Poor cash flow problems continue to be the major reason why 82% of small businesses fail. While that is a huge percentage, there is a one way solution to help you gain a competitive advantage over others.
Whatever organization or industry you are in, the Chief Financial Officer (CFO) plays a vital role in the success of a business. However, when running a small company, you may not have the workload for a full-time CFO.
Here is why your business should hire a fractional CFO to leverage your financial functions.
Creating Cash Flow Forecasts
Countless businesses fail to get accurate cash reports regularly and lack of financial clarity harms many companies. An outsourced CFO develops a precise cash flow forecast depending on the financial position of your business.
The process involves tracking weekly, monthly, and annual financial data to make well informed financial decisions. Deciding where and how to spend is a dilemma many companies face. However, with outsourced CFO services, stressing over such issues will be a thing of the past. Such evaluations on whether to change distribution channels or pursue an acquisition from retail to digital are handled by a fractional CFO.
Manage Key Stakeholder Relations
Although CEOs have the financial acumen to field tough questions from investors, boards, and banks, such relations can be demanding. Sometimes the decisions presented do not bring valuable financial information to the organization.
Board members hold many decisions and future paths, but CFO consulting brings a fresh outlook. The interaction creates two way thinking, which provides more insights to the directors, which helps avoid any conflicts of interest.
In such a situation, a fractional CFO prepares well analyzed presentations for the board of directors who effectively deliver the right package of reports. The information provided illustrates the trends and data the company needs to visualize to make well informed decisions.
Raising Capital
As mentioned earlier, running out of cash is one reason businesses fail. Besides cash flow management, capital injections are vital. The fraction CFO plays a crucial role in preparing financial presentations and aiding the fundraising process to sustain running operations. Before approaching any financial institution, the outsourced CFO identifies the right places in need of finances to support and increase growth plans. The process makes it easy for the company to participate in beneficial negotiations with lenders and potential investors.
Navigating Cash Crisis
You do not have to feel bad about seeking outsourced CFO services once your small business finances hit the wall. Many businesses come across this phase once in a while. For instance, your business may be subjected to reduced profits, bankruptcy, market downturns, and other interruptions. Maybe your company does not have a budget or an analysis of each financial year.
Experienced fractional CFOs have seen it all, so hiring one makes jumping in to keep the financial lights on a breeze. The best practice is to implement cash management controls to ensure your business does not suffer cash crises again. Such rules give you the time and energy to respond once a problem is on the horizon.
Restructuring the Entire Accounting Process
By now, you understand the financial benefits a fractional CFO brings to your company, but there is more. Hiring one allows you to invite someone to implement what has been proven to work for various businesses.
You may be surprised by learning the number of errors your company makes, leading to stunted or slow growth. Redesigning the accounting layout allows you to learn how to optimize the capital structure and understand cash flows.
During this process, the CFO detaches the established norms to reorganize finances and activities toward a new version.
Increase the Value of Your Company
Many small or medium business owners do not know what their firm is worth. Worst of all, some do not know how much value a potential buyer can bring to the business. Lack of such knowledge leaves a huge gap in your future expectations and affects retirement planning.
Consulting CFO services can help you learn and improve the value of your business. Although this is not achievable in a day, the benefits of learning about your best sale value comes with long lasting benefits. Contact Nexagy today if you are looking for an experienced and reliable fractional CFO.