As your business grows, you might find yourself struggling to keep up with the financial challenges that come with expansion. You’re not alone – many business owners face this hurdle as they try to navigate the complexities of their evolving financial landscape.
A Small Business CFO can be your lifeline, providing support that goes beyond just everyday bookkeeping and accounting. Instead, they proactively identify opportunities to improve your company’s financial health, guiding you towards a more stable and prosperous future.
But how do you know when it’s time to bring a CFO on board? The answer varies for each business, but we’re here to help. In this article, we’ll share general advice and specific scenarios to help you determine when your small business could benefit most from CFO services. So, let’s dive in and explore how a CFO could make a real difference in your financial journey.
What size should my business be before investing in CFO Services?
There isn’t a one-size-fits-all revenue figure, employee count, or business age that dictates the need for a CFO. However, businesses generating over $2 million in revenue often experience significant benefits. A more telling metric is transaction volume and complexity. For instance, a service business and a construction contractor may have similar annual revenues, but the latter typically has greater complexity and a higher need for accurate financial insights.
What size should my business be before investing in CFO Services?
There isn’t a one-size-fits-all revenue figure, employee count, or business age that dictates the need for a CFO. However, businesses generating over $2 million in revenue often experience significant benefits. A more telling metric is transaction volume and complexity. For instance, a service business and a construction contractor may have similar annual revenues, but the latter typically has greater complexity and a higher need for accurate financial insights.
Contractors often deal with equipment, financing, receivables, payables, bad debt, insurance certificates for subcontractors, and more. Several business events and opportunities could also indicate your small business would benefit from outsourced CFO Services.
How CFO Services can benefit your small business:
- Cash Flow Management – Cash flow challenges are common among small businesses. CFO Services can help review and optimize internal processes to accelerate cash flow.
- Reporting Accuracy – CFO Services can ensure that your reporting is precise and current, enabling you to make informed decisions based on accurate data. A comprehensive financial package is essential for managing business performance and must be timely, accurate, and understood.
- Establishing KPIs – Have you set KPIs to evaluate your business’s success and profitability? A CFO can assist in defining and monitoring KPIs.
- Reducing Overall Risk – Outsourcing CFO responsibilities ensures a dedicated focus on your finances, helping establish internal controls to minimize errors or fraud. This reduces the risk of costly financial errors. CFO services also allow business owners to concentrate on their core competencies, reducing risk in other areas of the business.
Signs that indicate you may need small business CFO Services:
- Planning to open multiple locations
- Considering acquiring another company
- Slow invoicing and collections causing cash flow issues
- Planning a significant capital purchase
- Expecting to hire several new employees soon
- Needing increased professionalism in managing external relationships – vendors, suppliers, banks, auditors, customers
- Late tax filing due to unclean books
CFO Services can alleviate stress and concerns in any of these situations, providing support during crucial business decisions and challenges. CFO-level resources have the experience needed to guide you through best practices and potential pitfalls, as they have encountered these situations before.
How are outsourced CFO Services for small businesses typically structured?
While some CFO services providers may offer hourly engagements, most will require a minimum commitment period to deliver the most value and benefits to your business. Usually, an annual or monthly commitment is required for long-term collaborations. However, specific engagements may be project-based, such as PPP forgiveness.
When evaluating potential CFO services providers, consider asking if they would entertain an initial 4-6 month consulting engagement. This arrangement allows both parties to assess the fit, expertise, and service level before committing long-term.
Many providers offer a fixed monthly cost for CFO services, enabling predictable budgeting without surprises. When evaluating providers, ensure you outline all your needs and inquire whether their monthly fee covers all required services or if additional fees apply for specific services.
What should I expect to pay for small business CFO services?
When it comes to CFO services for small businesses, hourly rates can range between $180 and $300, depending on the chosen company and their location. Monthly engagements may start as low as $499/month and go up to several thousands per month for comprehensive, full-service outsourced CFO services.
While the hourly rate might seem high, keep in mind that an experienced CFO could potentially save your business thousands of dollars with a single strategic recommendation. For example, a CFO may identify opportunities for cost reduction, negotiate better payment terms with suppliers, or restructure debt to significantly reduce interest expenses, all of which can have a substantial impact on your bottom line.
Bottom Line: Are you ready for small business CFO services?
In conclusion, determining whether your small business requires CFO services right now ultimately depends on your specific situation. However, if your business encounters any of the challenges and scenarios mentioned above, it might be time to consider such services. We encourage you to reach out to us for a free consultation, where we can discuss your needs and help you make an informed decision about the right financial support for your growing business.