CFOs Need A Diverse Set Of Capabilities

Chief Financial Officers in today’s business world need a diverse set of capabilities. Being responsible and managing money is an important CFO service, therefore the CFO needs to know a great deal about ALL facets of business and business ownership, including out of focus aspects such as marketing or manufacturing, to better do this job. The CFO might not start out an expert on every last detail of the business world, but developing a deeper knowledge of those out of focus areas is a great step towards broadening a CFO’s capabilities, making business owners take notice and consider what  an invaluable asset a CFO who really knows what they’re doing is in a business world that revolves around money.

Let’s take marketing, for example. On certain aspects of marketing (particularly website marketing and search engine optimization), a Part Time or Temporary CFO can provide some really useful insight and help clients a great deal. A business can attain top positions on Google and other search engines with a good Search Engine Optimization (SEO) strategy. Those kinds of positions will give the business a strong Internet Presence, thereby enhancing their current marketing strategy. Thanks to knowledge about a facet of business a bit outside their realm (marketing), the CFO in this example was able to do their job better.

On the subject of marketing and good SEO strategies, using an RSS feed will help you get top positions on Google and other search engines. Fresh up to the minute content can be provided for your website by an RSS feed. Reuters example of an RSS Feed is Reuters who services many news related websites with up to the minute news around the world through an RSS Feed. The best way for a business to use an RSS feed is to start a blog about their business and write articles daily about their business using key word rich content. Most Blogs have an RSS feed connection and connect the RSS Feed from the Blog to your website and every time you write an article about your business and post it to your blog it will change the content of your website. When you change the content of your website the search engine crawlers index your site. The more you change the content the more you get indexed by the search engines and indexing increases your search engine ranking.

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The Importance of Business Forecasts

Business Forecasts are an essential Service and Duty to any responsible CFO. Many of my clients ask me what the purpose of business forecasting is. More traditionally, the role of CFO has been that of a historian, in that they told the business owner financial results from the past. While knowing what happened in the past can be useful for sure, what business owners really need to know is where they’re headed. A CFO should be able to tell the business owner what they think is most likely to happen in the future. Basically, tell the business owner today to bring a raincoat tomorrow because it’s going to rain, don’t tell them tomorrow that it’s raining while they stare at you drenched and disgruntled. Trust that business owners generally know where they have been. Today’s Chief Financial Officer should let the business owner know about what direction the business is going to take in the future.

A business forecast answers this major question: will the existing business model achieve the desired results, or not? Obviously, if the answer is not, the business model will need to be changed. A CFO should not only be able to prepare a forecast on a business’s existing business model, but also be able to prepare a forecast on a new model if the preexisting one does not work. The CFO needs to have knowledge of the industry and a sharp over all understanding of business that can only be achieved through the experience of owning a business themselves, and accurate forecasting tools at their disposal in order to do this.

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Inventory Purchases

When their client is making a decision about which supplier or vendor to purchase their inventory from, the part time CFO needs to make sure their client is considering all factors. Sometimes this particular CFO service is forgotten, but it’s a service that can save the client many dollars all facts considered.

Consider the following when choosing what supplier to purchase inventory from:

  1. Terms
  2. Price
  3. Price breaks
  4. Freight costs
  5. Turnaround time
  6. Restocking charges
  7. Minimum quantities
  8. Does the vendor confidently stand by their product?
  9. How efficiently is the product handled?
  10. Is the product packaged efficiently?
  11. How efficiently can the product be used?
  12. Are you getting sufficient support from the vendor to help sell their product?
  13. Is the Vendors’ credit department flexible?
  14. What products do your competitors sell?
  15. Can orders be cancelled without penalty?

The obvious part is looking for the best price, but remember it’s also important to know where the quantity discounts or price breaks are in comparison to other suppliers. If you hit a brick wall in your attempts to negotiate with your vendor, ask for free freight. It’s an offer many suppliers will give you.

You need to understand what the turn around time is and how quickly your customers will receive a product after it’s been ordered. If you have a cash flow problem, it is especially important for you to know turn around times because you need to time your inventory receipts very precisely. It helps to know minimum order quantities if you have a cash flow problem, sometimes all you need is a small quantity.

Vendors need to take full responsibility for their product. That means if something goes wrong with the product, be it an issue of quality or technicality, the vendor needs to issue proper credit upon the product’s return, and the client needs to feel absolutely confident in the fact that their vendor will do that. Vendors should wave restocking charges unless the client is in an industry where there are a lot of special orders, so make sure and check what their restocking fees are for a product that has been incorrectly ordered.

The receiving department depends on the efficient handling of products. You need to consider all possible methods and avenues at once to save costs through out the entire process. This means you need to consider everything from logistics to manufacturing to merchandising/packaging to how efficient the product is to use at once, and figure out where you need to sacrifice and where you shouldn’t to end up with the most cost efficient solution. For example, one of my clients in the insulation business uses the pink panther insulation because although it is more expensive, it is so much easier to install that it makes up for any extra cost it incurs.

Support from your vendor to help you sell the product is a very big help and a sign of good faith. Anything from free displays and marketing materials to coop advertising programs tells you that the vendor is dedicated to working with you and is happy to be. It’s always good to know when you’re in a cash crunch that your vendor is willing to work with you, and hopefully also that their credit policies are flexible enough to with stand economic shifts and industry downturns.

If you know what your competitors sell, you can use that information to find a vendor who is not with competitors in your market. You will probably be able to get a good deal out of such a vendor because they do not yet have much market share in the market you serve, and chances are they’d love to work with you to get in there.

One of the most common things businesses (especially retail businesses) get in trouble for is over buying inventory. You will want the flexibility from your vendor to cancel your orders with out being penalized. This option will cut down on your risk of overbuying by giving you the option to reassess what you really need and change your mind, and also protecting you from having impulsive purchase decisions become permanent.

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The Chief Financial Officer And Communication

In order to be successful, a CFO must have solid communication skills. These skills are even more important for CFO consultants because with multiple clients, the challenge to communicate with them all becomes even more difficult.

The number one rule for being the kind of good communicator a CFO or CFO consultant needs to be is that you are responsible for both sending and receiving communication. You aren’t a good enough communicator if you only take responsibility for what you send out. You need to understand what the other person is saying and make sure they know they’ve been understood. Identifying the needs and wants of their clientele is at the core of what being a CFO is all about, and at the core of finding out what these needs and wants are is good communication with your clients.

It only takes one person in the loop to break down communication. If one person does not like someone else in that loop, communication starts to break down. Agreement and understanding are hindered if a person or people in the communication loop let their biases affect them. If people like each other perfectly fine but cannot agree in the loop and refuse to bend or compromise, or simply let their frustrations rule their behavior, communication starts to break down.

The only way to obtain good communication with in the group where you need it the most is to having a liking for and respect for the people in your “loop”. You need to be in agreement and understand each other, and be a true united front.

CFO’s and CFO consultants need good communication skills and also need to be able to impart those skills to their clients.

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