Strengthening Your Business' Competitive Edge with CFO Advisory Services

Strengthening Your Business' Competitive Edge with CFO Advisory Services For better or for worse, developing sustainable financial practices will be an essential part of running any type of business. If your business is unable to successfully manage your financial situation, it will not matter how good your business’ ideas may be or even how hard you are willing to work.

Because developing good financial practices is so important, many businesses consider their CFO to be one of their most valuable team members. CFOs are general in charge of making important financial decisions, even when these decisions may be difficult for the head of the company to hear.

If your business is relatively new or is somewhat small (less than 30 employees), you may not yet be ready to hire a CFO that exclusively works for your company. But instead of taking on all of the CFO duties as the owner of the business, it may be in your best interest to outsource these responsibilities to someone with a bit more financial experience.

The availability of ​CFO advisory services​ has been expanding in the United States, and elsewhere around the business world. The digital era has made using a virtual CFO more accessible; essential processes can be conducted much more efficiently than they were in years past.

In this article, we will discuss some of the many ways that fractional CFO services can help strengthen your business’ competitive edge. By taking the time to do your research and find a service or firm that meet your needs, you can immediately add measurable value to your business.

1. Advanced Cash Flow Analysis Naturally, as a business owner, you are looking for ways to maximize the amount of money coming into your business while minimizing the amount of money that you need to spend. But while this principle may be somewhat intuitive, knowing how to get there will be much more difficult.

The best outsourced CFO services will be able to clearly identify which cash flows are worth pursuing and which ones are worth avoiding. CFOs traditionally operate using an objective, opportunity cost framework. This will help prevent your business from assuming any new projects that are not financially feasible.

2. Accurate Financial Reporting

While you may also want to hire an outsourced accountant or finance expert, your CFO can also help you develop accurate financial reporting practices. Having an accurate and honest balance sheet and income statement will make it much easier for your business to make the right decisions. Additionally, accurate financial reporting will be essential for interactions with prospective investors, clients, and—in some cases—federal auditors.

3. Long-Term Strategic Planning Most financial decisions are made within a short-term frame, but it will also be very important to find a CFO who is able to look ahead to the future. With a long-term strategic planner, you will be able to account for variables such as depreciation, brand value, and various externalities that are often overlooked. Looking ahead towards the future may fundamentally change the decisions that your business makes in the status quo.

4. Short-Term Budget Analysis Budgeting will inevitably be a crucial component of any sustained enterprise. Though you may be able to generate a rough budget on your own, an experienced CFO can help you fine tune the budget and ​increase profit margins​. With the right CFO, you will be able to take a close look at your expenses and determine which are necessary. Just as importantly, you will also be able to recognize which expenses can be reduced, modified, or eliminated entirely.

5. Accelerated Decision Making Process One of the most common misconceptions about outsourced CFO services is that your business will not be able to make decisions quite as efficiently. On the contrary, many CFO services will actually have the infrastructure (software, standardized practices, knowledge, etc.) needed to make decisions ​even more​ quickly than you would be able to accurately do on your own. By having someone who can determine whether a given decision will have a positive impact, your business can operate more effectively and consistently improve your bottom line.

6. Loan Negotiations Even if your enterprise has a considerable amount of working capital, it is likely that you will need a loan at ​some ​point throughout the course of business. Without ever assuming at least some debt, your business will be missing out on various profit opportunities over time.

In order for a loan to be a “good idea”, the return on your investment will need to exceed the interest rate you paid for the capital. As a result, some loans will be justifiable while others should probably be avoided. A good CFO will be able to negotiate with potential lenders, understand your alternative options, and secure terms that are workable for your business. They will also help explain all of the fine print that’s involved in each contract.

7. Assistance Combating Fraud Unfortunately, financial fraud and identity theft are ongoing threats to businesses of all kinds. In order to protect yourself from these inevitable sources of risk, you will need to develop an adequate fraud-prevention system. By working with an outsourced CFO, you will have access to someone that can monitor your financial status and keep a look out for any abnormalities. If an instance of fraud or theft does end up occurring, your CFO will be able to act quickly and ​minimize the amount of damage​ it has caused.

Fraud prevention can disproportionately hurt small businesses, making the development of safe practices even more important.

8. Increased Sense of Professionalism Lastly, hiring an outsourced CFO can help create an increased sense of professionalism in almost every aspect of your business. In addition to providing financial reports that are reliable and accurate, your CFO can also act as an ongoing resource capable of answering any of the questions that you or your clients may have.

Being able to assure potential clients and investors, “my CFO can take a look at it” will help increase your business’ perceived level of authority. Incorrectly answering these sorts of questions on your own may end up damaging some of your most valuable relationships. Until your business is ready to hire an in-house CFO full time, you should strive to at least have someone by your side with a greater sense of financial expertise.

Conclusion Many new and small businesses hesitate to outsource their CFO duties and other work, due to the fact that they are trying to minimize costs. While this may seem like a reasonable goal on paper, it is actually a perfect demonstration of the long-term vision that most inexperienced enterprises are lacking. By hiring a CFO advisory service that is compatible with your business’ specific needs, you can improve almost every dimension of your business, including your bottom line.