The role of the CFO

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Companies without a Chief Financial Officer are at a competitive disadvantage. It\'s not unusual for small to mid-sized firms to have sophisticated operations and complex cost and financial challenges like large companies. This often means that the CEO or the owner of the business needs the expertise of a senior financial executive. This presentation outlines the roles of an effective CFO and why business growth increases the need for a financial executive.

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  • I did not cite all bullets. I simply mentioned there are many factors such as those I listed.
  • I mentioned the first couple bullets.
  • I cited the primary bullets but not the added details.
  • I cited the first couple bullets.
  • I cited the first three (3) bullets.
  • I did not cite all these. I emphasized that a seasoned CFO can help the business owner / CEO with all aspects of financial management such as these.
  • I commented that strategic and financial plans are more than just a one year budget. I did mention both aspects of cash management and cited profitability management but not all the factors listed.
  • I simply commented that there are many questions that can be asked to consider whether a company needs a CFO for the first time or to replace an existing CFO.
  • The role of the CFO

    1. 1. THE ROLE OF THE CFO
    2. 2. <ul><li>Financial and goal clarity </li></ul><ul><li>Increased profit and cash </li></ul><ul><li>Trusted, long-term business advisor </li></ul><ul><li>Successful exit strategies </li></ul>THE RIGHT BUSINESS PARTNER THE RIGHT FINANCIAL ADVISOR EVERY COMPANY, REGARDLESS OF ITS SIZE, NEEDS A CHIEF FINANCIAL OFFICER
    3. 3. <ul><li>Long term full time CFO employee </li></ul><ul><li>Interim full time Contract CFO </li></ul><ul><li>Interim part-time Contract CFO with contract staff </li></ul><ul><li>Long term part-time Contract CFO </li></ul><ul><ul><li>National Firm </li></ul></ul><ul><ul><li>Local Firm </li></ul></ul><ul><ul><li>Local Independent </li></ul></ul>Is A Contract CFO - THE RIGHT BUSINESS PARTNER THE RIGHT FINANCIAL ADVISOR EVERY COMPANY, REGARDLESS OF ITS SIZE, NEEDS A CHIEF FINANCIAL OFFICER
    4. 4. <ul><li>Started in 1987 </li></ul><ul><li>National CFO firm: 170+ partners, over 5,100 years experience </li></ul><ul><li>Our Publications </li></ul><ul><ul><li>The Danger Zone, Lost in the Growth Transition </li></ul></ul><ul><ul><li>Avoiding the Danger Zone, Business Illusions </li></ul></ul><ul><ul><li>Finding The Exit™ </li></ul></ul><ul><li>Intranet </li></ul><ul><ul><li>Latest US Master GAAP Guide </li></ul></ul><ul><ul><li>Latest US Master Tax Guide </li></ul></ul><ul><ul><li>ProfitCents industry Database </li></ul></ul><ul><ul><li>CCH Accounting Research Manager ® </li></ul></ul><ul><li>www.b2bcfo.com </li></ul>Qualifications of B2B CFO ®
    5. 5. <ul><li>B2B CFO ® is a nationwide CFO firm </li></ul><ul><li>We serve emerging and mid-market companies </li></ul><ul><li>We help clients increase profitability and cash </li></ul><ul><li>In fact, our slogan is: Cash. We Help You Get It.™ </li></ul><ul><li>All the services are delivered by partners </li></ul><ul><li>Our relationships are on a hand-shake basis </li></ul><ul><li>Each partner is supported by over 5,100 years of combined experience </li></ul><ul><li>Our services are provided on an affordable as-needed basis </li></ul>
    6. 6. “ Unofficial Organization Chart” Finders – future thinkers Minders – historical view Grinders – live for today
