The CFO on-demand trend began in the United States in the 1990s during the dot-com boom, in which hundreds of small companies emerged in Silicon Valley. Many of these startups were not big enough to warrant a full-time CFO but were engaging in fundraisings that were complex enough to require seasoned finance professionals. In 2007, the on-demand CFO industry boomed as the global downturn pressured companies to cut back on full-time finance staff. As a result, more businesses throughout Australia, Canada, and the US turned to the services of on-demand CFOs. However, many people are still unsure of what an on-demand CFO does. People question if on demand CFOs act as accountants, bookkeepers, corporate advisors or a mix of any and all of the above. Read on as Elan, one of our top on demand CFOs demystifies his role and reveals how an on-demand CFO might revolutionize your business.
The Role Of An On-Demand CFO
An on-demand CFO is very different from an accountant or bookkeeper because their assistance extends beyond day-to-day administration. They are responsible for driving the overall business strategy and ensuring that the business maximizes its financial advantages and minimizes its financial risk. They look behind the numbers and make sure business owners understand their financial information so they can make informed decisions. They can even sit in on planning and management meetings so that they are across all aspects of your business. An additional bonus to startups is that an on-demand CFO, even part-time, adds credibility to the company and gives stakeholders confidence in knowing someone independent is involved with the financial running of the company.
Business Activities Provided By On-Demand CFOs
Most on-demand CFOs are responsible for the following business activities: Management reporting and dashboard reporting Management reporting gives businesses a financial view of how they are performing. An on-demand CFO puts systems and tools in place, including dashboard reporting – a visual representation of business key performance indicators (KPIs) – to measure and generate this information, which is regularly reviewed with the owner. Cash flow modeling, reporting, and management Cash flow are critical to business success. A part-time CFO will implement, update and monitor cash flow forecasting and modeling. They work hand-in-hand with business owners to create strategies to manage cash flow and assist in business growth. Budget and forecasting preparation, analysis and tracking An on-demand CFO will review and analyze a businesses’ prior financial results alongside their strategic plans. They work with business owners to ensure their budgets drive towards the future direction and goals of the business. Finance process reviews An on-demand CFO will review current finance processes and policies and implement improvements to allow the businesses to operate more efficiently and effectively. Cloud accounting advice An on-demand CFO will find the most suitable provider and solution to fit the needs of the business and help with the integration and implementation.
How can an on-demand CFO help your business?
1 - Help me! My business has no financial support If your business has been managing its own finances, grappling with its financial records and has no time to plan future growth: An on-demand CFO will:
- Take control of finance requirements to eliminate concern about who is responsible for your accounting function
- Implement processes to streamline your accounting function
- Implement cloud accounting to enable the business owner to access accounting records on any device, at any time, anywhere
- Implement basic reporting, so the owner understands how the business is performing.
2 - But I already employ a bookkeeper Your thriving small to medium business employs a bookkeeper, who is overseen by the business owner. As the business grows, the owner needs advice about their increasing financial responsibilities and business direction. An on-demand CFO will:
- Streamline the accounting function by ensuring the correct systems and processes are in place
- Implement a reporting framework including a KPI dashboard to assist in monitoring business performance
- Implement and monitor a cash flow forecasting model
- Review payroll compliance and ensure all record-keeping is in place.
3 - I’m sorted. My business already employs a bookkeeper and accountant Your business has engaged a bookkeeper to maintain its income statements and balance sheets and an accountant to help with tax and compliance. You want to expand, but feel you need support to do so. An on-demand CFO will:
- Work with your business and build a budget/forecast for the financial period. This budget would include a profit and loss, balance sheet and cash flow (three-way model).
- Assist in developing your financial strategic plan during expansion, which would include a three- to a five-year financial model. This model will be based on key business metrics.
- Work with the business to source finance via banks or potential investors and act as their advisor in these transactions.
Hiring an on-demand CFO can be a game-changer for most businesses. Businesses between $1 million and $20 million in revenue generally see the best results, however on demand CFOs can be revolutionary for businesses of any size.