5 Questions the Small Business Owner Should Ask the CFO or CFO

Small business owner, congratulations. Your business has grown to such an extent that you need to beef up your accounting firepower in the form of a CFO. Maybe your company is now a middle-market company, big enough to justify giving your “numbers person” the grander title of chief financial officer.

Either way, I commend you for wisely trying to hire someone who isn’t just a bean counter, but has strategic insight and at least some depth in several key areas of your business, including marketing, human resources and technology.

But how will you make sure you get the most out of that key rental? Below, I’ve compiled five topical questions to guide you in your work with your CFO. These questions are designed to address both granular and general topics in your business; collectively, they can help create a constructive working relationship to move your business forward.

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1. What is our cash position?

It doesn’t matter how big your business is or what kind of safety margin your bank balances give you. Knowing your business’ daily cash position (adjusted for deposits and outstanding checks) is one of the best exercises you can do as an owner or CEO. Asking this question frequently, and signaling its importance to you, creates a teamwork mentality with your CFO regarding your company’s most critical resource: money.

Getting a daily reading of the company’s cash position provides an intuitive idea of ​​the seasonal ebbs and flows of your business. When sales linger too long at a marginal level, you will know in your gut that inquiries need to be made. And growing cash levels will also stand out – they will need to be distributed to stakeholders, placed in investments that can stay ahead of inflation, or reinvested in business operations.

From my past experience as a CFO in the manufacturing industry, I can personally attest to the value of mutually building this cash flow awareness, to support a host of larger business decisions. So avoid letting your CFO worry only about money. Keep it in mind for both of you!

2. What stands out from the dashboard (or other reporting framework)?

Your CFO will keep an ongoing summary of important metrics that address financial health, as well as a range of others that address sales, asset utilization, and even marketing effectiveness.

Increasingly, accountants are creating visual “dashboards” in Excel or using off-the-shelf business intelligence software available from companies such as Picture Where Qlik. It’s easier than ever to get a quick read of an organization’s health and pain points, in easy-to-understand graphical formats for non-financial people. Be sure to review these types of reports regularly with your CFO, outside of official presentation days. Pick his brain on the positive and negative trend lines that are formed from real-time company data.

Two businesswomen sitting at a table with a laptop facing away showing data visualizations

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3. What do you think is our most important key metric?

This is related to the first two questions, but with a much more specific purpose. In most businesses, there are a handful of important metrics that, if followed and optimized, will increase the success of the organization. Key metrics tend to affect revenue, profitability and/or productivity of operations.

But to go a little further commercially and philosophically, a business owner needs to know what his Most important key metric is. In other words, what activity, resource, or sales outcome is most critical to the current success of the business?

Your CFO or CFO, with an overview of business operations and day-to-day oversight of the finance function, can be a great partner in this exercise. But beware: it may take some time for your finance manager to get back to you, especially if they’ve been hired recently.

4. What should IT spend its money on next year?

In small businesses, and even in some medium-sized businesses, IT support is often very dispersed. Between installing and maintaining computers and mobile devices, and implementing “sticky” software that helps get the job done (like production software, Google Docs, Microsoft Windows, Slack, and similar apps), IT staff don’t always have the resources or time to fully review strategic technology initiatives.

So, if there’s one part of your staff that your CFO should integrate tightly with, it’s IT. A finance manager can bring return on investment (ROI) discipline to the various projects and purchases suggested by the IT department. In fact, you’ve hired your CFO for tasks like this: weighing the costs and benefits of each of the tools that help your business achieve both day-to-day work and long-term goals.

Suppose a manager at your architectural services company wants to order several new AutoCAD licenses. What is the payback period and what efficiency will the new licenses bring?

Or let’s create another scenario: the IT department suggests that your small flexible manufacturing company replace its outdated production costing software with a brand new system, which will (of course) have six figures. Could this purchase significantly increase profitability, or will it end up hurting profits due to installation complexity and steep learning curve?

Your CFO can help you work through project scenarios like this to determine whether to accept or reject an investment. Consider it the CFO’s duty to merge the budgeted IT wish list with the business strategy.

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5. What will our capital structure look like in five years?

The capital structure of a business reflects how it is capitalized, that is, how money has been provided both to found the business and to help it grow.

In some cases, entrepreneurial start-ups receive equity from day one and scale through self-funded growth.

In other cases, a company’s capital structure will consist of a mix of equity and debt. You can review a current balance sheet with your CFO to see exactly what your company’s capital structure looks like today.

If you plan to grow, it is wise to consider travel money in advance. You may not have a detailed strategic plan written out in five-year increments. But as the owner, you probably have a good idea of ​​where you’d like the business to be in five years. Will you need to change your capital structure to get there?

In other words, will you be required to invest additional capital yourself, bring in outside investors, add debt, or combine any of these three strategies? Or could your business provide the revenue and cash flow needed to achieve your goals on its own? Debt often plays a larger role in a company’s balance sheet as the company grows. You may want to read a primer on how small business owners can approach debt with some degree of confidence.

Your CFO can do the heavy lifting of modeling revenue, cash flow, capital expenditure, and more. on a spreadsheet. If projections show that your future capital involves heavy borrowing in year three, you can start working on those key banking relationships today. Like the cash flow teamwork we talked about at the start of this article, considering the capital structure with your finance lease is a hugely rewarding exercise, and it will reward you for the time spent time and time again.

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