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CFO – Outsourcing Options & Solutions for Small Businesses

 

 

 

 

Small to medium businesses are at a distinct disadvantage as compared to larger companies.  They may not be able to afford the experienced C level professionals they enterprise needs.  Since 1997 contract CFO firms such as the GMA3000.com directed by  Mr. John (Giancarlo) Meazzo, M.A. there is access to the best C level support.   GMA provides assistance as a contract or interim CFO (and other C level professionals) for just the amount of time required and afforded by clients.  GMA provided support to companies for typical problems such as:  melt down (loss of staff and systems) of the accounting department; lacking strategic plans and budgeting systems; no understanding on when or how reduce costs as business volume dropped substantially; fast growth lack of operating capital;  These are just examples of the many problems that need solutions from a seasoned financial manager.  Mr. Meazzo can be reached at 1.310.228.7721 or by email at: gmeazzo@yahoo.com

CEOs have an increasingly monumental task to manage and direct their enterprises.  From keeping up with new technology; understanding company financial needs;  valuating and planning for financial and human resources makes the need of a senior financial manager (CFO) essential for  survival .  The typical CEO may be excellent in operations and managing their enterprise.  Often they lack the experience in accounting and financial management. Thi is Why 50% of businesses fail the first year and 95% the first 5 years.

Competition is fierce and economy is not stable. There is a need to be proactive in making business changes and decisions to navigate through these difficult times.  Having good financial statements, budgets, cash flow projections and preplanned strategies to activate in the event of slow down in business are imperative.   With these considerations and a key to success and survival, an enterprise needs to have access to best C level support (part or totally outsourced).   To find the right support takes time!   To  look for support at the last minute is not advisable.

 

Planning for staffing in the Accounting Department

 

Owner of the company or CEO :

 

1.  Is investing most of his time in sales and marketing and does not have much time or experience in managing the accounting department. Is not certain if the accounting staff is performing at a high or required level of effectiveness and productivity.
2.  Does not know if the current financial staff has the required experience to perform duties beyond the core responsibilities.  Are they able to assist executives in creating new opportunities; foresee upcoming financial problems and assist in strategic planning?
3.  Concerned about lack of internal controls.  Not quite sure of all safeguards are in place to protect the company from theft.   Are there safeguards in place to eliminate opportunities for theft? (see article of why companies fail first year: http://www.gma3000.com/Fail.htm )
4.  Is not certain it the Controller or staff accountant is qualified or experienced in financial management.  A good part of the work of the highly paid accountant is taken up by performing clerical (low pay) tasks.  How to resolve the over/under employment of staff?   Is the executive qualified to know if he needs an accounting supervisor, accounting manager, controller or CFO?
5.  No support from accountant in planning and providing “think tank” advice and services.  Accounting manager has little or no education in accounting and financial management and cannot really train or manage the accounting staff.
6.  Does not understand the accounting software and does not know how to use the financial statements for managing the enterprise.  Are the financial statements sufficient or are there other financial reports needed to manage the enterprise?  What key reports should the CEO receive daily, weekly or monthly?
7.  Operates day to day without a strategic plan or budget.
8.  Is not certain of the breakeven point for the business.
9.  Does not know the types of management reports he should receive from the accounting staff  so that he can understand the ergonomics of his business, causes and effects of changes in business volume.  Does not understand how to develop and compile key performance indicators (KPI), the basis for budgeting, planning and resource management.
10.  When there is turnover in accounting staff, has to invest time in training new temps or replacements.  Takes much time from his other important tasks.  Accounting falls behind and causes a lot of stress.
11.  Too busy and not experienced is setting business strategic plans with goals and objectives.
12.  Not certain how to flex the staff and costs depending upon the volume of business.
13.  Doesn’t have a cost reduction plan in place in the event of reductions on volume of business.

 

Case study.

 

Service Company: 10 employees, $10 million in revenues, $90,000 budget for Controller. Need to hire experienced controller to handle accounting department and take on the financial management needs of the company. Current accounting manager/controller left or about to leave company. Needs: (example, actual needs will vary for each company) Identify and fix problems (or develop new accounting system for start-up) with accounting/finance department.