    7. 7. “ Finder” <ul><li>Entrepreneurs are Finders </li></ul><ul><ul><li>Live in the future; pull others into the future </li></ul></ul><ul><ul><li>High ethical and moral business core values </li></ul></ul><ul><ul><li>Creative, visionary, innovator, dreamer </li></ul></ul><ul><ul><li>Relationship builder </li></ul></ul>
    8. 8. Cash Management Infrastructure Creation
    9. 9. Factors Creating Infrastructure <ul><ul><li>Employees </li></ul></ul><ul><ul><li>Vendors </li></ul></ul><ul><ul><li>Computer hardware and software </li></ul></ul><ul><ul><li>Outside contractors </li></ul></ul><ul><ul><li>Bankers </li></ul></ul><ul><ul><li>Lenders or leasing companies </li></ul></ul><ul><ul><li>Outside accountants and attorneys </li></ul></ul><ul><ul><li>Operating procedures and processes </li></ul></ul><ul><ul><li>Machinery and equipment </li></ul></ul><ul><ul><li>Office space or buildings </li></ul></ul>
    10. 10. Cash Management Infrastructure Peak
    11. 11. Infrastructure Peak <ul><li>Business Growth drives Infrastructure Peak </li></ul><ul><ul><li>Company runs “lean and mean” </li></ul></ul><ul><ul><li>High level of customer service </li></ul></ul><ul><ul><li>Short cash collection cycles </li></ul></ul><ul><ul><li>Few customer complaints </li></ul></ul><ul><ul><li>Low overhead </li></ul></ul><ul><ul><li>Personal sacrifice by the Finder </li></ul></ul>
    12. 12. CEO / Owner’s Activities Infrastructure Peak <ul><li>Building relationships with customers </li></ul><ul><li>Creating relationships with vendors </li></ul><ul><li>Delegating tasks to employees or associates </li></ul><ul><li>Causing sales and cash to come into the company </li></ul>
    13. 13. Cash Management Out-Growth of Infrastructure
    14. 14. Cash Management Out-Growth of Infrastructure <ul><li>A result of running lean is burn-out of owner and employees </li></ul><ul><li>Attitudes change, owner thinks: </li></ul><ul><ul><li>“ I should have a raise” </li></ul></ul><ul><ul><li>“ We need more people so we can take time off” </li></ul></ul><ul><ul><li>“ We need a better building” </li></ul></ul><ul><ul><li>“ I need a new car/house/vacation……” </li></ul></ul><ul><ul><li>“ We should buy more equipment or inventory” </li></ul></ul><ul><li>A shift in perspective </li></ul><ul><ul><li>Less attention to customer needs </li></ul></ul><ul><ul><li>Less emphasis on running “lean and mean” </li></ul></ul>
    15. 15. Cash Management Out-Growth of Infrastructure <ul><li>Symptoms (Consequences) </li></ul><ul><ul><li>Customers – complaints increase, orders decrease, problems increase </li></ul></ul><ul><ul><li>Productivity – quality decreases, inaccurate information, more meetings, equipment downtime </li></ul></ul><ul><ul><li>Employees – higher turnover, increased theft of time, money and inventory, increased cost of benefits and training </li></ul></ul><ul><ul><li>Cash – receivables increases, cash shortages, increased dead inventory, debt incurred to cover overhead </li></ul></ul><ul><ul><li>Vendors – delay deliveries, relationships decline, time is spent finding new vendors </li></ul></ul>
    16. 16. Cash Management The Danger Zone
    17. 17. Cash Management The Danger Zone <ul><li>The Danger Zone: </li></ul><ul><li>The Danger Zone is created when the cash needs of your company far exceed the cash available to meet those needs </li></ul>
    18. 18. Cash Management The Danger Zone <ul><li>Activities in The Danger Zone </li></ul><ul><ul><li>Analyzing cash flow </li></ul></ul><ul><ul><li>Meeting with bankers and lenders, attorneys and accountants </li></ul></ul><ul><ul><li>Deciding which bills can be paid </li></ul></ul><ul><ul><li>Hiring or firing staff </li></ul></ul><ul><ul><li>Writing checks </li></ul></ul><ul><ul><li>Purchasing computers </li></ul></ul>
    19. 19. Cash Management The Danger Zone What is the CEO / Owner doing?
