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Fractional CFO Services Company Expands to Nashville

Fractional CFO Services Company Expands to Nashville

Columbus, OH – October 13, 2020 – FocusCFO announces it is now providing fractional CFO Services to small and medium-sized businesses in the greater Nashville area. The company, based in Columbus, OH, has 20 years of experience helping entrepreneurs with cash flow, business risk and scalable growth, resulting in increased value in their business.

“Business is moving at the speed of light and today’s business owner must stay flexible and creative to meet the competitive demands and ever-changing financial risks,” said Brad Wolf, Nashville Area President. “As an entrepreneur in Nashville since 2011, it is exciting to have FocusCFO be a part of the Nashville business community and to help build our local economy through support of small business.”

Support is provided on a fractional basis, meaning clients get all the advantages of a full-time CFO on terms that are flexible and affordable, working exclusively onsite at the client’s office under a recurring schedule that fits within their budget. Typically, engagements are one to two days per week, but can vary.

“It is critical to have strategic professional advisors whose tenure can anticipate how to add value and side step challenges in the transitioning marketplace,” continued Wolf. “At FocusCFO we stay at the business owners’ side to ensure the forward implementation of their financial goals,” he added.

“This gives entrepreneurs running small and medium sized businesses a level of internal CFO support they never envisioned they would have access to,” said Brad Martyn, Founder and CEO.

“Nashville is the first southern regional market for us, which will be followed up very shortly with Charlotte and Greensboro,” continued Martyn. “We’re honored to serve these communities and look forward to building many lasting relationships there.”

About FocusCFO:

Founded in 2001, FocusCFO is a leading onsite fractional CFO services provider, with more than 100 CFOs and Area Presidents serving clients throughout Ohio, Michigan, Pennsylvania, Kentucky, Indiana, Tennessee, North Carolina and West Virginia. FocusCFO works closely with small to medium sized businesses, helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. FocusCFO provides services on a fractional basis, meaning clients get all the advantages of a full-time, seasoned CFO under terms that are flexible, affordable and within each client’s budget. What really sets Focus CFO apart is their CFOs work exclusively onsite at the client’s office under a recurring schedule. Typically, engagements range from two days a month to several days per week, and many clients are in the $2 to 6 million revenue range when they initially engage with FocusCFO.

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Making Sense: Budgeting

Making Sense: Budgeting

Creating an effective annual budget that is aligned with a clear vision for the future of the company is a goal any business owner will agree on. Timely, accurate, and thorough budget preparation helps to quantify and achieve clear company goals for the next year. The information needed to create the budget will come from many sources:

  • The company’s historical budgets

  • KPIs extracted and analyzed from past and current financial statements

  • Sales forecasts and planned growth initiatives

  • Other internal and external information

Learning from the Past

When examining historical budgets, it must be determined if those budgets aligned with the company’s goals for those years, and if the goals were achieved. These budgets and their analysis will help to create the foundation of a new budget that will be modified based on the other sources of information.

Looking at KPI’s

The analysis of KPIs will determine actions that need to be taken to improve those metrics throughout the year. These actions may reduce or increase costs. The KPIs, combined with other factors, will impact sales forecasts. If projections indicate that sales will increase, supporting those additional customers may require things like additional inventory, operational capacity increases, and higher customer support costs.

Sales Forecasts

If the company plans growth initiatives for the year, which may involve increasing sales and marketing, expanding product lines, or expanding into new markets, the expected costs and additional planned revenue, as well as the costs of the necessary higher customer support capacity must also be part of the budget.

Internal and External Impacts

Planning and budgeting also must consider other factors. For example, if profitability is largely dependent on labor costs, current and projected trends in labor costs must be analyzed. This is true of any other major costs of the company, such as inventory and materials. Industry and market trends in general must be thoroughly examined as well.

Multiple budgets may be required. Creating worst case, best case, and mid-range budgets will prepare the business owner for various scenarios.

Process is Everything

A clear budgeting process also must be in place. Pete Gstalder of FocusCFO says that an effective CFO should “oversee the implementation of a comprehensive forecasting and budgeting process. This is a forward focused process that forces the organization to plan for the future in a very detailed manner.” When developing the process, the following should be considered:

• Who will be involved in the process? (which should be driven by the CFO)
• What systems will be used to create the budget?
• What resources of information (i.e. market and industry information) will be used?
• Who will monitor the budget and what are the potential actions that may need to be taken if the budget needs to be modified? For example, if sales forecasts are not being met, what costs will need to be reduced?

Budgeting is an ongoing process – no budget is set in stone. It is dynamic and must be adjusted continuously based on real results.

