When should your SME engage CFO Advisory services?
There comes a time when SME Owners realize they have out-grown DIY accounting & finance or that their Bookkeeper/Controller does not have the strategic depth to take their organizations to the next level. It is likely that the hiring of a full time CFO is not an option at this time, as the budget is just not there for this. An effective solution at this stage of the SME’s life cycle is to engage CFO Advisory Services.
A CFO Advisor is a highly experienced accounting & finance executive with solid business acumen, usually across multiple industries. This individual provides high-level strategic financial guidance to organizations on a part time or project basis. Typically addressing areas such as cash flow & treasury management, profitability analysis, KPIs tracking & reporting, strategic financial planning, forecasting, risk management, capital & funding and operational improvement.
Below are some tell-tale signs your organization should consider engaging CFO Advisory services to optimize financial health, build competitive advantage and financial resilience:
High growth & increasing complexity: The business is growing rapidly. Outgrowing existing financial systems (including staffing & internal controls). Increasing complexity arising from a multi- revenue streams and multi-entity structure.
Financial instability: Revenues are increasing, yet there are cash flow shortages. Mismanaged funds. Slipping profit margins.
Very little or no financial oversight: Late and/or inaccurate financial reporting exposing weaknesses in technical competency and operating efficiencies in the financial function.
Preparing for major events: Including mergers & acquisitions, funding rounds, external financial audit.
Lack of Strategic Direction: Making critical strategic decisions based on gut-feeling/intuition instead of data-driven insights (“flying blind”). No financial road maps to guide proactive decision making due to inability to generate accurate forecasts.
Business Owners losing focus on growth & vision: Business owners are more focused on finance-related matters than growing the business or executing its vision. (“Stretched & wearing thin”).
Preparing your SME for CFO Advisory Services
To ensure that your SME derives the maximum benefits from engaging CFO Advisory Services, there are certain critical things organization leadership should do prior to onboarding your CFO Advisor:
Perform honest assessment of existing finance function: The CFO Advisor is not a bookkeeper who will be brought in to perform number-crunching tasks. This individual will be brought in to provide strategic financial guidance for the organization. This can only be done effectively, if there are accurate, organized GAAP-based financial records and statements. For eg. the CFO Advisor relies on accurate historical numbers to create accurate forecasts. If there is no one currently inhouse to generate these, the CFO Advisor should be able to assist you with sourcing technically competent staff and provide financial oversight of the staff.
Set specific, measurable and realistic objectives for your CFO Advisor:. It’s a great idea to set measurable goals for your CFO Advisor. This ensures that both the company and Advisor are on the same page at the outset. No misunderstanding. Predetermined objectives also provide a means for the company to measure the decision to hire a CFO Advisor was beneficial to the company. Organization Leadership should ensure that the Advisor prioritize those areas requiring the most critical attention and will yield the greatest value to the organization.
Essential Qualifications for the provider of CFO Advisory Services
When evaluating a provider for CFO Advisory Services, the SME Owner should be looking for a blend of high-level technical credentials and deep operational expertise . Because advisory services are strategic in nature, the qualifications should prove they can handle complex, high-stakes financial engineering. These qualifications include:
Educational Foundation & Certifications: While experience is king, the following credentials serve as the baseline “license to practice” at an executive level: Bachelor’s Degree in accounting, finance or economics, at a minimum, Certified Public Accountant (CPA), MBA or Master’s in Finance, CMA or FPAC.
Deep “In-the-Seat” Experience: Typically 10-15 years in senior finance roles such as CFO, VP of Finance, Controller or Director of Accounting).
Technical Mastery in Strategic Modeling : Including developing (a) Scenario Planning Modeling - the ability to create “what-if” models to effectively navigate economic volatility & build financial resilience (b) Three-Statement Modeling - proficiency in building integrated income statement, balance sheet and cash flow models to allow for sensitivity analyses to be performed. (c) Unit Economics Expertise - for eg. a deep understanding of Customer Acquisition Cost(CAC), Lifetime Value (LTV) and Burn Rate if they are advising subscription-based businesses.
Technology Stack Fluency: As an architect of finance automation, they should be prepared to optimize or implement ERP systems, FP&A Tools and KPI Dashboards.
Specialized Industry Knowledge : Ideally, the Advisor should have a background in your specific industry. For eg. for the SAAS or Tech industry, understanding revenue recognition (ASC 606) and recurring revenue recognition metrics. For the Nonprofit industry, understanding restricted and unrestricted revenue recognition and ASU 2016-14 and other key nonprofit metrics.
If you are a SME Owner or Leader and can identify with one or more of the tell-tale signs identified above, schedule a discovery call today. WA Anderson CPA has the expertise to assist SMEs in the following industries:
Service-based (including professionals & skilled trades)
Home healthcare
Restaurant
Consumer Packaged Goods
Manufacturing
Nonprofit