Title: Does a Small Business Need a CFO?
Description: Knowing when to hire expert help is one of the most difficult challenges that small and medium-sized enterprises (SMEs) face, especially those that are rapidly expanding. We're told as business owners to manage costs and to seek help rather than trying to be experts in everything - two seemingly contradictory pieces of advice!

Strategic financial management is an area of expertise that many SMEs overlook. As a small business grows, its needs tend to outgrow what its accountant or bookkeeper can provide, and its success and future growth are likely to be hampered by a lack of access to the appropriate level of financial advice.

The problem is that the business often does not realize the tipping point has been reached until it is too late. According to this Forbes interview, the tipping point may occur when the information required to support business decision-making is unavailable. However, it is possible that it will be determined by a variety of other factors, such as the size, growth, and complexity of the business.

A CFO is an acronym for Chief Financial Officer. In larger corporations, she will typically sit at the top of the finance and administration hierarchy, reporting directly to the CEO. In many cases, the CFO will take on responsibility for HR and IT, especially if the company is too small to appoint executives in those areas - though this is less common if the company is heavily reliant on its IT systems or its people.

**When should you hire a CFO?**

When a company is experiencing rapid growth, it is usually advised to hire a CFO for the first time. Typically, rapid growth brings with it complexity and risk, and an experienced CFO will ensure that the company successfully navigates its way through rapid growth. However, the problem with this viewpoint is that many SMEs will never experience rapid growth because they are stuck in their way of seeing the world: a specific market they are in, a specific solution or product they are selling, a specific category of client they serve. They may not recognize the lost opportunities associated with maintaining unprofitable customers, processes, or products without the insights of a CFO.

Here's an interesting blog from Janine Popick (CEO of VerticalResponse) that offers some useful insights from an SME owner about what you get from a CFO and how she would have done things differently in hindsight.

Outsourcing

Outsourced <a href="https://www.openstreetmap.org/user/cfoadvisory">CFO</a>
is one solution that many SMEs are turning to. Of course, this trend is not limited to corporate financial management. Some of the more well-known outsourcing sites are guru.com, odesk.com, freelancer.com, fiverr.com, and expert360.com. These are establishing a new lean business model, with business owners realizing the value of trusted, expert help that is easily accessible and reasonably priced - and with no long-term commitment.

While an outsourced CFO will undoubtedly cost more per hour than a typical freelancer, it is critical to view this as an investment in the business rather than a cost. Indeed, some consultants will agree to be paid on a contingency basis, which means that you will only pay them a predetermined percentage of any increase in revenue or profit.

Given the financial outlay, the business owner should give some thought to how to best leverage this resource.

SMEs can gain ongoing access to a CFO's experience and expertise for as little as Rs11,000 per month, or even hire a  <a href="https://www.almondz.com/CFO-advisory.php">CFO consulting company</a> to work on a specific project, such as advising on an investment opportunity or preparing the business for sale when the owners retire.

What exactly does a CFO do?

To begin, it is critical to distinguish between a CFO, an accountant, and a bookkeeper.

A bookkeeper (who, by the way, is the only word in the English language with three consecutive double letters - the fact of the day!) is a traditional 'beancounter' who processes paperwork and general ledger entries using accounting system software. In smaller businesses, they usually report to the owner and prepare information for the outsourced tax accountant to use.

It is not uncommon for a company to hire an accountant as it grows (though this role can be outsourced to a firm). A qualified accountant is one who has passed an accounting qualification and is registered with a body such as CPA or CA in Australia. This is significant because it gives you some assurance that they are properly qualified and professional, as well as bound by a code of ethics - after all, you will be entrusting them with your money. Typically, the accountant will supervise the bookkeeper. They will be in charge of preparing financial reports for both external compliance (statutory reporting) and internal use by the company's management (management information). They may also be involved in taxation.

While the accountant is concerned with ensuring that you comply with accounting standards and tax obligations, the CFO goes a step further. They are frequently crucial in the following areas:

- Developing policies, controls, and systems to manage risk and ensure that the business grows sustainably.

- Thinking more commercially and outside the box than an accountant. For example, they will not only ensure that you pay your taxes on time, but they will also ensure that all options for tax reduction have been explored. Rather than simply ensuring that your accounts receivable are collected on time, they will identify your most and least profitable customers and ensure that your company's resources are focused appropriately.

**- Providing advice on productivity, efficiency, process improvement, and business growth.**

- Preparing a company for sale or investment.

- Providing strategic advice and ensuring that strategy, controls, measurement tools, and management reporting are all in sync.

- Ensure that you are using the most appropriate type of financing for your business (debtor finance, bank debt, operating cash flow, angel investment, VC, etc).

- Assisting decision-making by ensuring the existence of systems that provide key decision-makers (directors) with timely and accurate information, allowing them to make the best business decisions. In SMEs, and it's fair to say in the majority of larger companies I've worked with, the design of what management information is required is frequently driven by existing systems and processes (and thus constrained by what is available), rather than the other way around, as it should be. Systems are typically implemented with a focus on the automation of a specific operational task (issuing a packing slip, tracking inventory, sending out a customer notification, etc.), with little consideration given to the reporting requirements. As a result, system consultants are frequently called in at a later stage to develop data analytics and reporting solutions.