Do your clients need a CFO in 2021? Some of your clients already have one and he/she may be performing brilliantly. Others will not have any strategic financial support… which is a huge opportunity for accountants.

How should accountants pursue this opportunity? Establishing credibility is a starting point. That involves analyzing the business and its management. Here are some important questions which will build your clients’ confidence in your potential role as a CFO:

1. What projects are underway and should we re-evaluate their relevance?

Many businesses start projects which make sense in a prior business environment but will no longer deliver the value expected. These projects can linger on… because culling them involves ‘hard’ decisions and backtracking. An effective CFO will delineate between mission-critical and discretionary projects to drive the best business outcomes.

Example: A school for tradespeople started to investigate opening a new campus to be closer to corporate customers. With a shift to online learning, the CFO was instrumental in the decision to abandon this project (after considerable investment) and redeploy resources into online education.

2. Do we have access to the data (and analysis) necessary to make business decisions?

The CFO has access to critical data which should be used for analysis, faster decision-making, risk assessment, financial modelling and forecasting.

Example: An online retailer achieved considerable customer growth through investment in online promotional campaigns. When the growth rate started to slow, there were many opinions as to which customers to target, what offers to promote, how to price products etc. The CFO analyzed the Return on Investment from marketing and proposed a 25% reduction in spending. These recommendations, supported by data, persuaded the board on what to do next.

3. We can cut costs… but what are the long-term implications?

Ruthless cost-cutting may be essential sometimes but it also risks harming the future agility of the business. An effective CFO will make recommendations to get the balance right.

Example: A mid-size consulting firm has invested to improve their billing processes. Once implemented, there will be considerable cost savings since invoices are currently generated manually. After extensive analysis, the CFO recommended continued investment in the billing system project, satisfied that the returns would be realized soon and the business could afford the cash outlay.

4. How can we improve liquidity?

Simply put, a business with cash is in a relatively strong position. A potent CFO will, for instance, identify assets which can be turned into cash, consider factoring, improve collection processes, reduce costs, renegotiate payment terms, improve inventory management and revisit tax payments.

Example: A construction company with multiple projects underway set up a “Cash Control Tower” to improve liquidity. Within 30 days, procurement processes were revised resulting in dramatic short-term savings. This helped to fund labor costs and kept projects running.

5. What strategic opportunities have arisen in the current market?

The CFO has a critical role to play in conventional operations of the business but what about unique (inorganic) opportunities arising from a disrupted business environment? Are there distressed businesses selling assets at discounted rates? Can new partnerships be forged as the landscape changes? Quantifying the risk and upside of these opportunities is the work of a successful CFO.

Example: An owner and operator of Aged Care facilities is holding significant cash reserves. Noticing that contractors working on their building projects were financially compromised and unable to complete their jobs, they started lending funds to these contractors on attractive terms. The CFO played a crucial role in evaluating and reducing the risk associated with this new business activity.

6. Are we taking good care of the customer?

The CFO should be fully acquainted with the customer and their needs ESPECIALLY in changing business conditions (good or bad). This leads to intelligent recommendations to retain customers or acquire new customers.

Example: The CFO in a home improvements business noticed increased activity from customers undertaking kitchen renovations. They recommended additional promotions and sales activity to drive revenue in this niche area.

7. How can we strengthen the Balance Sheet?

The CFO should have laser-like focus on how improved inventory management, accounts receivable and accounts payable affects the business.

Example: A consulting business had poor visibility into aged receivables because this had never been a business priority. The CFO developed reports to highlight slow-paying clients and renegotiated payment terms with others resulting in an injection of cash into the business and reduced Accounts Receivable.

8. How can finance support management to communicate better?

Business leaders have the challenging job of communicating effectively with their teams. That means issuing a clear, coherent message whether the news is good or bad. The CFO provides important input into this message and helps leaders build credibility.

Example: A hospitality business made lay-offs and the team was – understandably – concerned about job security. The leadership team saw a clear pathway to recovery and wanted to communicate this in a positive but credible way. The CFO played a critical role in supporting the position of management with data and this helped to retain key personnel.

9. Is the business compliant and adhering to governance rules?

Extraordinary business conditions require a different approach to running the business. Speed is of the essence but departing from the usual ‘rules’ can put the business at risk. A successful CFO will support any change in the best interests of the business PROVIDED THAT associated risks are well understood and can be managed.

Example: A service provider was short of cash and the business was at risk. An equity investor expressed interest in the business but on terms which some shareholders would view as unfavorable. The CFO played an important role in understanding the interests of all parties, ensuring business continuity and proposing palatable terms for the investment, while reducing the risk of any future claims against the board or management.

10. Is management acting boldly and decisively?

Boldness is important in times of uncertainty. A ‘wait-and see’ approach is seldom appropriate and the CFO should enable bold decision making.

Example: A retailer needed to close stores in mid-2020 and the finance team thoroughly analyzed the short and long-term consequences of various options. This helped management quickly arrive at decisions and then execute a plan which ensured the continuity of the business. The retailer learned to operate more frugally and has maintained this approach even as conditions have eased.

Do you have the skills and interest to help clients as a CFO? In that case, you might:

• Make your clients aware of your skills. Some may not know that you can help.
• Define your product. How will you help and at what cost?
• Promote consistently. What will make clients WANT TO work with you?
• Get in touch. Panalitix has helped many clients build revenue streams in this area.