Many smaller companies don’t operate with a permanent CFO and there are reasons for this. They may not have the budget for it, they don’t think they need one, or they think it’s sufficient to have a controller who manages the general ledger and produces monthly statements. CFOs are strategic resources that work side by side with the CEO/founder and the other members of the senior team. Some businesses may reach the stage where they need a professional CFO but can’t justify the cost of bringing in a full-time resource. As a result, many of these organizations take a more strategic approach and turn to hiring an Outsource CFO, which can provide flexibility with respect to cost as well as the ability to target specific areas that the business considers critical. An Outsource CFO can significantly free up members of the senior management team to focus on growth areas of the business.
Financial Analysis
The Cecere Group’s Outsource CFO services provide the company’s management team with customized financial analysis that allows them to gain insight into the company’s financial results and help them in the development of long term and short-term business plans. There are many different types of analysis that can be applied to a company’s specific needs depending on the nature of its operations. We will customize key financial analysis for your organization that is designed to highlight and bring focus to those critical measurements of financial health needed to run your business.
Which analysis is important to you?
- Leverage: concern over large debt balances
- Profit margin: product pricing or direct cost of revenues is variable
- Cash flow: cash position is fragile
Budgets & Forecasts
The budget serves as the roadmap a company has follow to achieve the objectives of its business plan. The forecast looks at actual financial results and determines the direction those financial results are taking and will likely produce for the year.
The Operating Budget is created based on achieving specific results of the plan. There shouldn’t be a lot of guess work in creating the budget as it is largely built on predictable variables. The Financial Forecast is based on historical actual results and requires a degree of vision to see where the company is headed and the estimates and assumptions that should be applied to the historical results to determine a creditable forecast the financial results for the year. Forecasts are created based on sales activity and other significant events that have occurred after the budget has been cast. The forecast allows management to take actions in real time to adjust for sudden changes in the business.
Trigger points for revising the forecast:
- Sales volume deviating from budget, higher or lower,
- Addition or loss of a substantial customer,
- Employee turnover from loss of skilled workers
- Deviations from budget for sales and marketing expenses.
- Corporate reorganization, mergers, acquisitions.
Management Reporting & KPIs
Competition in the marketplace has created pressures on management to protect the company’s market position (market share) while continuing to increase value for shareholders. Management Reporting is a necessary tool for the management team in understanding the performance of the internal operations of a company. It gives management the opportunity to make assessments and change course to bring the company back on track where needed. Management Reporting is unconstrained because it doesn’t have to follow GAAP and focuses on what is of significance to management given the strategies they have developed for the business.
Key Performance Indicators (KPIs) are the natural compliment to Management Reporting. KPIs are developed for each of the business objectives that management has undertaken under its strategies.
Forward Looking Analysis:
Although reporting and analysis using historical financial data is helpful in understanding where the organization has come from, forward looking analysis using predictive KPIs and insightful Management Reporting is critical in keeping the organization moving in a forward direction.
Strategic Cost Management
Traditional methods of margin improvement such as operating model efficiencies, key process or service outsourcing, and external spending reductions remain at the center of any successful cost management program and will always be taken as the first steps. However, gaining a few percentage points from an unfocused operation is not strategic. By this point any quick cost wins from the low hanging fruit have probably been realized which now reduces options to the more difficult choices that require thoughtful consideration. Strategic Cost Management is not a pseudonym for across the board cost cutting. A critical assessment of the state of the business is required to identify opportunities to migrate resources away from low margin business towards higher value and higher return market opportunities.
The greatest obstacle to Strategic Cost Management typically arises from within when cost reductions are apportioned across the board to share the burden. This process merely serves to extend the legacy cost structure and provides no strategic value.
Productive Costs vs. Non-Productive Costs
A core principal of SCM calls for reallocating resources where they will generate the highest value for the business rather than just making broad cost reductions. This starts with a thorough understanding of the resources needed to fund profitable growth initiatives (productive costs) from the resources being consumed by low or negative margin business (non-productive costs).