What Does a CFO Do? Pt. 6, Strategic and Financial Planning
Where is your business going? Have you looked at your company’s plan, both strategic and financially? In this installment of “What Does a CFO DO” we talk about the CFO’s role in the process. For a small business owner, with a company of any size, it’s critical that you have a trusted advisor on your team to guide you through this process.
Often times, the first step is to work with your CFO to develop and implement a planning process. This includes a structure for developing annual business plans (including detailed financial budgets), and a system to monitor and report on variances from the plan. If your business is lacking this structure, it’s difficult to achieve accountability and maximize performance. It is often the CFO and the business managers that lead, refine, and implement these processes.
This planning process is important for many financial reasons, one of which being that it will allow your business to be run in a more controlled manner. Capital expenditures should ideally be made within the context of a pre-established budget. Somebody wants to buy a new tractor, or a new computer…what’s in the budget? Your CFO should establish these budgets annually and update as needed to adapt to changing business conditions. Along the same lines, the CFO should evaluate potential purchases and leases, ensuring that they not only fit within the capital budget but also offer the best option for the company’s needs.
Is your company looking at growth or expansion? This requires in-depth planning to insure that your staffing, facilities, and cash resources are up to the task. Your CFO should incorporate growth implications into your financial projections.
The CFO should lead monthly and quarterly meetings with management to review variances from the budget, and present budget updates for the future. It is typically the CFO’s role to challenge management on their assumptions, considering their past performance and the company’s constraints. Operations and sales personnel are often optimistic in nature, and it’s important that the business is operating from a conservative viewpoint. Overstating/projecting your profit or revenue does nothing but harm.
Aside from the financial planning, it is also the CFO’s responsibility to assist the owner/CEO in the development of the company’s mission statement, objectives, and strategies. A CFO can not be focused solely on numbers. They must have operations and general management experience, and be well versed in marketing and sales. At a minimum, your CFO should be working closely with department heads to ensure they are tapped in to the pulse of the company. With this visceral understanding of the company’s capabilities and strengths, the CFO should prove to be a trusted advisor to the owner/CEO in charting the organizations near future.
Stay tuned for Part 7 next time, as we discuss the CFO’s role in “Stakeholder Relations.”
If you missed the previous posts, here they are:
- Part 1 Introduction, click here.
- Part 2 on Cash Management, click here.
- Part 3 on Financial Reporting, click here.
- Part 4 on Accounting, click here.
- Part 5 on IT Development, click here.
About Gateway CFO Solutions, LLC:
Based in St. Louis, Gateway CFO Solutions helps small businesses grow profits and revenues, and bring peace of mind to their company’s financial picture through part-time CFO services. Many small business owners are without a trusted advisor for the financial side of their business, and they have seemingly few resources to turn to for expert guidance. We provide that guidance and act as a trusted, strategic advisor for our clients. We provide both broad, global planning and “roll up the sleeves” technical services.