By Chris Carl
Regional Director at The CFO Centre
A part-time CFO is to an SME what a doctor, a physical trainer, and a world-class coach is to a superstar athlete. The superstar athlete will always be good – but they will only be great if they are healthy (the doctor makes sure of that), they are in great physical shape (the trainer takes care of that) and that they can compete at a world-class level (the world-class coach takes care of that). In a business setting, the CFO Centre refers to these same three levels of conditioning as Business Support (being healthy), Operational Skills (getting in great physical shape), and Strategic Planning (competing at a world class level).
The highly experienced and successful part-time CFOs from the CFO Centre can help make a company flourish in every respect. From increased profitability, to growth through financing or mergers and acquisitions, to increased happiness in the C-suite and all employees, a part-time CFO can literally help perform miracles. But, these results can only be achieved through sound business practices and a great strategic plan. A successful experienced CFO, that costs only a fraction of a full-time CFO, can make all of these happen.
This article (part 3 of 4) discusses how to improve your financial fitness through improving your Operational Skills.
To continue with the analogy of a becoming a world-class athlete, one needs to be healthy to be able to perform, but to operate at a high competitive level you also need to be continually improving your level of top physical fitness.
In business terms, you need to ensure that your business is healthy by making sure critical business tasks are done correctly and not falling through the cracks. You also need to know that your current operations are running smoothly and at peak financial performance. The best news is that this does not require added cost. Instead, and without fail, improving your Operational Skills will always add tremendous value to your profitability.
At the CFO Centre, we reference operating at peak day-to-day financial performance as “Operating Skills.” If the four key Operating Skills are at peak performance, that means your company is operating at peak performance and you are therefore ready to handle any growth, or new projects, that you may desire for your business. These Operating Skills include (click on the links below for more information):
By assuming leadership for the Finance function and by implementing these key Operational Skills, a part-time CFO provides the business owner with TIME to focus on the business and CASH through a focus on operational efficiencies, by providing timely analysis and insights on the business to drive profitability and better cash and working capital management. Having more TIME and CASH, two much needed resources for any SME, eliminates some of the stress of operating your business and allows the business to be physically fit and healthy for the next level of growth.
As any owner or senior executive of a small to medium sized business knows, “cash is king.” That doesn’t mean sitting in the safe counting your money, but rather being constantly aware of your day-to-day cash flow. If something unexpected occurs, or you suddenly have a new opportunity that you must decide on quickly, you must be able to access, and to trust, the cash flow information of your company quickly.
In my experience working with SMEs, with clients or that I have run myself, it is an inability to access internal cost information quickly, and to be able to believe in the information you are getting, that can really slow a CEO down.
As an example, if you are running a business averaging $1 million per month in sales, and you get a call to take on $100,000 per month of new business at a 25% gross margin can your company handle this? Do you have an internal cost reporting system that allows you to accurately determine if this will be profitable for you? At the surface, the answer seems obvious: who wouldn’t want $25,000 more margin each month? But there are many things you need to know before you can say yes, such as:
- How does the new business affect expediting of current sales?
- How many more people do I need to fulfill this business?
- Do I have enough working capital to manage the new receivable?
- How many months of setup is required and at what cost before I start to see incoming cash?
- Could taking on this business reduce the quality of the products or services I am already selling?
- What is the credit risk of this new receivable?
The list of questions you want to be comfortable with is extensive but the point is made: without having Operating Skills that are in top financial fitness, you may spend hours trying to figure all these things out, and even then, you might make the wrong decision. But, the opposite is also true. If you have great Operating Skills and you trust them completely, not to mention having a part-time CFO who is a phone call away to share ideas with, you can make this decision in good conscience and feel great about the decision you just made. Does your finance function have the leadership and skillset to help drive your business forward? See how your finance functions rates (take the F Score).
While this is but one example of thousands to choose from, the point is clear. If your Operating Skills are in great shape, you will be able to make new decisions quickly and accurately. Just as importantly, while you are getting these systems in top shape, your part-time CFO will find areas where cash flow can be improved, and profitability will be be increased. This is just one of the ways that a part-time CFO will pay for themselves, or more likely, generate new profitability and cash flow far in excess of the cost of he or she being there.
Chris Carl has a 30-year career growing manufacturing based companies with novel technologies both as start-ups and within Fortune 500 companies. Having held both CFO and CEO roles, he has raised a combined $500 million in debt, mezzanine and equity financing in private and public companies listed in Canada, the US and Europe.
The CFO Centre provides highly experienced, part-time CFOs to small and mid-market organizations at a fraction of the cost of a full-time CFO. We are committed to helping companies work through complex financial issues, in order to maximize profit and provide senior financial leadership.
Our global team has over 400 CFOs across 13 countries; our services include business and strategic plan development, financial reporting, cash flow management, internal control, risk assessment and mitigation, training and development, and negotiations.
1-800-918-1906 or email: [email protected]ocentre.ca