Everyone is striving to become an entrepreneur to enjoy the essence of running a business. It might sound exciting, but managing a business is more challenging than one can imagine. From looking after business operations to overseeing finances, everything demands time and much effort. Therefore, you need to hunt for experts – a human resource (HR) manager to look after the daily operations of the business and a chief finance officer (CFO) to administer finances.
It does not matter if you have a small company or a well-established one; the need for CFO is consistent. After all, without efficient management of funds, businesses can’t grow and prosper. A CFO holds an in-depth understanding of business models and banking norms to keep up with financial challenges.
Likewise, these experts have the knack of dealing with the board of directors and working with auditors to track financial performance. These experts are nothing less than an asset for companies, assisting them in growing and succeeding.
Here are seven reasons to understand why a CFO is essential for your business:
1. Ensures Timely Financial Reporting
Can you assess how your company is performing? It is essential to have a financial reporting system that gives you a clear picture of how your company is doing. Similarly, this information is crucial to make appropriate business decisions. Honestly, after looking at your expenses and dropping profits, you will think of implementing cost-cutting methods.
These experts are responsible for preparing source documents and financial statements. They will also arrange monthly, quarterly, and annual reports to the management. However, if your budget is not giving a green signal for hiring a CFO, then you can learn how to become a cfo to make your business succeed. After all, learning never stops, and in today’s world, getting a degree has become accessible than ever.
2. Safeguards Company’s Assets
When we talk about finance, it covers many aspects, and only a CFO knows how to tackle different things together. Hence, they take the responsibility of safeguarding the company’s assets, preventing frauds, and misstatements. They keep track of accounts receivable to ensure customers are paying on time, setting aside all cashflow problems.
Sometimes, companies encounter inventory theft or damage, a CFO deploys people for regular inventory checks, knocking off any inventory losses. You would be surprised to know that people can play with international accounting standards. At times, companies involve themselves in shady practices by misstating the value of assets. A CFO eliminates such practices by ensuring compliance with the law while maintaining the brand’s integrity.
3. Builds Credibility with Shareholders
Every owner wants to learn about his/her business practices, especially when there are multiple shareholders. A CFO prepares annual reports and projects financial statements to give an accurate and fair view of the company to the shareholders. They include every little detail in the company’s financials, for example, information about a new plant, short-term financing, future policies, and profitability ratio.
If a company is having losses and going into debt, they prepare strategies and suggest measures to combat those problems. At times, businesses make the mistake of excessive financing, which lands them under hefty interest payments. In such difficult times, only a CFO knows how to display the brighter side of the company to encourage investments by highlighting the dividend payouts.
4. Knows How to Leverage Technology
With the emergence of technology, handling finances has become uncomplicated. A CFO can help you leverage technology to automate routine accounting tasks. You will come across various tools for handling invoices, managing bill payments, recording transactions, and a CFO will assist you with it. Likewise, the overgrowing popularity of cloud-based technologies can also do wonders for your business.
It reduces the time spent on authorizing transactions by providing you 24/7 accessibility to data. Thus, employees no longer have to dig into paperwork to find particular data because everything would be just a click away. Besides, if you are pursuing a master’s degree to qualify as a CFO, make every possible effort to get the hold of fintech. In the coming years, it would be the next big thing.
5. Develops Policies
Unlike marketing practices where you have the autonomy to pick strategies, the finance department works on available reporting systems, rules, and policies. In case of non-compliance, you have to splurge money on massive penalties, while answering questions regarding your company’s credibility. Honestly, a CFO will knock off all these concerns since these experts are familiar with all accounting standards and government regulations. Additionally, they make sure all the details regarding taxes, interests, insurance, and business licenses are up to date. At the same time, they also develop in-house corporate policies to bolster the functioning of operations in the business. Alongside lightening the burden from your shoulders, you no longer have to worry about policies and regulations.
6. Analyzes Business Performance
A CFO’s job doesn’t end after creating financial statements because analyzing them is equally critical. They interpret all the financial information and put the actual image of the business in front of you. It explains all the financial metrics while comparing the results with your competitors in the industry. You get to identify your weak points and areas which need further improvement.
You can also ask the CFO to prepare monthly budgets so that you can compare your actual expenditure with the projected one. It helps in understanding the reasons why you went against your planned financial goals and how to avoid this happening in the future. Have you heard of KPIs? These are key performance indicators (KPIs) that give you an insight into how effectively you are pursuing your goals. Hence, don’t mind using these to evaluate your parameter of success.
7. Proficient Future Planning
When opening up a business, you are running on an accounting principle of ‘going concern’ which states you have to ensure the survival of your business. A promising future is not possible if you don’t plan for it. Fortunately, a CFO uses strategic planning by collecting available data to project your future performance. For instance, they will help you understand how financing today would have an impact on the profitability of business next year.
Similarly, it prepares financial forecasts by analyzing economic conditions and develops capital structures that cater to future trends. In short, the strategic plan works like a road map, ensuring everyone in the organization is on the same page. In the case of liquidation, they have a proper strategy. Making sure you exit the market with a comprehensive plan.
Believe it or not, but handling finances is not everyone’s cup of tea, you have to hire an expert to ensure smooth flow of operations. If you think your business can’t afford to have a CFO, take the step forward and get the required expertise yourself. Becoming a CFO or outsourcing one is in your hands, but having one for your business is what matters.