Generally, entrepreneurs start their business because they have strength in certain areas which would make the ventures tick. Some may be a good marketeer, some could be good and designing and manufacturing products, some may stumble on opportunities through good business contacts and so on. Above all, its the entrepreneurial spirit which is burning within the entrepreneurs which drive them forward.
On the other hand, cash is the bloodline of business. Any business which is starved of cash would not be able to survive. Sound financial management is essential to ensure the entrepreneurial spirit could be supported in order to create viable and sustainable businesses. This includes having budgets or financial projections, good understanding of cost of products or services, cash flow management, capital assets or project financing as well as the ability to appraise the financial positions and figure out plans for improvements.
Given the fact that not all entrepreneurs have the financial management skills, which may be the case for most of them, how could businesses enjoy the benefits of sound financial management?
In house Chief Financial Officers or Finance Directors could be one solution. Here, the business would have a dedicated qualified person to be responsible for the financial management. However, these professionals could be expensive and now days, difficult to be found. Most SMEs may have limited resources to afford a full fledged CFO anyway. So, is there another solution?
Why not consider out-sourcing the CFO services to firms which have the capabilities and are passionate to help entrepreneurs to be successful?
Under the out-sourcing arrangement, the scope of the CFO services could be agreed upon based on the needs of the business. For example, if the business has existing finance executives to take care of financial reporting, the out-sourced CFO could focus on more strategic areas such as developing cost strategies, reviewing cash flow requirements and identify options for the entrepreneurs to considers as well as identifying issues which result in financial issues and for those to be addressed in advance. This would focus the service to the areas which the internal staff of the business may not be able to address due to competency issues.
Out-sourcing the CFO needs of business would enable the business to have access to the strength of the whole firm which is engaged for the function, instead of just one or two individuals. This is critical given the mobility of talents now days. To a certain extend, this would manage the risk of people living half-way through the term of the contract.
The our-sourced CFO services would normally be structured for a fixed term with specific scope and fees. Additional needs would be negotiated separately. This would reduce the overall investment on the services as additional fees may be payable only when the needs arise.
An entrepreneur has to be honest in addressing the need for sound financial management of the business, especially under the challenging business environment. Why not start exploring whether your business would be better off if you bring in an out-sourced CFO?