A recent article detailed the four most common things CFO’s address when they start at a new company. While many people believe that every owner and company are different, financial officers state that the needs are generally the same, regardless of size or industry.
To begin, a CFO always examines the financial statements for the business. Carefully studying these reports can help to identify material errors or inconsistencies. It can also show if any useful or needed financial statements are missing. Once the officer has gathered all the useful data, the company hires a third party to perform a trend analysis report. These ratios and statistics can be compared against industry standards as well as the closest competition. This comparison gives the company a solid way to measure its performance.
Second, the CFO will analyze the company’s accounts receivable. Using software, the financial officer can easily group accounts by customer, amount, or due date. The outliers of this data set are the ones that become the business’s top priority. This process can also bring to light problems with the company’s billing or collections departments. Making simple changes to both departments can often result in greatly increased collectability from customers.
Third, the CFO will try to develop a high-quality system of reporting. With the help of the other business executives the finance officer will work to find several “key performance indicators”. Once these have been identified they can be added to a dashboard or control panel. At any time, this panel can provide a real-time snapshot of the company’s financial situation.
Finally, the CFO strives to help the business become better at cash forecasting. For weak cash positions, the company may need to rely on a weekly schedule. If the cash situation improves, the business may adopt a monthly forecasting plan. Financial officers state that only a few weeks are usually required before cash projections become “remarkably accurate”, resulting in more flexibility and confidence for the company.
A CFO’s contribution to your business includes numerous years of experience and expertise. However, many lower level employees are also capable of performing these tasks. If you own a small business, you should still consider how these procedures might benefit your company, even if a CFO is not your budget.