Planning and execution (the primary jobs of a full-time of fractional CFO) are two of the most critical pieces necessary for building a successful business. Decide what you’re going to do, and then do it.
The ability to map out where you want to go and then efficiently implement those plans dramatically improves your likelihood of success.
But every facet of your startup’s plans either ties to or directly impacts the financial aspect of your business. Sometimes those connections are easy to see and easy to follow.
But sometimes, the relationships between operational inputs and financial metrics aren’t straightforward and can be challenging to follow.
Could a fractional CFO help?
Annual Planning is a Big Part of Fractional CFO Services
Strategic planning is the vehicle that takes your organization from where it is to where you want it to be.
Like a traditional, in-house CFO, a fractional CFO offers a wide range of services and support for all things financial. But one of the best ways to utilize a virtual CFO is to have them drive the annual planning process.
Although you may already have a financial manager, they may not have the capacity to give the planning function the attention it deserves.
Budgeting and planning are critical tools to help management to make decisions. The financial plan needs to accurately reflect the financial implications of the company’s strategy to serve as a solid basis for future decisions.
But annual planning doesn’t happen in a vacuum. Operational and financial drivers affect and are impacted by the company’s budget, forecast, and hiring plans.
The CFO uses the planning process to help the CEO weigh the viability of their plans against the company’s financial situation and offers informed suggestions to help achieve the desired results.
Since very few aspects of your business function entirely independently, your strategic goals will affect how you allocate resources and plan growth. Setting organizational priorities allows the best use of limited capital and human capacity.
A good CFO will also help identify possible alternate scenarios and plan for contingencies. How will your plan change if growth is 50% higher than expected? What cuts will you need to make if sales shrink by 50%? We’ve seen over the past few years how unpredictable the world can be.
Planning for contingencies allows for a quick and deliberate reaction when necessary.
A CFO Develops and Implements Financial Systems
An outsourced CFO does more than perform accounting services.
An outsourced or on-staff CFO fulfills much more of a financial oversight function. A fractional CFO is mainly there to prepare and provide data to allow company management to make informed decisions.
For efficient steering, your company needs a comprehensive financial management system.
Together with company management, the CFO will help develop a coherent set of KPIs that reflect the business’s actual performance. These KPIs will combine financial and other operational data to measure the company’s effectiveness and overall financial health.
The CFO is also responsible for maintaining financial dashboards to enable easy access to information. These dashboards allow company management to monitor what’s happening in the company in real-time.
In a typical dashboard, the KPIs show a comparison vs. the annual plan, allowing easy tracking of progress throughout the year.
Regular Reporting and Advice
Financial systems, dashboards, and KPIs are useless if the rest of the organization doesn’t have access to the information. A competent CFO will monitor and understand the financial systems, synthesize conclusions, and relay recommendations to the rest of the team.
Company stakeholders and managers depend on the accuracy and timeliness of this financial information. These dashboards and reports enable the organization’s management and other key stakeholders to understand the business’s financial health. The CFO is responsible for ensuring that the information in the dashboards and reporting tools are complete and accurate.
In addition, a qualified virtual CFO presents and reports the company’s financial information. These progress updates let you know whether or not you’re on target and which scenario is playing out (and why).
Ready to Plan the New Year?
A CFO does a lot more than perform simple accounting oversight. A CFO’s responsibilities include financial planning and cash flow tracking, with planning being one of the most vital roles a CFO plays. They will make sure your annual financial plan reflects your goals and aligns with the economic realities facing your company.
But many early-stage companies aren’t quite ready to bring on a qualified full-time CFO. Here, a fractional CFO might be the perfect alternative.
Founder’s CPA provides fractional CFO and accounting services exclusively for startups. Our experts can walk you through the most complex financial processes.
If you’re ready to plan the new year, set up a free consultation to talk with us at Founder’s CPA about where you’d like your company to go.