When can taking on CFO services help your business and how can they improve your profitability and cashflow?

jamesk
June 14, 2022

What are CFO services?

All businesses have a single common objective – to improve profitability. Without the high-level expertise from a Finance expert, management may not be able to carry out the analysis that is necessary for a deep understanding of what drives the bottom line. This paper will discuss what CFO services are and how they can boost profitability and efficiencies for your business.

Why have CFO services?

At first glance, the thought of hiring a full-time CFO can be daunting given that they are usually very expensive and would be empowered to be the number two in your business. However, taking on CFO services gives you the control of taking on an experienced Finance and Accounting expert for your business without losing too much power and money in the process. They are primarily responsible for managing the financial risks of the business; be responsible for financial planning and record-keeping and providing financial reporting to higher management. CFO services can also assist with other services such as bookkeeping clean-up, managing payroll, and forecasting cash flow. Businesses in the UAE face an increasingly competitive, complex operating environment with much heavier demands being placed on them by regulatory and compliance legislations. The introduction of VAT in the UAE is a testament to that. This, coupled with the increasingly technical nature of global accounting standards, means that many businesses find they need access to high-level financial management but simply do not have the critical mass to justify hiring their CFO or to incur the fees of the ‘Big Four’ accounting firms to support them. Businesses also grow at different stages and their growth and development will require CFO services to match those stages. The following are examples of such scenarios: 

  1. Start-up and growth companies - many early-stage businesses and SMEs come to a point in their growth where their initial accounting strategies, processes, and systems are no longer sufficient. It is at that moment that they require an experienced and knowledgeable CFO to help find a way forward. 
  2. Mature small businesses experiencing challenging circumstances - mature small and medium-sized businesses may find that their in-house finance team needs to be supplemented by an experienced CFO to deal with a specific set of challenging circumstances such as business underperformance, cash flow issues, and inadequate controls and reporting. CFO services can assist with the strategic planning and option evaluation, business plan development, fundraising, financial rescheduling/refinancing, business process re-engineering, and remedial action plan development and implementation. 
  3. Businesses seeking to acquire or sell their business - where the acquisition of a complementary business makes strategic sense or an owner wishes to sell all or part of a business, an outsourced CFO can help make it happen by driving the strategic planning, identifying targets, developing synergistic business plans, assisting sale/purchase negotiations, preparing financial evaluations, coordinating the sale and purchase agreement process, preparing for due diligence, raising funds and integrating an acquisition. They can even save the business money by minimizing overruns of professional fees incurred in this process.

What CFO services can help you achieve?

Many small businesses in the UAE begin their first accounting hire with a Bookkeeper or a Junior Accountant whose role is to raise sales invoices, input purchases, and make payments to supplies. Their skills and knowledge are usually limited, making them unable to assist with strategy and more complicated areas of finance. You, as the owner of your business, may not be the right person to manage these employees to enable them to work more efficiently. This is where CFO services can help you.CFO services would initially have the following tasks to help your business which would include:

  1. Formulating strategy: The CFO works closely with the CEO and manages financial plans that ensure that the financial objectives of the company are achieved. The growth in profit to maximize shareholders' value is included as a part of this strategy. The analysis of the various risks is minimized using better management decision-making and innovations.
  2. Operations: The CFO understands the full functioning of the financial operations of the business. The CFO needs to understand the full business cycle in and out and needs to ensure that maximum output is delivered.
  3. Facilitator: The CFO needs to ensure that accurate financial documents are given to the concerned person for the efficient running of the business. The various control procedures have to be followed to ensure that the financial reports reflect the true picture. The internal operational controls and processes should also be scrutinized.
  4. Risk Management and Compliance: The CFO initiates new company policies and procedures to keep the business up to date with local regulatory compliance. For example, with the introduction of VAT in the UAE, businesses now operate under additional scrutiny when reporting tax submissions to the Federal Tax Authority. CFO services can take this burden away from business owners to ensure the company complies with the rules and regulations.

Other areas where CFO services may benefit your business might include: helping to reduce costs and fixed overheads, optimizing working capital management, providing management with up-to-date reports for decision making, reorganizing the finance function to improve efficiency, reducing time spent on financial and management report preparation and working on your behalf with external professionals such as bankers, lawyers, auditors, and regulatory bodies. Along with the above areas, CFO services can also manage the day-to-day activities such as ensuring controls and procedures are adhered to, managing cash flow, and monitoring key performance indicators of your business.

The risks of not having a CFO

Many businesses in the UAE appoint a bookkeeper to process accounting transactions and payments but having a junior person be the main point of contact for all matters relating to finance and accounting can prove to be unproductive. The lack of CFO expertise and capability in a business can lead to:

  • Inefficient cash flow and working capital practices
  • Inefficient and weak processes
  • Wasted effort and directionless staff
  • Loss of investor and client confidence
  • Critical resources not being available when required
  • Missed business opportunities and misguided decisions
  • Loss of revenue
  • Exposure to unnecessary legal or tax risks

An outsourced CFO function is seen by more and more small businesses as the best way to focus on what they know best – their business. Working with a firm that provides CFO Services means you tap into a wealth of knowledge and experience, vital to survival and success. An outsourced CFO function also gives you the benefit of an outside perspective, when sometimes you can’t see the wood for the trees. Although many business owners need to retain the control of their finance function – the result is the outsourcing of day-to-day operations (such as payroll) with the option to outsource other functions (such as tax planning, key performance indicators, etc.). An outsourced CFO function means the expert helps to let you take charge of your cash flow, your financial strategy, and ultimately your company’s success. If you would like to know more about Xero or would like to take up our discounted implementation offer, submit your contact details here and one of our consultants will be in touch.

DISCLAIMER

This article is an extract from the Xero website and is written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of its contents.

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