Posted 07.21.2010

Battle of the financial guys

CFO vs. Controller/Accountant/Bookkeeper

By Keith McAslan

Many business owners do not understand the differences between the roles and the value a CFO can bring to the business. Additionally, many business owners do not feel they can afford a CFO, however that is where a part time CFO who participates with the business owner and management is critical. A part-time CFO can spend as little as a day or two month with the business and add value to the bottom line.

CFO Responsibilities:

1. Cash Management
Cash management includes understanding your business’s “operating cycle” (i.e. cash-to-cash cycle). To improve your “operating cycle” it is imperative you understand what it means, how to calculate it, and what influences it before you can improve it. Cash expectations your cash balance to be in 6 months?” Most of the time companies are fighting cash flow problems today and cannot think about the future past this week. Forecasting and managing cash flow provide a real sense of control over the business. Implement a Cashboard-Dashboard http://www.cxotogo.com/blog/Dashboard-Cashboard.html, 13-week cash flow forecast and review cash flow reports at least monthly. The key for any business is to focus on cash, not just EBITDA and Net Income, as Cash is King!

2. General Financial Sophistication
• A sounding board for the owner in making key decisions, as the Trusted Advisor
• Fewer cash flow surprises using a Cashboard-Dashboard and 13 week cash flow forecast
• Better trained accounting staff
• Better documentation and controls
• Fewer surprises relating to tax payments and effective communication with the CPA for taxes
• Alternative, recommendations and solutions to company problems

3. Budgeting
The ongoing process of developing, implementing and reviewing the budget and its associated variances to actual results. The CFO helps correlate the operations and financial results of the business so the management team understands the financial impact of the decisions they make.

4. Compliance
The ongoing process of keeping in compliance with bank, investor covenants, tax versus management reporting working papers, insurance, corporate minutes.

5. Financial Oversight and Management
Analyze and review monthly P&L’s and Balance Sheet and Cash Flows with the board and management team. Look at the story behind the numbers, not just the numbers. Drive toward data-driven decision making.

Monitor key business metrics using a dashboard, which gives you the vital statistics in the areas, needed to monitor working capital. For instance, each month a report is produced showing information such as aged receivables, receivable days, inventory levels by category, inventory turnover, and days in payables. These statistics should be looked at and compared month by month to determine if the problem is getting better or worse. Trending and associated analysis and decision making is a key CFO function. Action should be taken immediately when the numbers show a trend that will be bad for the company.

Oversee the activities, work and quality of the Controller/Accountant/Bookkeeper. Working capital and treasury management. Overseeing CPA relationship, business lawyer relationship.
Working capital planning and forecasting. A simple Cashboard-Dashboard report will focus management in the right areas, and help to move the business into stronger cash performance.
Review financial reports before sending to investors or any other external party.

6. Key Ratios
Track and analyze key financial ratios against industry standard benchmarks. Put plans in place to exceed certain industry ratios, or make decisions to not meet certain ones, to meet others, and to exceed others.

7. Profitability
Gross margin analysis by product line, products or customer is critical for small businesses. Migrate towards having the internal systems provide information to manage gross margins for product lines and products.

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Last updated on Jul 19, 2010 at 05:55 PM

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