 

Typical areas needing attention: Accounting system to support financial statement preparation by product lines; by revenue/expense centers and divisions (or other areas of responsibility); consolidated income statement with inter-company eliminations; internal controls; a capital and operational budgeting system; analyze and report on budget/actual variances; prepare break even analysis; internal audit and controls system; finance dept. policies and procedures; evaluate business performance against industry bench marks or standards; ensure profit margins (product line and department) are reported, evaluated and managed;  manage the revenue cycle insuring proper rate setting (product and service pricing) is performed;  procedures are in place for write off of bad debt;  that “days in AR” are adequate; there are no “lost revenues” due to inadequate revenue recording systems; eliminating payroll error factors; insuring adherence to payroll labor laws; reduce costs without effecting client satisfaction and quality of services; train managers in financial management concepts; develop key performance indicators (KPI) reporting system; ensure staff works at 100% of productivity;  understand the need to reduce or increase staff based upon changes in business volume; evaluate mergers and acquisitions opportunities; develop data mining solutions for business management; ensure adequate insurance coverage; develop corporate governance policies; succession planning; assistance in strategic planning (power of collaborative diversity)

 

Solution: A senior financial manager is needed to plan, manage and implement systems to satisfy the needs (partially listed above) of a typical enterprise. When planning to hire a full time financial officer, the CEO should consider outsourcing that position as many companies now do. To satisfy the above needs of a company, GMA  for example, would provide its client a high level CFO (35 or more years of multi-industry experience) for 10% of the time, a Controller for 30% and an Accounting Manager for 60%. Based upon the needs of the client the percentages may differ.

 

In some cases there may be a mix of CFO and Accounting Manager or controller! This may total 1 full time equivalent (FTE) and most likely, at the same cost of one existing or planned hiring of a controller. Needs would vary based upon the size and needs of the business. CEOs should evaluate their current staff and determine if the staff can provide their company with the support and financial management they need (not the other way around). It does not necessarily mean to change the finance staff. Rather, it means understanding their abilities and obtaining assistance through companies such as GMA, for whatever the company lacks in expertise.  Let’s not forget that experience comes with time and diversity in various industries.   It has been found that controllers or accounting managers that were promoted within the company without experience working in various companies or lack of training by an educated and experienced CFO could be disastrous.

 

Having one full time professional to perform all duties may not be the best strategy!. Likewise, someone who does not have the finance experience may undermine the viability of any enterprise. In a small finance department the typical full time professional will either be under or over qualified and/or under or over employed.  Many times an employed financial manager may not want to seek the assistance of a C level consultant. The reason is obvious. The financial manager may be concerned of how their CEO may view the request of a consultant. Also concerned if  the engaged CFO would have adverse finding on the tasks performed by the staff professional.

 

Relying on a senior accountant or a controller who does not have strong experience could be the downfall of a company. GMA contract CFOs professionals have firsthand experience in these matters!  If your financial manager leaves your employment, is the other staff able to continue with operating the finance department? We have seen companies fail as they grew too quickly without planning for such growth. Also, without the right supervision and internal controls, companies lost funds and became insolvent as a result of employee dishonesty.

 

Many of GMA’s engagements were due to a turnover in accounting staff, controllers and CFOs as well as a total collapse of the accounting and finance department. We saw firsthand what serious problems an unqualified financial manager can cause. By having this important position outsourced as in Choice 2 below, will allow continuity of services for when you experience a possible turnover, while providing the right mix of financial support and expertise.
Below is a one staff professional vs. GMA’s three tiered professional team. Which would you prefer to have?

 

CHOICE 1

CONTROLLER. 7 YEARS OF EXPERIENCE, SALARY $95,000

CHOICE 2

CFO, 35 YEARS OF EXPERIENCE, 10% OF TIME (FTE)

CONTROLLER 16 YEARS OF EXPERIENCE, 20% OF TIM

ACCOUNTANT 6 YEARS, 70% OF THE TIME

TOTAL SALARY $95,000

On Choice 1, the Controller may be skilled in supervising the accounting department and preparing financial statements. The Controller most likely will not have the knowhow (due to lack of experience) in developing strategic plans and determining their financial effects to the company; analyzing financial ratios and their trends; calculating the break-even point; analyzing and preparing for the effects to the company of changes in the economy (e.g. inflation – recession etc); developing and implementing operational corrective action plans; analyzing the budget to actual variances; bench mark comparisons; managing the revenue cycle and more.

 

Word of caution: companies sometimes believe that by hiring a CPA the problems will be solved.  Acronyms are just that, abbreviations, and a CPA or MBA behind someone’s name does not mean that the job can be done. Accountants that graduate usually choose the CPA route to perform independent audits and tax services.  Conversely, an accountant may decide to stay in the area of corporate financial management where a certification of public accounting would not be needed.  There are many great CPAs and many great financial managers that are not CPAs.  Bottom line, experience is the most important factor not acronyms!

 

We believe that having experienced operations financial managers (CPA, MBA or not) is KEY to a successful enterprise. These financial managers will work with CPA, typically for the latter to for perform audits and tax returns. Asking for our assistance is very simple by clicking here.

 

          Mr. John Meazzo, M.A. Principal of GMA may be contacted directly by calling 310-228-7721.

 

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