The Five Business Challenges That Give a CFO Heartburn

 

business-challenges, cfo

Being number 2 has its perks. Unfortunately, the stress that comes along with the gig isn’t one of them.

Much is expected of today’s chief financial officer. Tough business problems like liquidity and cash flow, finding and retaining good talent or even how to approach selling a company can induce heartburn in the most senior and tenured CFOs.

However, their experiences can help other C-level executives prepare and plan for these situations, even when the issues don’t exist – yet. Understanding the issues from a CFO’s point of view can help their counterparts, like CEOs and business owners, spot trouble even before it begins.

Here are six business challenges commonly faced by CFOs and what every CEO and business owner should know when facing these issues.

  1. Finding and retaining good talent

It’s not always an easy task to find the right fit for an open position at your company. But even when you do, keeping them might be even harder. While baby boomers might have stayed at one job their whole professional lives, millennials are curious explorers of their own careers. Research suggests that by the time today’s college graduate turns 30, they’ll have held more than a dozen or more jobs.

Angie Chin, a former CFO with Coffee Bean and Tea Leaf and Yum! Brands, said that even with the unemployment rate being 5.5%, finding a match off the street isn’t as easy as it seems. “As a matter of fact, there are many more resumes to weave through and [with that comes] having to do more work in terms of finding the right person with the right fit.”

Facing this issue today? One way to stay ahead of the hiring game is to source and groom talent from within. “In many cases, I try to look within the company to see if there’s anybody that could be mentored and groomed to be where they need to be, to build those specific roles,” Angie says. Putting formal programs into place to make this process easier might be something to consider at your company.

  1. Complicated cash cycles

Not surprisingly, fast-growing companies today run the greatest risk of having the most problematic cash cycles. In the midst of growing offices, expanding business plans and beefing up inventory, CFOs need to be able to monitor more than their P&L to stay ahead of the game.

“The pulse of a company is literally with the real cash-in, real cash-out,” says Angie.

John Loevenguth, a turnaround CFO who travels around the country stabilizing companies in distress, says that his first assignment on any job is finding out what the cash flow is. “I don’t care about accrual-based accounting or GAAP,” he says. “It’s all about cash. What’s coming in, what’s going out. What’s the payroll? When is your tax deposit due? When are your leases due? When do vendors need to be paid? When do your loan payments need to be made?”

Facing this issue today? Loevenguth has seen much success by forecasting cash flow thirteen weeks at a time, a method best used as a “big picture” tool to see how much cash is required on a forward rolling basis. “It’s a good indicator of what’s going on in near term, so you can plan for operational shortfalls,” he says. “Once you’ve done them for several cycles, it’s a good predictor of what’s going to happen down the road.”

  1. Involvement in Operations

Traditionally, the responsibilities of a CFO range from financial projections to annual operating budgets, to equity and debt negotiations. However, CFOs don’t always have the luxury of focusing solely on the money. A recent study by Accenture shows that high-performing businesses are notably more likely to have CFOs whose influence in key strategic activities has grown over the past several years. Translation? Bring the tough problems to the CFO.

“You know the CFO is not just a debits and credits person,” says John. “Not just an accountant to make sure the books are closed and everything’s in accordance with GAAP. The CFO’s often the number 2 person in the company and relied on very heavily to think outside the balance sheet and the P&L to get involved in operational issues.”

Facing this issue today? CFOs can play to their strengths when getting involved in other parts of the business. “As CFOs, we have the mindset of doing due diligence and research, and in some cases, I have presented business segments that the company has never even looked into,” says Angie. “CFO’s bring that to the table, and presenting a different point of view could also drive revenue, not just a cost-containment and cost measurement of the financial performance of the company.”

  1. CEO and CFO dynamics

While many organizations have CEO/CFO teams that not only work well together but use their good working relationship to foster that teamwork throughout the company, others aren’t as lucky. A recent discussion on Proformative.com, an online resource and professional network for senior finance, accounting and related professionals, shows that not having a solid financial plan and discipline to monitor the actual results and compare them to the plan is what causes tension in most CEO/CFO relationships.

However, as most relationships do, it all boils down to trust. “The fundamental element that is needed in a partnership is the trust and the intent of where it’s coming from,” says Angie.

Facing this issue today? Even though a CEO and CFO will sometimes focus on different areas of the business in day-to-day operations, it’s important to establish a partnership that will carry them through any obstacles they may face. “The point of view that I always want to share with a CEO is we’re literally driving the company forward together with a common vision, with a common goal and ultimately I’m supporting his or her success as the CEO of the company,” Angie says.

  1. Getting companies ready for sale

According to a newly published study by BizBuySell.com, the Internet’s largest marketplace for business buyers and sellers, businesses spend more than $35.5 billion annually on suppliers and vendors during business-for-sale transitions. And according to John, selling a company is a long, arduous process – especially for the CFO, who is really the point person for the transactions.

“To sell a company you need to scrub it up and get the accounting books in order, you need to clean out all the sort of the junk that’s buried in the PNL,” he says. “You’ve got to be involved in the due diligence side as well in terms of what’s expected of you, when potential buyers come in, what kinds of information is going to be presented, in what format is it going to be? You have to answer a lot of questions. “

Facing this issue today? The best way a CFO can prepare for the sale of a company is to know the strengths and weaknesses of the business before even stepping foot into this situation. “CFO’s really have to know that the ins and outs of what is impacting the business and what the levers are that are coming in and out of the business equation,” Angie says.

Cerius Executives has successfully helped a variety of companies, from small, startup ventures to the Fortune 100, overcome their most challenging business problems. For more information, please visit www.ceriusexecutives.com or call us at (888) 565-5289.

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