    20. 20. Cash Management The Danger Zone <ul><li>Risks </li></ul><ul><ul><li>Loss of current and future customers </li></ul></ul><ul><ul><li>Damaged business relationships </li></ul></ul><ul><ul><li>Lost enthusiasm or energy of the Finder </li></ul></ul><ul><ul><li>Damaged relationships with family members </li></ul></ul><ul><ul><li>Death of the dream of the founder </li></ul></ul><ul><ul><li>Death of the company </li></ul></ul>
    21. 21. Cash Management Escaping The Danger Zone <ul><li>CEO / Owner focus - Find sales with good margins </li></ul><ul><li>Leave Minding activities to others – Contract CFO </li></ul><ul><li>Sales or cash? – let Contract CFO find the cash so finders can generate sales </li></ul>
    22. 22. Financial Management The Key to Avoiding the Danger Zone <ul><li>More businesses fail due to cash problems than fail due to business problems </li></ul><ul><li>Sound financial management equals control of the business </li></ul><ul><li>Allows CEO / Owner to be proactive rather than reactive </li></ul><ul><li>Cash management is a process not just an event </li></ul><ul><li>You can’t manage what you don’t measure </li></ul>
    23. 23. <ul><li>Banking & Lending Relationships </li></ul><ul><li>Profit Improvement </li></ul><ul><li>Financial & Strategic Planning </li></ul><ul><li>Cash Flow Projections </li></ul><ul><li>Working Capital Improvement </li></ul>Cash. We Help You Get It.™ <ul><li>Gross Profit Optimization </li></ul><ul><li>Expense Reduction </li></ul><ul><li>Timely & Accurate </li></ul><ul><li>Financial Statements </li></ul><ul><li>Increased Sales </li></ul><ul><li>Exit Strategies </li></ul>
    24. 24. Financial Management <ul><li>Strategic and financial plans </li></ul><ul><ul><li>Annual and longer term benchmark </li></ul></ul><ul><ul><li>Communicate to all key parties </li></ul></ul><ul><ul><li>Tie bonuses to the results </li></ul></ul><ul><li>Cash management </li></ul><ul><ul><li>13-week cash forecast and tracking </li></ul></ul><ul><ul><li>Attain and sustain required capital funds </li></ul></ul><ul><li>Profitability </li></ul><ul><ul><li>Revenue growth </li></ul></ul><ul><ul><li>Profit improvement </li></ul></ul><ul><ul><li>Optimize gross margin </li></ul></ul><ul><ul><li>Cost efficiency and control </li></ul></ul>
    25. 25. <ul><li>Financial and goal clarity </li></ul><ul><li>Increased profit and cash </li></ul><ul><li>Trusted, long-term business advisor </li></ul><ul><li>Successful exit strategies </li></ul>THE RIGHT BUSINESS PARTNER THE RIGHT FINANCIAL ADVISOR EVERY COMPANY, REGARDLESS OF ITS SIZE, NEEDS A CHIEF FINANCIAL OFFICER
    26. 26. <ul><li>Preparing for the exit </li></ul><ul><ul><li>Identify and execute a plan </li></ul></ul><ul><ul><li>Succession planning alternatives </li></ul></ul><ul><ul><li>Forecasting potential results with credibility </li></ul></ul><ul><ul><li>Identifying risks and opportunities to achieve forecast results </li></ul></ul><ul><li>Executing the exit </li></ul><ul><ul><li>Business valuation </li></ul></ul><ul><ul><li>Identify potential buyers </li></ul></ul><ul><ul><li>Presentations to buyers </li></ul></ul><ul><ul><li>Negotiations </li></ul></ul><ul><ul><li>Transition / integration to buyer </li></ul></ul>SUCCESSFUL EXIT STRATEGIES CFO Role CFO plus M&A Advisor Role
    27. 27. <ul><li>Do the bankers and lenders trust company internal financial statements and the individual directly responsible for prudent financial management? </li></ul><ul><li>Are company internal financial statements accurate, and meaningful for effective business decisions and strategic planning? </li></ul><ul><li>Do company internal accounting staff understand the financial statements from an accounting, income tax, business, and industry perspective? </li></ul><ul><li>Do the company monitor monthly the amount that will be owed the IRS on April 15, and other quarterly or annual payment obligations? </li></ul><ul><li>Does the CEO / Owner receive accurate internal cash flow projections? </li></ul><ul><li>Is the CEO / Owner focused on “finding” customers and revenue? </li></ul>BUSINESS CHECK-UP Does the Company Need a CFO?
