Why Use A Fractional CFO or Controller Services?

Why Use A Fractional CFO or Controller Services?

Identify Cost Savings and Increase Efficiency

In order to stay competitive, businesses are forced to examine all aspects of their operations to identify cost savings and drive efficiencies. The companies that do this successfully will be rewarded with increased market share and improved profitability.

The challenge for small business owners is how to effectively conduct this analysis without the knowledgeable resources to do it. Typically, small business owners will try to handle the company’s finances on their own, even though accounting is not their core strength. Consequently, owners can end up with poor financial reporting that impacts their understanding of their business operations.

Specific results of accounting and financial reporting shortcomings affecting small businesses include:
  • Inability to obtain bank financing or raise equity investments
  • The financial complexity of the business has outgrown the capability of existing staff
  • A lack of financial bandwidth on a specific project such as a M&A transaction
  • Inability to respond to growth opportunities due to misunderstanding the relevant financial implications
  • Misperceptions about the origin of profitability

Most Efficient Method for Small Business Owners

For many small businesses, hiring a full time CFO or Controller is not economically viable. However, utilizing a fractional CFO or Controller service to access the financial expertise they need is affordable. On average, most small businesses (subject to size) should only spend between $15,000 and $60,000 annually for fractional services, compared to $90,000 – $120,000 annually to hire a full time CFO or Controller. Clearly, utilizing fractional CFO/Controller services makes sense for small businesses who are looking to identify cost savings and drive efficiencies.

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3 Steps to Strengthen Accounting Procedures for SMBs

3 Steps to Strengthen Accounting Procedures for SMBs

Office billing and accounting procedures are essential to running a business no matter its size. If there are no rules in place, chances are very good that at some point you will have a big mess on your hands if you haven’t already had one. Accounting procedures give structure and organization to processes. For example, if your business’ procedure is to pay bills every Friday, then bills are paid on Friday with no exceptions. The procedure is not suggestion; it is a business rule. SMBs can strengthen their procedures, making them more effective and useful when running their organizations by following the three steps below.

Related: Accounting Solutions for Early Stage Companies

1. Identify Your Risks and Weaknesses

Figure out the areas that your business can improve. First you need to identify any problem areas. Then you will need to analyze the cause of those issues, which are often not readily apparent. Look for bottlenecks in the process. Examine if there is a chance for fraud with current procedures. Are errors happening? If so, why? For example, you may notice that your collections of receivables is too slow. This is often because bills are sent out too late, or because the bills are confusing. Would accepting credit card payments or offering online ACH options accelerate payment? Maybe the reason behind the slow payment is as simple as the mail not being opened promptly by your customers. Identifying problems and root causes behind the problem can be tricky.

2. Be Aware of Checks and Balances

Public companies are mandated by SOX Section 404 to establish internal controls and procedures for financial reporting and must document, test and maintain those controls and procedures to ensure their effectiveness. Many times the quickest way to solve a problem, may not be the best one because it may eliminate “checks and balances”. For example, a person doing the billing should never be the one receiving payments. This is a basic concept known as segregation of duties. Often smaller companies lack segregation of duties which opens them up to the potential of fraud. If the same person sends bills and receive funds, and there is an error, it can be hidden or missed altogether. Worse, if the billing person steals funds, it is hard to catch. Have at least two people involved in the main accounting processes of receiving money and bill payment.

3. Talk to Your Customers and Vendors

Welcome all feedback – good and bad. Make sure you follow up after you implement changes to make sure the issues have been corrected. Also look for patterns. For example, when multiple customers complain about a particular staff member, then he/she may need to be trained to ensure procedures are being followed to keep your customers happy.

Read More: A Solid Accounting Strategy is Key to Your Success