Small businesses often do not have the human resource capacity to hire a Chief Financial Officer (CFO) full time. Although the business’s internal or outsourced accountants can perform basic profit and loss and financial reporting, small businesses often miss out on higher level strategic interpretation, analysis and planning, which is the function of a CFO.
In larger and often times small established companies, the board of directors meet monthly to discuss the business’s progress, position and future plans. Newer small businesses may not have a board of directors, but the progress, position and plans of any business is of vital importance to its continued survival and growth. A CFO is responsible for creating and reviewing forecasts and budgets, identifying gaps between actual and estimated, assessing viability of revenue streams, and strategizing the raising of capital.
If small businesses want to expand, they will need to raise capital, whether the money is for mergers and acquisitions or simply to fund organic growth. Without the direction and oversight of a CFO, this can be a tricky procedure. This is especially true if a business plans on listing on a public stock exchange in the future. A CFO will have the expertise necessary to undertake the many requirements for a stock exchange listing. CFOs can help in other areas, such as strategic alliances, marketing pricing, acquisitions and cost cutting, all processes which are vital to a business’s growth.
Small companies such as technology firms may have the knowledge and expertise in their field of work, but how much would a normal tech employee in product development know about tax credits for research and development? Or company valuations of patents and how to recognize and measure grant applications on the accounting books? It’s these and many other reasons why CFOs are essential to some small businesses’ operations because they provide specialist knowledge that core employees may not have.
The cost of hiring a CFO can often be prohibitive, especially for start-ups and research technology companies that have yet to set up a revenue stream and are cost-conscious. Paradoxically, it is also these businesses – the startup, research-heavy companies – that require the services of a CFO the most. The solution is outsourcing the CFO function to an accounting firm for an integrated strategy, tax, accounting, reporting and financial advice service.
If you have any questions regarding how ALTIUS can help with your outsourced CFO needs, reach out to us any time.