Running a Business Without a CFO? What You Should Know

Posted by Tyler Walz on Dec 17, 2019 2:00:03 PM
Tyler Walz
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There are many different functions associated with running a business, including marketing, administrative, and overall operations of the company. For many organizations, the finance and accounting function can be an overlooked area of the business as other areas may require more immediate attention. A Chief Financial Officer (CFO) can provide the financial acumen necessary for a company to develop a roadmap for financial growth and address current financial issues within the organization.

What Does A CFO Do For Your Business?

An established CFO fulfills many different functions that can create value for their company. Among these is cash flow management. A CFO can help an organization understand where its cash is coming from, and where cash is being used within the company.

Understanding cash flow activity allows a company to make better decisions about how its resources are utilized, in many cases providing a better return on invested capital in the business.

Another advantage of having a better understanding of your company’s financials is the ability to create realistic budget amounts and accurately track expenses to those budget amounts. This allows a company to identify any areas where they are spending more money than intended and make any needed corrections in their operations.

Additionally, monitoring your costs will also help with managing your margins, a key metric for assessing the performance of many businesses.

Measuring and Managing Business Growth

Running the day-to-day aspects of your business requires a lot of time and energy. But how do you make sure that the return on those efforts is worth all that attention? A CFO can help by developing performance metrics to evaluate the company against it. 

An example could be evaluating how your gross margin is compared to established goals developed by the CFO. These performance metrics can help to identify where your business might be struggling and potential solutions to improve.

Can A Business Succeed Without A CFO?

The short answer is yes. Many successful companies do not have a CFO. But a better question might be: what opportunities are you missing by not having one?

There are also some risks in not having a CFO in your C-Suite. A CFO can bring a level of financial expertise to upper management that is valuable when evaluating margins and analyzing financial data. There may be some issues or areas to grow your business that may be ignored if there isn’t a certain level of financial acumen within your management group.

Further, many external stakeholders, including bankers, suppliers, and investors, will ask financial-based questions of your business. Your company’s response may be important to them if they intend to have a business relationship. A CFO can help navigate these requests and discussions with external stakeholders by presenting a clear financial picture of your business. As an example, this can help when negotiating for bank loans or credit terms with suppliers.

What Happens Without a CFO?

Not having a CFO can also put unnecessary strain on the accounting department. The staff needed to collect and present financial data may be required to perform tasks that are outside of their traditional roles.

An example could be a controller negotiating with external stakeholders or a bookkeeper performing analysis over monthly reporting packages. Asking these professionals to perform duties that may be higher in complexity could lead to an increase in errors, causing financial data to be inaccurate and misrepresent the performance of your business.

Financial Strategies For Business Growth

A CFO is not a mandatory position for a business, in fact, many are successful without the role being filled. However, without a CFO, your company may not grow as fast as you may like. A potential solution to not having a full-time CFO could be outsourcing the service, for example, have a CPA firm act as the CFO for the company.

A CPA firm would be able to provide the financial expertise to the company to help you assess your financials and make recommendations for improvements to help you reach your business goals. MRPR provides CFO Solutions to help uncover opportunities and position your company for growth. Contact us for help.

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Topics: Business Planning & Operations