Hire a CFO Call us 1300 447 740
Hire a CFO Call us 1300 447 740

Tag: fractional cfo

The Role of a Fractional CFO in Navigating Economic Uncertainty for SMEs

Published: by lauramills
The Role of a Fractional CFO in Navigating Economic Uncertainty for SMEs

In times of rising costs, uncertain market conditions, and labour constraints, the role of a Fractional CFO (Chief Financial Officer) in SMEs has never been more critical. CFOs are instrumental in guiding businesses.  They work alongside the internal finance teams and external accountants to shield risks, while identifying growth opportunities. Here’s how a CFO’s expertise can be a game-changer for your business.

  1. Strategic Planning

Strategic planning provides clarity and confidence in navigating economic volatility. CFOs, with their in-depth understanding of the financial landscape, steer this process, aligning financial goals with broader business strategies. This involves:

  • Scenario Planning: The challenges presented by the COVID pandemic is a great example of the need for effective planning. At The CFO Centre our fractional CFOs successfully prepared best and worst-case scenarios which helped our clients navigate the uncertainty created around customers, supply chain, labour, and cashflow issues. Economic uncertainty continues, as does the need for scenario planning.
  • Cash Flow Management: CFOs ensure that businesses maintain adequate liquidity, implementing strategies like optimising working capital and exploring flexible financing options. Refer to our blog “Successful Cash Flow Management: A Comprehensive Guide”
  • Cost Management: Fresh eyes combined with year of experience, allows CFOs to identify areas where efficiencies can be improved, ensuring resources are allocated to high-return initiatives. Quite often it is the sum of small improvements that add up to make a material impact on the business’ bottom line.

  1. Financial Oversight & Risk Management

The CFO’s role is vital in ensuring that the business’s financials are continuously monitored and managed. This encompasses:

  • Budgeting and Forecasting: Regularly updated and accurate budgets and forecasts provide a roadmap for financial decision-making. Refer to our blog “The Power of Budgeting”
  • Reporting and Performance Analysis: CFOs have the expertise to analyse financial data to uncover insights into the company’s performance, identifying trends that may impact future growth or stability. At The CFO Centre we have unlocked the power of financial analysis for countless clients, including the insights that come from gross margin analysis by product / service stream.
  • Risk Management and Compliance: CFOs oversee compliance, mitigating financial and reputational risks.  This often involves working alongside other professionals such as tax accountants, lawyers, insurance brokers, and financiers to ensure a co-ordinated and comprehensive approach for the client.

  1. Opportunity Identification

Economic and/or market uncertainty often brings not just challenges but opportunities. A strategic CFO can guide SMEs to:

  • Invest in Growth Areas: By identifying emerging trends, backed by data.
  • Innovate and Diversify: Encouraging innovation and exploring new markets or products, backed by market research.
  • Strategic Acquisitions: CFOs play a key role in identifying and evaluating strategic acquisition opportunities, including financial due diligence.

Conclusion

The role of a fractional CFO in navigating economic uncertainty is multifaceted, combining strategic foresight with practical, hands-on financial management. CFOs can guide SMEs through the differing stages of their journey, ensuring not just survival but a thriving business.

 

At The CFO Centre, we provide highly experienced, commercial CFOs on a part-time or “fractional” basis for SMEs looking for expert guidance with respect to strategic financial management. If you’re seeking help to steer your business, whether that be to improve its financial performance, to grow, or to ready itself for investment or an exit , then reach out to us – 1300 447 740 or [email protected]

Why Every Business Benefits From a Fractional CFO

Published: by lauramills
Why Every Business Benefits From a Fractional CFO

A typical company finance function can be divided up into 3 areas. However, many businesses believe the finance role is principally to produce accurate accounts.

Ask any bank manager and they will tell you that the bank’s most problematic customers are those who don’t truly understand what is going on in their business. Some customers ask for finance or expect to maintain an overdraft, yet cannot even produce up to date accounts.

Most SME business owners want to focus on the business and not the numbers. The business is their baby and they want it to be their sole focus – not the financials!

The areas which the business owner will seek help in first will be determined by the focus and needs of the business whether in sales, operations, admin or finance. If we look at the finance function, it is traditional to break it down into 3 roles:

3 roles of the finance function

1. Financial direction – the CFO

2. Financial control – the Accountant

3. Book-keeping/basic accounting/ AP & AR – the Finance Department Staff

Many business owners think the finance role is transactional in nature, and so concentrate just on producing accurate accounting records. This is essential in itself, but not enough to manage and develop a growing business. When focusing on the CFO role specifically then, what are the key tasks of this role and what does the fractional CFO bring that the other finance roles do not?  Why would you need a part-time or fractional CFO?

I suggest the following four main areas of expertise and input:

1.Strategic

  • Co-ordinating and developing long term business plans
  • Defining the implementation timetables
  • Assessing the risks involved
  • Seeking the funding required to deliver the proposed plans.

2.Operational

Developing internal controls; managing and developing the reports needed to run the business; improving profit levels; managing cash flows. Does the business owner fully understand the profitability of each product / service they offer? Often the answer is no.

3.Leadership

Instilling a financial approach and mind-set throughout the organisation to help other ​parts of the business perform better ​

4.Support

Tax planning and legal issues; compliance issues; managing external relationships; outsourcing relationships.

The modern CFO needs to be able to develop all this and more. There are many other considerations that go beyond the pure “job description” above.

What’s the difference between an accountant and a CFO?

A CFO looks forward and financial accounting looks backwards. Your accountant plays a vital part in tax, compliance and other essential tasks such as auditing. A fractional CFO will essentially oversee your overall finance function; providing high-level strategic advice and planning, preparing the business for growth or sale, sourcing funding, managing banking relationships and improving the business’ cash flow and profit.

Experience: it is important that a CFO has a wide range of commercial experience, not just financial. Good CFOs do not learn their skills from textbooks alone, in fact they learn very little from textbooks – they learn by doing. Commercial experience means leaving their offices and talking to customers and engaging with the production and operations teams.

Personality: a CFO must be able to communicate at all levels be it the production teams, sales teams, marketing teams to board level. The CFO must be able to relate to people on all levels of a business. We always strive to match the best CFO not just commercially, but culturally for your organisation.

The CFO Centre provides high calibre fractional CFOs to SME businesses who don’t need, don’t want or can’t afford a full time CFO. This allows organisations to benefit from the expertise of a highly experienced Chief Financial Officer without incurring the expense of hiring someone full-time. There’s no recruitment fees and no tie-in contracts.

Whether the business is in fast growth mode and needs more control, or has hit a brick wall and needs survival solutions to get through a tough patch, our CFOs can navigate both ends of the spectrum.

For more information about The CFO Centre’s fractional CFO services see How it Works  or call us on 1300 447 740

 

Article written by Peter O’Sullivan – Regional Director – CFO Centre, Victoria