    28. 28. <ul><li>Long term full time CFO employee </li></ul><ul><li>Interim full time Contract CFO </li></ul><ul><li>Interim part-time Contract CFO with contract staff </li></ul><ul><li>Long term part-time Contract CFO </li></ul><ul><ul><li>National Firm </li></ul></ul><ul><ul><li>Local Firm </li></ul></ul><ul><ul><li>Local Independent </li></ul></ul>Is A Contract CFO - THE RIGHT BUSINESS PARTNER THE RIGHT FINANCIAL ADVISOR EVERY COMPANY, REGARDLESS OF ITS SIZE, NEEDS A CHIEF FINANCIAL OFFICER
    29. 29. <ul><li>Why not a long term full time CFO employee? </li></ul><ul><ul><li>Challenges attracting a desirable candidate </li></ul></ul><ul><ul><li>Severance obligation may not be prudent </li></ul></ul><ul><ul><li>Short term needs vary significantly from long term needs </li></ul></ul><ul><ul><li>Needs do not merit the time and cost of “full time” </li></ul></ul><ul><ul><ul><li>Overpay a CFO who also performs Controller role </li></ul></ul></ul><ul><ul><ul><li>Rely on a Controller not qualified to perform a CFO role </li></ul></ul></ul>Is a Long Term Full Time CFO - THE RIGHT BUSINESS PARTNER THE RIGHT FINANCIAL ADVISOR EVERY COMPANY, REGARDLESS OF ITS SIZE, NEEDS A CHIEF FINANCIAL OFFICER
    30. 30. Cost - Alternative Scenarios 25% 10% Strong CFO B2B CFO® Moderate CFO B2B CFO® Traditional + Controller Traditional + Controller Total Cost $360,000 $268,000 $240,000 $208,000 Strong CFO FTE 1.00 0.25 - 0.10 Moderate CFO FTE - - 1.00 - Strong CAO/Controller FTE - 1.00 - 1.00 Total Financial Leadership FTE 1.00 1.25 1.00 1.10
    31. 31. <ul><li>PHASE 1 – Steps we take to determine the company’s needs </li></ul><ul><ul><li>Ask about concerns </li></ul></ul><ul><ul><li>Interview the appropriate individuals </li></ul></ul><ul><ul><li>Review the company’s accounting and/or computer systems </li></ul></ul><ul><ul><li>Review appropriate documentation </li></ul></ul><ul><ul><li>Review most recent internal and external financial statements </li></ul></ul><ul><ul><li>Review key management reports </li></ul></ul><ul><ul><li>The CEO / Owner will receive a confidential written report. This valuable PHASE 1 diagnostic report is free. We engage our clients with a handshake </li></ul></ul><ul><li>PHASE 2 – Solve the immediate concerns </li></ul><ul><li>PHASE 3 – Ongoing relationship with the company </li></ul>WHAT’S THE NEXT STEP?
    32. 32. Escape The Danger Zone <ul><li>Someone is spending time with the current and future customers. If not the CEO / Owner, it will be the competition. </li></ul><ul><li>Engage the Contract CFO for “Minding” Cash Management, Profit Improvement, and preparing for the Exit Strategy for the cost and time only as needed </li></ul><ul><li>Enable the CEO / Owner to focus on “Finding” new customers, open new markets, dream, and have some fun! </li></ul>

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