1. What Does a CFO* Do, Anyway?*Chief Financial Officer
2. Prepare timely and accurate financial statements: Timely – by 10th of following month. Accurate – Recurring expenses consistent with previous months / years. An estimate of quarterly / annual expenses such as Bonuses, Commissions, and Income Taxes, are recorded each month (Accruals). Bad debts / slow moving inventory /rebates, etc. accounted for. Consistent Revenue Recognition process. Bank Interest is recorded.
3. Cash Flow Forecasting: Start at bottom (cash needs) and work to top (cash requirements) Monthly recurring fixed expenses – payroll and benefits, rent and leases, sales commissions, interest, insurance. Monthly variable expenses – travel, advertising, repairs. Quarterly recurring expenses – income taxes. Principal payments on debt. Add all of the above to determine cash requirements.
4. Liaison with outside CPA Firm: Prepares year end financial statements and assists CPA with annual audit or review as required. Tax planning and payments for company and business owners. Proper entities set up to minimize taxes. Estimated payments made timely and calculated correctly. Info for tax returns submitted timely and accurately to CPA. CFO understands tax law and discusses changes with CPA Firm. CFO “double checks” work of CPA Firm.
5. Benchmarking: Comparing your company to industry / competitors: Gross Margin Percent Administrative Expenses as a % of Sales Revenue Per Employee A/R Days, A/P Days , Inventory Days Current Ratio Debt to Equity Monitor the above on a regular basis.
6. Breakeven Analysis: Like Cash Flow, start at bottom and work to top. Can be done on a yearly / monthly / weekly basis. Add up all expenses below the Gross Margin Line, be sure to include interest expense. Take this amount and divide it by estimated gross margin. Example: $150,000 of monthly expenses, 25% margin (150,000 / .25 ) = $600,000 Breakeven Sales.
7. Banking and Lending Relationships Are you getting the best deal from your bank? Loan Terms and Interest Rates Credit Card Discount Rate Remote Deposit / Lockbox On Line Banking Accuracy of Processing
8. Exit Strategies: Every business must have one: Owner dies at his desk and company folds. Bank or IRS seizes company for non payment of funds. Business passed to next generation or partners on an orderly basis through use of buy / sell agreements and life insurance. Business owner puts systems in place (Operational and Financial) so that business can function in his / her absence. Business can then be sold to the highest bidder with BIG CHECK to Owner.
