What is CFO Service And How To Know If You Need One?

Financial management is a crucial factor for small businesses with a growth mindset. It helps understand the numbers your business is crunching such as revenue, cost, and the numbers associated with growth and investment opportunities.

For small businesses, these factors play a massive role in the company’s future goals and their ability to realize them.

What Are CFO Services?

A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company. A CFO is responsible for a variety of tasks, some of which are listed below:

•             Cash flow management

•             Assess a company’s current financial situation

•             Financial Forecasting and Planning

•             Risk assessment for investments

•             Taxation and compliance

•             Creating a roadmap for financial growth

So what are CFO services? In short, they are like rent-a-car but for businesses to rent CFOs. CFO services include all the services that a CFO would perform for a business. So what is the difference between hiring a CFO and investing in virtual CFO services for small businesses?

CFO services are different from hiring a full-time CFO in two key aspects.

First, CFO services only cost a fraction of what it would cost a business to hire an in-house CFO. Second, CFOs are a single-person unit, whereas CFO services come with a team of financial experts with vast experience in your industry. At a fraction of the cost, you get all the services listed above.

Moreover, Virtual CFOs don’t have geographical limitations, which means you can hire the best team across the globe that best fits your industry and business rather than just focus on the resources available locally.

Hiring a full-time CFO is a substantial financial investment for a small company and committing that many resources at an early stage are risky. Furthermore, if you’re looking to hire a full-time CFO then who is responsible for the risk-assessment on that investment or creating an ROI report?

Not having these resources is one reason why small businesses should look towards virtual CFO services in their early days.

How To Know If Your Business Needs CFO Services?

There are a number of things that could be happening on the financial end of things that could be an indicator that you need CFO services.

If you’re having problems with record management or bookkeeping, that’s not what CFO services are meant for, so that one thing that isn’t a signal that you need online CFO services.

So what are they? Let’s take a look.

Making Sense of Numbers and Reporting

Financial reporting plays a crucial role in helping small businesses scale rapidly and increase their revenue in a short span of time.

But reporting is more than just about looking at the cost and revenue and calculating profits. It’s about analyzing the trends behind those numbers to understand the overall performance of a business.

It also entails future predictions based on several factors such as demand, season, rising costs and so on. Growth projections are incredibly tricky and not something a bookkeeper can manage.

If your business is unable to make sense of why your numbers are rising or dropping and what is causing this constant flux, then that’s a sign that you need CFO consultancy or services for your business.

Lack Of Risk Assessment

Small businesses need to be growth-oriented, which involves constant innovation and trial and error. Business owners have to try new things to salvage a Unique Selling Point or improve their service through technological investments.

When discussing a new idea, you have to see how much of the conversation is based around numbers. Most likely, there will be no concrete numbers to back-up a new idea. The decision to implement it or to not implement it would most likely be subjective and observation-based.

If that is the case for any small business, then they need CFO services for risk assessment and ROI reporting on possible investments. These reports and assessments become the basis of your investment decisions to ensure that your business does not suffer a substantial loss from which either recovery is impossible or it significantly affects your businesses’ ability to grow rapidly.

Cash flow Management Problems

A lack of Cash Flow is one of the biggest killers of the 82% of SMEs that fail. Late invoice settlements, overhead cost, and cost of daily operations if mismanaged, can result in devastating effects on a business.

For businesses, it is vital to stay on top of their cash flow management to ensure that you don’t run out of operational cash.

As a small business, if you’re constantly having cash flow problems, then your business needs immediate CFO services to ensure stabilization. CFOs are responsible for optimizing expenditure and implement cost-cutting to ensure that the company does not fall below a particular revenue figure, depending on the size of the business.

Problems With Capital Structure

For businesses, having a reliable capital structure is crucial. Most small businesses do not understand the nuances behind the combination of debt and equity that a company uses to finance its growth.

If you’re feeling a bit lost here, then that’s one sign that your business can perform a lot better by Outsourced CFO Services.

Debt is obtained in the form of loans or bond issues, while Equity comes in the shape of common or preferred stock. Managing the Capital Structure requires years of experience and industry insights to curate a combination that will work for your business.

A strong Capital Structure improves your business’ day-to-day operations, assets management and long-term growth strategy. The lack of this can often result in companies either stagnating or suffering heavy losses, accumulating debt that is bound to take your business down.

If this is something that you as a business owner, don’t have a solid grasp on or extensive experience with capital structure, then it is best to acquire CFO services to ensure your business’ long-term success.

Do You See Similar Signs in Your Business?

If any of these signs are present in your business, then consider leveraging online CFO services to improve your business’ financial standing, to make better financial decisions based on analytics and reports, and for better and more accurate growth projections.

Our CFO services for businesses have helped business owners grow and scale quickly, thanks to our financial experts with years of experience working with startups and small businesses.

Think your business has the potential to make it big? Reach out to us at Compt and see how we help your clients create a stable business model and financial systems that are aligned with their long-term business goals.