There is a temptation as a business grows, to see an organisational chart and think you need all those positions in your business. However, the reality is what might be suitable for a manufacturing company is not the same as a service business. Factors such as transactional volumes, complexity of your business, turnover, number of customers, staff etc. have an influence. Anyone that you hire should return value for you.
Standard practice with any start up is to have a CEO and COO. If there is technology element then a CTO would be expected. However a role that is not needed, which is traditionally the number 2 spot in a large organisation, is a CFO. A CFO is far more than an accountant. What they are responsible for is the financial well-being of the organisation and work with the CEO to ensure the sustainability of the business. They should also step up for the CEO as required and can be the direct reporting line for the CTO (non tech companies). The days of a bean counter are very much gone!
Considering finances are so important for an organisation, you might wonder why there is no need for a CFO?
There is a lack of complexity at the start. You may have projections and cash flows, but the CEO or COO should be able to manage these. There are plenty of free templates and inexpensive online accounting packages to look after transactions, once you start to trade. Another layer of complexity missing for smaller companies is the need for an audit. If you are unsure if you are exempt, the rules for the UK are achieving 2 of the following:
- Turnover under £6.5 million
- Assets under 3.26 million
- Under 50 employees
The reality is, you need to assess what you actually need. You may not need a full time member of staff, instead you may need a day a week or a day a month. An ethical consultant should access your current needs and agree with you the most cost effective solution. So what should an outsourced FD/CFO do for you?
- Irrespective of who does your bookkeeping there are financial standard rules that you should be compliant with. Being exempt from an audit is no excuse for HRMC for poor records. An outsourced CFO will review accounting entries and treatments to make sure you are following good practice.
- A review of the balance sheet and P&L for signs of any issues e.g. overtrading, liquidity issues
- A review of costings and challenge as necessary to make sure your business is being efficient.
- To provide advice on credit control and how to address non-payment.
- Review of long term cash flow and advice on methods to finance or manage working capital.
- Provide an objective view of business strategies with the leadership team.
- Review of operational procedures, to make sure the business is operating as efficiently as possible.
- General business guidance and compliance.
Something that needs to be stressed and this applies to any role you outsource, the consultant does not run your business. They can provide you with opinions and ideas, but ultimately you run your business.