Determining a financial strategy and partner in today’s small business climate can be a daunting task. Where do you get the financial advice needed? How do you implement it? When is the right time to seek out financial support? What type of financial advice should you be seeking and from whom? These are good questions and it can be overwhelming on how to get the right answers. In our experience, the following professionals have provided the best guidance and results for our clients and prospects.
Once a company has determined its basic business model, most businesses focus on three key things: selling their product or service, delivering their product or service and collecting their earnings. When a business owner decides their ready to grow their business to the next level they need to determine next steps. These steps typically include enhancing secondary functions like accounting, financial management, and financial analysis to name a few. This is the time to seek out financial guidance for your business. This help can vary from Bookkeepers, Controllers or fractional CFO’s (CFO for hire). CPA’s have a secondary role tied to the accounting and tax management of a business. Each professional provides a different function and value to a small business. Here are some of their roles, responsibilities and how they fit within a small business.
Bookkeepers
A Bookkeeper is typically an employee of the business. They are responsible for the daily inputting of financial information into an accounting system, like Quick Books. Additional responsibilities may include reconciling bank accounts, sending and collecting invoices and paying vendors.
CPAs
A CPA coordinates audits or reviews, creates financial statements, may provide cash flow forecasting and gives direction on tax filings. A CPA partnership provides valuable tax strategy for a small business. In addition, they will assist with delivering all the financial information and data for the business to outside parties, as well as assist in maintaining good books and records for the business owner.
Controllers
A Controller takes on many of the responsibilities of a Bookkeeper but typically has more expertise and experience that allows them to be more of an intermediary between the owner, the CPA and other outside parties. Their responsibilities may include closing the books, producing financial statements, reviewing profitability of products or services, managing forecasts and preparing cash flow reports. They may also manage A/R and A/P processes along with coordinating accurate inventory counts and procedures and support quality assurance in the accounting systems. Revenue size and complexity of the business and salary expense will typically drive the need for a Bookkeeper vs. a Controller.
Making Decisions As A Business Owner
Now, it’s time for the business owner to analyze and make business decisions based on all the financial information provided. A small business owner is good at what they do, but analyzing financial information can be challenging at times as that is generally not their core competency. This is when it may make sense to bring in a fractional CFO (CFO for hire), or engage with a CPA whose practice includes advisory services and are more like a consultant rather than just focus on tax or financial statement reviews and audits.
Fractional CFOs
A fractional CFO works for your company less than full time (a ‘fraction’ of full time) and is sometimes also known as a “CFO for hire”. A fractional CFO is a part-time contractor you hire to handle specific duties of a CFO. These professionals typically have extensive work experience as a CFO with employers and companies they have worked with in the past.
A CFO’s role is to interpret and analyze the financial statements to make strategic business recommendations to the business owner. These recommendations will vary depending on the business’s need but, but the primary focus is generally to help the business owner grow revenues, manage costs and improve profitability for the company. In addition, they provide direction on dealing with banks, the raising of alternative forms of capital beyond bank financing, develop feedback programs for other parts of the business, run cash flow projections, and assist with a business owner’s overall strategy for the business. A “CFO for hire” can provide valuable advice for a business owner’s short and long-term goal for their business and in essence be their financial psychologist. Business owners often lack someone to talk to, and a consultative CPA or “CFO for hire” can be that sounding board.
Different Roles
The Bookkeeper, CPA, Controller and CFO all deal with financial and accounting information. However, their roles are markedly different. Choosing one instead of the other will depend on the business’s need, desire, and at what stage the business finds itself.
Contact The Commercial Finance Group Today
If financial matters are bogging you down in the way of working capital, our Los Angeles asset-based lending solutions can help. Get in touch with The Commercial Finance Group today.
