Posted: April 18, 2011
The high price of a cheap bookkeeper: Part 4
It costs less to take care of thingsMarty Koenig and Susan Commins
Here is what every business owner needs to know when hiring a CFO:
1. Are they just a number cruncher who appears socially awkward, or are they clearly a people person with proven leadership skills and someone that people want to follow?
2. How technical and systems oriented are they? If they don't know what IM is, or aren't comfortable in information technology, find someone else.
3. Are they strategic and visionary? Many CFOs stuck in the number cruncher mentality find it difficult to visualize the big picture, and look strategically at the business. This makes it hard for them to be a trusted advisor to the owner/CEO if they can't see the forest through the trees.
4. Do they have broad industry experience? If they've spend their entire career in a few industries, they can have a myopic view of the world. Find one that's worked in at least half-dozen industries, that way they bring experience that may not have been applied to your industry, giving your company a competitive advantage. (Take a look at a previous cobizmag.com article for more details.)
When you don't have a good bookkeeper and a good CFO, there is an exponential increase in costs. You can see that for a smaller company, it costs less to take care of things. That's because there aren't as many transactions and the complexity is typically less.
As your company grows, it becomes more costly and time-consuming to get the books right. And when you do, your accounting people can provide you with the true story of the business. Then you will look and act like a real business, which makes your company worth more when you go to sell it or leave it to your heirs.
After hiring a competent bookkeeper, we were successful dialing in to near perfection the whole accounting process. As their part-time CFO, I could do my job much better and provide extreme value to them. We were able to help our client POA see and understand the story of the business. The owners didn't have to spend hours and hours a week with their nose in the books, keeping them from spending time growing their business.
Together, Susan and I optimized it all - from forecasting and ongoing cash flow projection and budgeting to managing debt, accounts payable/receivable. Helping POA keep their spending on track with the budget allowed them to hire new people as needed. They didn't have to guess whether they could afford that.
The results of POA finally having a good bookkeeper and CFO speak for themselves:
Compound Annual Growth Rate = 50.5 percent
EBITDA Multiple upon selling POA in Feb. 2011 = 19.1 percent
Return on their investment in great bookkeeping and CFO help = 583 percent
The real world is not the businesses that make headlines like Facebook and Twitter, or the other social web companies that get valued at billions for doing and producing almost nothing. The real businesses of today are made up by you and us - the other 27 million small biz owners.
As business owners, we are the ones that cause 80 percent of net gain in employment. We are the ones that own 99 percent of all businesses in the US. We don't make the headlines. But we want to grow to where a company or investors will someday buy our businesses for a nice amount. Not for billions, but millions would suffice.
That way, we can build our next big thing or spend more time and money with our friends and families. That's our version of success, and it starts with a great CFO and a competent bookkeeper.
Marty Koenig is Founder and CEO of CxO To Go LLC. He loves what he does for a living, because he gets to work with so many great, world-changing people and help them succeed in their business. His team is dedicated to building financial, operational, strategic, technological excellence for small/mid size business owners and entrepreneurs. Marty has over 29 years of diversified experience in private and public companies, from startups and mid-size firms to multinational Fortune 30 companies including AT&T, General Electric, NCR Corporation and StorageTek. Marty performs in roles such as CFO, COO, COO and CIO for his private clients, and he has been nominated for Denver Business Journal 2011 CFO of the Year. Marty is an author, educator, and speaker. See his and his partner's recent books at Buchanan Publishing or visit www.cxotogo.com . Read his professional blog here. His private email is firstname.lastname@example.org.
Susan Commins, owner of All About Accounting LLC, is a recognized QuickBooks expert and a business management consultant that specializes in the financial management of businesses. Susan's business management experience includes 20+ years: first as a law firm administrator in Los Angeles, California, then as the owner of a law firm/business management consulting firm in Los Angeles and Sedona, Arizona, before relocating to Denver in 2005. Susan specializes in improving cash flow, cash management, and profitability for all types of businesses using QuickBooks as the financial management tool. She believes that "Smart Business Management through Smart Accounting" is what makes a business successful and profitable, especially in these difficult economic times. She creates all the reports that make it easy for business owners to make educated financial decisions to enhance profitability. Susan has been using QuickBooks since its genesis as DOS.1.0. Her website is www.AllAboutAccounting.net