Many wonder about the value CFO services bring to the table, in this series of demystifying CFO Services I would like to expand as to what this entails and what value it adds to the organizations. CFO services are generally designed based on the size, complexity of the business, and growth stage of the company. CFO focus areas are Strategic planning, Operating plan & performance management, Profitability improvement, Cash-flow management & forecasting, board reporting, MIS setup and reporting, and fundraising.
From organization design to performance metrics, strategic long-range plans to annual operating, budgetary controls to financial policies, board reporting to monthly dashboards and reviews, CFO services cuts across all functions of the organization and are the fulcrum of the organization’s decision-making process for profitable growth.
Every organization, whether big or small, an early-stage startup or a large corporation is unique and therefore the tailored services provided by a CFO partner can help achieve success and efficiency.
CFO services provide the following value to organizations:
1. Strategic planning
Strategic planning of the company and implementation of long-term and short-term targets in terms of revenue, products, or services. The strategic planning services provided by a CFO can help in making informed investment decisions as well as help in improving your organization’s bottom line. The CFO helps provide the organization with a direction, sets goals, and helps in day-to-day decision-making of the organization.
2. Board and investor management
Board and investor management are very critical for continued support for VC/PE/FO funded companies and CFO ensures that investor expectations are managed in a proper way and ensures the path is laid for a conducive board that continues to support the future growth of the company. CFO also helps the company raise future capital and be a part of the fundraising exercise.
3. Cash Flow Management:
Cash Flow is critical for survival and, estimating future cash flows is the key differentiator between companies that flourish and companies that barely survive. Poor cash flow management can create massive problems in an organization irrespective of the level of profitability. A CFO Partner can help track the expenses and sources of cash and guide in their optimum usage. The CFO can help find the underlying causes of the cash flow problems in the organization and help establish a system for its proper management. This can help prevent the cash flow problems from recurring and identify and address all the threats associated.
4. Profitability Management
Profitability is the key driving point for any organization to survive. It is a tool that helps in the performance management of the organization. Revenue maximization and cost reduction are the mantras CFOs implement across Organizations. This is achieved by using various tools to arrive at the right decisions on customer mix, cost optimization, and cost structuring. This involves restructuring the pricing process and the way costs are being viewed. A CFO Partner can help integrate both the finance department and the sales department of the organization in order to bring about an optimum balance between margins and revenue maximization. They help in laying down pricing strategies depending upon the market and various other factors in order to achieve the balance.
5. Budgeting & Planning
A CFO implements annual operating plans which encompasses the entire organization, reviews the historical data and past performance, segments the business both in terms of revenue and headcount, sets targets and identifies performance measures, implements measurement systems, reviews performance, and helps in reporting. They also assist in the setting up of MIS systems and dashboards. Budgeting is a very important tool for every organization as it helps to track expenditure, plan and control the finances, and helps in cash flow management. A CFO can help play a massive role in the budgeting process of an organization by creating budgets after considering both the internal and external factors which have a bearing on the organization. They can help establish a framework for the day-to-day operations of the organization and help track and achieve the targets and goals with the help of such plans and budgeting.
6. Help you with fundraising
Business plans and pitch decks are two vital and crucial documents for early and growth-stage funding. They help decide the success or failure of the business. A business plan can help evaluate the company or the idea. A CFO partner can work with you on building up a business plan. A pitch deck, on the other hand, is a significant document, especially for early-stage startups and plays a major role during their fundraising process. A CFO Partner will have deep expertise and experience in creating these documents and thereby help your business achieve success. In addition to this, a CFO partner can help you identify potential investors and get the right valuation for your business.
7. Policies & Procedures
A CFO partner can help your business to set up a standard operating procedure. Establishing policies and procedures in the organization will provide direction to the employees and help in making the entire process efficient and effective. In addition to this, it will also help in reducing unwanted expenses and result in optimum utilization of resources.
8. Performance Management
A CFO partner can help your business identify various key performance indicators such as employee performance, attrition rates, retention rates, recruitment costs, training and development expenses, and more, and show how those relate to your company’s performance. They can also help your organization to spot new ways to apply analytics to performance management and next-generation employee engagement efforts.
It is very vital for businesses to partner with someone who has deep industry expertise. They can help you benchmark your operational and financial performance with your peers and help identify the gaps. Once the gaps are identified and communicated, they will also suggest strategies to improve performance.