One of the most important things that a valuable CFO can provide to his or her constituents (e.g., business owners and entrepreneurs) is the ability to not only understand, but explain, what the financial statements are truly saying about the business. Moreover, the CFO has to toe a careful line between understanding the details of the financial statements and understanding the business owner’s interpretation of those results. It is usually during the month-end close conversations with the business owner or while preparing for Board meetings that the expertise of a trusted finance partner really shows its true value — and its ability to transform an entire business model and culture in the long-term.

The most memorable, thought-provoking, and impactful discussions usually start with an entrepreneur’s open-ended questions. Some examples are:

What does this mean? For many of our clients, we implement the concept of Key Performance Indicators (KPIs) which will showcase how a company is doing on a macro level. There are some metrics that focus on liquidity, such as current ratio or working capital ratios. There are others that focus on the strength of your financing, such as return on assets or debt/equity ratios. If you focus on the KPIs, it allows the CFO to steer the conversation away from the “emotional” aspects of running your business and more on the “blocking and tackling” — the fundamentals of what is occurring in the business. For example, interest expense accounting for a growing amount of free cash flow combined with an interest rate environment that is rising is an example of a higher-level conversation that owners should be having with their finance chief.

How do I compare to others? Let’s say you provide statistics such as “Our days sales outstanding is 60 days” or “Our return on equity is 13%”, to your CEO and the response is: “This is what the industry standard is so it does not alarm me.” (Insert alarm) This is the kind of response (and lack of specific know-how) that can negatively impact the operations of your business. Using the DSO example, a response that we have provided in the past (by contrast) goes something like this: “Do you realize that if you were able to decrease the average balance of your outstanding receivables by 2 days, it would mean an extra $500,000 in cash in a year? Is that something that is worth going after?” The answer is obvious — I mean, who doesn’t want an extra half a million dollars? But more importantly, it shifts the conversation to how we can shorten the time to collect outstanding receivables. Do you need extra employees? Can we outsource the function to a company to focus on this 100% of the time? These are important questions that spark discussion.

What do I do now? This is where we want to be focusing our time and effort when speaking with C-Suite executives. We have fared well through several “booms and busts” in the economy and have taken companies from start-up status to becoming a $100 million dollar business. We can speak to what we have seen occur and how it positively or negatively impacted the future of the company that we were working with. When we combine the experience factor with our supporting statistics and metrics, we provide compelling cases, and our clients are comfortable adopting specific suggestions. This is the value-add that differentiates us from other CFOs and will ultimately make you and your business stand out from the rest of the industry.

In summary, a trusted finance partner is to be able to take data from an organization’s financial statements and turn it into information that can be digested by the business owner. He or she needs to be able to understand the financial picture of the business and know that the advice provided is the best available. Being a true CFO means more than just making sure that accounts are reconciled and debits equal credits; it means that you can see the forest through the trees and help companies maximize their valuation and impact.

Take-away: If you could use a finance partner to help you with your business and guide you through the challenges you face, contact Scott or Brian at info@acceleratingcfo.com. We can provide the support and guidance that will determine how to best allocate your resources and optimize your company’s profitability and cash flow.

Brian Califano