO can provide.
Cash Flow Analysis
Businesses need to maintain enough cash on hand to pay employees and manage routine expenses. CFO’s routinely oversee cash flow analyses to ensure cash flow concerns do not impact business operations. Companies often earn revenue that will be received later. For example, a customer will buy a product or service and agree to pay within a 90-day window. The company has earned revenue, but the cash is not available for immediate use. An interim CFO can conduct cash flow analyses to determine how much cash the company has on hand and how much it can expect to have in the future. That analysis may identify budget shortfalls that can be met with short-term borrowing.
Budgeting
Cash flow analyses are key to developing operating budgets for each part of your business. An outsourced CFO can manage the budget development and review process, which often takes months. That process requires the CFO to consider managers’ assumptions, broader corporate budget goals, and market data. The CFO will then need to hold a review session for key stakeholders to assess the draft budget. Once there is consensus, the CFO will finalize the budget and ensure there are periodic reviews of company performance. That budget will be a key input for many other corporate processes. A comprehensive budget underpins most finance operations including forecasting, reporting, and raising capital.
Short / Long-Term Forecasting
Management teams are charged with finding the most efficient uses for their raised capital. They need to explore a range of strategies and business opportunities to reach that goal. Effectively navigating those options requires forecasting and scenario modeling. An outsourced CFO can build complex forecasting models to help management effectively assess those options. Those forecasting efforts are dynamic, allowing for testing of different inputs (“What if we raise prices?”) to probability analysis (“What is the most likely outcome?”). This iterative process ensures management can make the most informed, thoughtful choices.
Financial Reporting Process and Analysis
Budgets and forecasts are internal documents, but most companies will need to prepare formal financial statements for investors. These documents are critical for planning purposes and raising capital in the future. The preparation and publication of the Income Statement, Balance Sheet, and Cash Flow Statement is one of the most important CFO services. The first step in this process is ensuring the company has the right infrastructure to capture and aggregate this data. That requires a properly staffed Financial Planning & Analysis team, reporting workflows, and accounting software. An experienced CFO will manage the reporting process end-to-end and review the financial statements for errors. This is one of the most important CFO services because reporting errors can erode investors’ confidence in your company.
Raising Capital
Another important CFO service is helping firms raise capital. Both established companies and startups will eventually need to raise capital. Raising the right amount of capital at the right price is incredibly complex. An outsourced CFO will have a strong understanding of current macro-financial conditions. They will be able to determine how much capital the company can realistically raise and the appropriate ratio of debt to equity. Mismanaging this process at best can lead to higher borrowing costs. At worse, your firm may not be able to raise the capital needed to grow your business.
Mergers & Acquisition
Sooner or later your firm will run out of organic growth opportunities. When that happens, you need to consider M&A. You may find an attractive company to acquire or field a takeover offer from a competitor. Those moments require a CFO with a strong understanding of M&A valuation and due diligence. The right CFO will be able to conduct an extensive valuation of acquisition targets and find the right fit for your firm. That CFO will also be able to determine whether a takeover offer is fair and perform due diligence on would-be acquirers. M&A is often a “bet the company” moment for any leadership team. In those moments the right experience is critical.
Why You Should Trust Navitance For Your CFO Services
Navitance understands that not every business has the resources for a full-time CFO. Navitance provides businesses the ability to choose a part-time CFO that matches their specific needs. That hand-picked candidate can provide the full suite of CFO services, guiding your business through periods of growth, transition, or specific financial challenges. Your business gets the benefit of years of large corporation expertise without the traditional cost. Navitance provides first-class CFO services for the moments you need it most.
