2018-01-10 00:00:00 Firm Management English Learn about the duties of a CFO for small businesses, and how your accounting firm can step in to provide these services to an expanding... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2018/01/15075841/Small-business-owner-talks-with-acting-chief-financial-officer.jpg Acting as the Chief Financial Officer to Small Businesses

Acting as the Chief Financial Officer to Small Businesses

4 min read

There comes a time in the development of many small businesses when their financial needs become more complex than the owners or staff can manage on their own. This is prime time for your accounting firm to step in as a chief financial officer (CFO). While large, national corporations usually have an in-house CFO to guide all financial decision-making, most smaller businesses only require this type of service on a part-time basis. Acting as a client’s CFO means understanding its current financial status and long-term goals, and making decisions about budgeting, growth and change, and investments.

Keeping Track of the Budget

Budgeting for a small business isn’t just about revenue, although there tends to be some correlation between increased revenues and the need for a CFO. It’s important for a business to have someone it can count on for financial analysis once budgeting becomes more complex than simple expenses and sales.

A business that’s making millions of dollars in revenue per year from big-ticket sales on a single type of item still has a relatively simple business model, and might get along just fine without a CFO. On the other hand, a business that’s manufacturing and selling a variety of smaller products and making hundreds of thousands in revenue might need a CFO to analyze market trends, see which items are generating the most profit, and to keep track of the many transactions between a variety of different supply vendors.

Acting as a CFO, your firm’s duties might include analyzing current budget allocations and projecting the budget for future years, taking into account potential business growth. You need to know how much revenue the business is making on a yearly and quarterly basis, and where the majority of that revenue is coming from. You might make decisions to cut off vending avenues that are no longer profitable or to expand ones that are profitable.

You need a solid understanding of not only the financial operations of the business but also of the many Canada Revenue Agency rules and guidelines. Make sure you understand CRA regulations for things like quarterly instalment payments, capital gains and expenses, foreign rental properties, and motor vehicle expense deductions. Work with the business to create a firm budget plan, and make adjustments as necessary to account for any budget deviations.

Helping a Business Grow

A CFO’s job doesn’t just involve crunching numbers. As acting CFO, you also need to be prepared to work closely with owners and proprietors to make profitable decisions for the company on both an immediate and long-term level. For clients, hiring an accountant they’ve already worked with for several years can be an attractive option for a CFO, because they already have a working relationship with you and should have a decent flow of communication.

The role of a CFO includes creating and refining a business strategy based on analyses of performance and budget. You need to make sure your client is keeping you informed, especially if you’re not working in-house every day. Regular meetings with the business proprietors are essential. Ask your client key questions to make sure you’re on the same page from day one with regards to business planning and strategy. Where do the proprietors want the business to be in a year? In five years? What steps are they already taking to achieve those goals? What are the biggest challenges the business faces with regard to profits and expansion?

Your client should be able to provide you with at least a general idea of the answers to these questions. Keep the client’s goals in mind during your analysis of financial records and statements, and devise actionable plans for moving forward on a daily basis and in terms of a bigger picture.

Keeping Investors Informed

Investment funding can add complexity to a business’ financial model, and might be one of the reasons a business needs a CFO. If your accounting firm chooses to take over CFO duties for a business client, you also become the liaison between the business proprietors and their investors.

Your firm needs to communicate directly with investors to keep them informed of any changes to the business’ strategy or finances. Investors are concerned with how these changes could affect the value of their investment, so the CFO needs to be able to make informed hypotheses and projections based on market fluctuations, previous trends, and the business’ unique strategy.

The CFO should also keep the business aware of any questions or concerns the investors may have. Business owners who are juggling complex transactions and budgets need to be able to keep investors happy and well-informed. As the messenger between these groups of people, you also have the opportunity to do a bit of interpretation, and simplify complex financial ideas into concepts that business owners and staff alike can understand and use.

Providing CFO services to a growing business is a great opportunity for that business and your firm. A CFO needs to be an expert in not just bookkeeping or accounting but in the overall field of financial decision-making. You and your accountants should be prepared to analyze risks, prepare budgets, and communicate regularly with your clients, as well as with their vendors and investors.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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