Most importantly, the budget will be determined based on the company’s goals. However, don’t lose sight of how the budget will also impact the company’s goals by helping to determine if the goals are realistic based on all the factors analyzed. In other words, the strategic plan and the budget must align.

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Making Sense: Cash Flow Analysis, Forecasting, and Management

Making Sense: Cash Flow Analysis, Forecasting, and Management

Internal cash flow, also called cash flow from operations, is the single most important financial factor in a business. It is critical to understand cash flow, and how it differs from net income, so that steps can be taken to impact it. This is perhaps the most important role of the CFO. Having strong cash flow enables a business owner to run their company efficiently and invest in growth initiatives. Mike Dodson of Focus CFO describes this well. The CFO will “control the cash flow position of the company, understanding the sources and usages of cash and projecting the cash outlook for the company in a clear and concise manner.”

Many business owners report a profit on their income statement, but have difficulty making sure they have enough cash on hand to pay all obligations when due. Knowing how much cash the business generates, from what sources, and specifically when it will be generated is very important. Knowing how much cash the business will need and when it will need it is equally important. It is critical to be certain that the business will have enough cash for essential items such as payroll, vendor payments, and quarterly tax payments.

The 13-Week Rolling Forecast

The best way to manage a business in order to have the right amount of cash at the right time is to create, maintain, and utilize an effective rolling 13-week cash flow forecast.

A rolling cash flow forecast helps the business owner to anticipate future cash flows and positions, significantly reduces surprises, and enables the business owner the opportunity to take action to improve the company’s future cash position.

Managing Cash Flow

So, what impacts cash flow and how can it be improved?

✓  Accounts receivable – How fast is cash coming in the door? If customers have too long to pay or payments are not collected fast enough, the business has an accounts receivable asset but no cash.

✓  Accounts payable Cash flow can be impacted by negotiating terms with vendors so that the business has adequate time to pay without additional fees. The goal is to keep the cash coming in faster than it goes out.

✓  Inventory management – Cash invested in inventory is cash that is not in hand. The CFO will help to determine the optimal inventory level so that demand can be met, without keeping too much cash invested in held inventory.

✓  Costs – Costs may be reduced, or can be restructured to impact when and how expenses are paid.

✓  Bank line of credit –It can be advantageous to have a line of credit available to utilize during slow sales times, or when unexpected costs occur. It can also be used for growth initiatives.

A business owner will be able to sleep better at night knowing that the business has a plan in place to have the right amount of cash at the right time to handle its expenses. The best way to gain this peace of mind is to develop and maintain an effective rolling 13-week cash flow forecast and to take action based on the results to manage and control the company’s cash flow position.

About FocusCFO:

Founded in 2001, FocusCFO is the leading fractional CFO services provider, with more than 100 CFOs and Area Presidents serving clients throughout Ohio, Michigan, Pennsylvania, Kentucky, Indiana, North Carolina, Tennessee and West Virginia. FocusCFO works closely with small to medium sized businesses, helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. FocusCFO provides services on a fractional basis, meaning clients get all the advantages of a full-time, seasoned CFO under terms that are flexible, affordable and within each client’s budget. What really sets Focus CFO apart is their CFOs work exclusively onsite at the client’s office under a recurring schedule. Typically, engagements range from two days a month to several days per week, and many clients are in the $2 to 10 million revenue range when they initially engage with FocusCFO.

855-236-0600

Every Business Should Have a Professional Skeptic

Every Business Should Have a Professional Skeptic

The business model is the foundation of a successful business, and the CFO plays a critical role in building the optimal model for a company. The CFO tests the assumptions and presumptions of the business model, exercising his valuable role as professional skeptic. The CFO will look for potential improvements and enhancements, continuously looping that process periodically throughout the life of the business. The CFO helps the team place their plans and evolving culture beside the model to “defend” those plans or to realize they have moved beyond the original model and that is time to revise the model. Evolution does not justify failure to follow the model. It may call for changing the model and failure to do this is called chaos. A business model adopted and ignored is more dangerous than no model at all.

The business model is the foundation of a successful business, and the CFO plays a critical role in building the optimal model for a company. The CFO tests the assumptions and presumptions of the business model, exercising his valuable role as professional skeptic. The CFO will look for potential improvements and enhancements, continuously looping that process periodically throughout the life of the business. The CFO helps the team place their plans and evolving culture beside the model to “defend” those plans or to realize they have moved beyond the original model and that is time to revise the model. Evolution does not justify failure to follow the model. It may call for changing the model and failure to do this is called chaos. A business model adopted and ignored is more dangerous than no model at all.

