Imagine this scenario – Your start-up has found its feet, gained momentum and is doing a thriving business. But as the business owner, are you still doing most of the running around, filling in for many roles and looking after every aspect of the business? It might work initially, but after a while, you won’t be able to focus on the areas where you are really needed, thereby hurting your business.
This is the time to bring in key people in key positions – who bring in their own specializations, strengths, learnings and allow you the time and energy to concentrate on growth strategies. One of such key people is the person you bring to manage the business’s finances – the Chief Financial Officer or CFO.
He is particularly important as every small action/initiative of the business has financial implications. The decision to bring on a finance chief depends on a lot of factors. Here are a few pointers to help you decide when to hire a CFO for your small business.
Financial Reporting Requirements
You have a third-party accounting firm to look after your taxes and payroll but as your small business grows, that is not enough. Your financial reporting requirements become complicated and you need a dedicated full/part-time person to look after your accounting books, bank accounts, and tax planning. A CFO’s expertise can help you with preparing, analyzing and interpreting financial statements.
Expansion and Diversification
If you are producing/servicing from a single site for a few clients, your financial requirements are easy and simple to handle. But once you decide to expand your business geographically and diversify into multiple product-lines/ service-lines for numerous clients, your operation becomes more complex.
It is in this stage of rapid growth/major expansion, that a CFO can prove to be vital owing to his strategic advice and ability to handle complex financial management.
Business growth entails stronger internal controls and measures to deter fraud, forecasting budgets, pricing jobs, and staffing and handling compliance. A CFO is best suited to put in place teams, systems and controls for these ensure that the business is in good health as it steers towards expansion.
A CFO can make sure that you have a strong financial plan outlined to guarantee additional funding when you need it. So if you are: • applying for a credit at the bank or looking for additional capital from investors or lending institutions or
• planning an Initial Public Offering (IPO), or more complex money-raising tactics a CFO can add value to your small business accounting team. Shouldering Responsibilities Lastly, if you are suffering from insomnia or high stress because:
• you are encountering cash flow problems as you don’t know how much money you need to pay bills or when or
• you need operational metrics to indicate whether you are on track or
• you are having a tough time handling operational and financial issues a CFO can prove to be a priceless asset for both you and your business. Remember, not every small business needs or can afford a CFO.
You may find the need for a CFO when your operation reaches a certain level of complexity like big staff, engagement in mergers and acquisitions, need of a financial audit, etc. You may even think of hiring a Consultant as it can be a cost-effective way to get the specific services you need when you need them.