The high price of a cheap bookkeeper: Part 4

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.

Conclusion:

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.
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Categories: Company Perspectives, Finance, Management & Leadership