Consider, a business may have a great product or service, but the business model to take the product to market must be designed and executed continuously and consistently across the organization. The CFO, with the CEO, should analyze the critical elements of the business model. This will lay the foundation of the company’s strategy and define the key tasks of the CFO going forward. According to Todd Whetstone of FocusCFO, “the CFO must have a strong understanding of the company’s business model and industry to build strategies to create additional value for the company.”

Understanding the Value Proposition

The first element to understand is the company’s value proposition – this is the heart of the business model. Is the customer’s problem being solved by the solution (product or service) the business offers in the best way possible? Are customers receiving the best possible value? The solution to the customer’s problem must also be solved as promised. In the market, the product or service may be positioned as a low-cost alternative to higher priced alternatives, or it may be positioned as superior to alternatives and come with a higher price. Either way, it must be delivered as advertised. The analysis should also consider whether the value proposition can be enhanced. Can new or better products be offered to current customers or to attract new customers?

Understanding the Revenue Model

Second, the CFO will evaluate the revenue model of the business. Pricing should be analyzed to make sure it is designed to ensure the highest revenue possible. The price may be too low based on customer demand or the prices of the competition. Conversely, it may be too high to attract more customers. The CFO will also look for additional revenue streams that can be added from offerings such as warranties, or customer support subscription plans.

Examining Costs to Bring Product to Market

Next, the CFO will comprehensively examine the costs of the company to find expenses that can be reduced, or even eliminated. This must be done in context, considering all other elements of the business model. If the company is offering a low-cost product in the market, costs of goods sold and other costs should be as low as possible, while still supporting a viable product. A higher priced product must have sufficient quality to support the price; hence higher costs to create and support the product.

Know Thy Customer

Additionally, the CFO must understand the company’s customers. Knowing who the customer segments of the business are is key to reaching them. There may be multiple segments already, and segments that can be added.

Understanding the company’s customers drives the strategies to sell and market the products, and the CFO will determine if these strategies are designed to produce the best possible ROI. For example, if sales are being made online through a third party, i.e. Amazon, would it be worthwhile in terms of costs and benefits to create a direct online sales and distribution channel? Additionally, are all potential sales channels being utilized? Can any be added, and what are the costs/benefits of doing so? These discussions can and will go on many levels.
From the analysis of these elements, a plan to improve, or even pivot the business model, can be developed to drive cash and increase the value of the business.

In summary, having a CFO who can play the role of professional skeptic will assure that the business model is well-managed and consistently applied across all departments and segments of a business. This will result in:

1) A focused team who are unanimous in their understanding and execution of the company’s methods, culture, and values.
2) Customers who are receiving consistent messaging and results.
3) A very nimble company that can quickly detect change and precisely respond to change.
4) And with adherence and constant management – efficiency will be maximized.

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Roles of the CFO, Controller and CPA Firm

Roles of the CFO, Controller and CPA Firm

By Mike Derringer

Roles of the CFO, Controller and CPA Firm

I was asked recently to give a presentation on the differences between a CFO and a Controller, and how both are different from your Certified Public Accounting (CPA) firm. This topic seems to fit my background, as I began my career in public accounting as a C.P.A. I later transitioned into private industry, working in various accounting positions including a Controller of a public company. I eventually moved more to the finance side of the company, which led to a CFO role. Since I’ve performed all three functions, hopefully I can shed some light on the differences.

Internal – Bookkeeper

To start with, it might make sense to look at a typical bookkeeper’s duties:

• Enter vendor invoices into QuickBooks
• Run checks for owner signature
• Send invoices to customers
• Post payments

Sometimes all of the above is performed by compiling bank transactions at month end and categorizing the activities into proper buckets into QuickBooks. This can easily be accomplished by downloading your bank files. Regardless of how it is done, it is essential that every company have a bookkeeper. A lot of times you’ll see the owner performing this function, or the owner’s spouse.

Internal – Controller

As companies get larger, more complex, or advanced, they may need to up their accounting firepower and add a controller.

Typical controller duties:

• Prepare/review Journal entries for monthly activity (cash to accrual accounting)
• Prepare month end financial statements
• Develop financial controls/processes
• Prepare financial metrics/monthly reporting
• Review or prepare:

      o A/R
           ▪ Set credit terms
      o A/P
           ▪ Negotiate terms with vendors
     o Payroll
           ▪ Oversee TPA for payroll and compliant tax reporting

Typically, this person is degreed, usually with a Bachelors in Accounting. Sometimes they are a CPA, and occasionally they also perform HR duties, so they also might have a background in HR.

External – Certified Public Accounting

All companies should have a CPA/CPA firm.  CPA’s perform:

  • Audit/Review/Compilation services
  • Tax returns

    o State
    o Local
    o Federal

  • Tax planning
  • Forensic accounting
  • Other services by CPA firms may include:
    o Valuations
    o Financial and wealth advisory services
    o Consulting type projects

CPA firms have employees that are just about always certified, obtaining their certified public accountant status (C.P.A.).

Internal – CFO

Back to the internal roles – again, as the company evolves and becomes more advanced, they benefit from having on their staff a Chief Financial Officer. CFO duties have evolved greatly over the years to be more operational and strategically focused, away from the accounting and even the finance circle. Typical CFO’s spend their time on:

  • Cash flow
  • Information Intelligence
           o Profitability (margin analysis)
                      ▪ By customer
                      ▪ By product

             o Drive healthy sales
             o Proper cost control/effective ROI

Operations connected to finance

             o Connecting the finance to the business strategy

  • KPI’s
  • Strategic planning
  • Forecasting/budgets

             o Cash flow forecasting

External partnerships and relationships

            o With bank
            o With CPA firm
            o With investors

Internal department relationships

         o
Sales
         o Engineering/ manufacturing/operations

  • Financial leadership and planning
  • SWOT analysis and strategic planning
  • Financial strengths and weaknesses

 

Most CFO’s have a degree, several an advanced degree, and most have significant experience in operations, as well as finance and occasionally accounting.

Your business needs will depend on where you are in the life cycle of your company. Early stage companies require both a bookkeeper and a CPA firm. As companies grow, they should have discussions with their trusted advisors as to when they need a Controller and a CFO. All companies can benefit from having both, as both will provide a return on their human capital investment. Obviously, fractional positions and fractional firms can bridge the gap until a full-time person is needed, thus providing an even greater ROI.

Mike is an Area President with FocusCFO based out of Columbus, OH.

855-236-0600

Making Sense: Sales Forecasting

Making Sense: Sales Forecasting

Forecasting sales for any business is an art, not a science, but is a critical discipline that business owners, in collaboration with the CFO, use to create operating plans and make informed management decisions. Sales forecasts estimate future sales volumes over a specified period of time, and they are essential to tracking and managing company performance. The sales forecast is the starting point for the operating budget that drives capacity planning, production, direct materials investments, labor investments, capital budgets, and more. As Jim McKinney of FocusCFO states “Forecasts help to shape and drive the implementation of the company’s strategy. Forecasts should be monitored and compared to actual results as the company’s future strategies are planned and implemented.”

Know Thy Best Customers

The CFO begins the forecast by evaluating the company’s best customers. Using KPIs for the business, a
definition of the company’s ideal customer can be created based on acquisition and maintenance costs, longevity, growth potential, overall profitability, or other factors.

Understand Your Market

The sales and marketing plan should consider the market size of these ideal customers and other
targeted segments of customers, how and where to reach them, and how much can be spent on sales and marketing efforts. This information will help to create an estimate of how many new customers can be acquired in a given time frame. When considering the sales and marketing budget, assumptions will have to be made about how much it will cost to acquire each customer. For example, if it takes $1 of marketing and sales to acquire one customer, how many customers will potentially be acquired over a period of time based on the amount of resources available? The plan and the forecasts should also differentiate between the number of customers the business wants, and the customers the business will be able to win.

Projecting Sales

Next, the CFO will analyze the mix of products and services these customers will buy, and how much revenue will be generated from each customer from different sources:

▪ New Business
▪ Up-Selling
▪ Retention/Contract renewals
▪ Cross-Selling different products
▪ Referrals

By projecting the number of current customers and potential new customers who will buy products, and how much revenue each customer is expected to generate, the foundation of a sales forecast can be created.
Sales forecasts also must be based on historical trends and current initiatives, as well as external factors, such as market and industry trends. Seasonal factors that influence buying patterns need to be considered as well, in addition to the general buying behavior of customers.

Forecast Modeling

The CFO can use systems and processes that will streamline the analysis of all these factors and create a sales forecasting model specific to the business. Models can also be built to create balance sheet and cash flow projections. Effective forecasting provides key leadership insights that will drive strategic management decisions throughout the year.

About FocusCFO:

Founded in 2001, FocusCFO is a leading fractional CFO services provider, with more than 100 CFOs and Area Presidents serving clients throughout Ohio, Michigan, Pennsylvania, Kentucky, Indiana, North Carolina, Tennessee and West Virginia. FocusCFO works closely with small to medium sized businesses, helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. FocusCFO provides services on a fractional basis, meaning clients get all the advantages of a full-time, seasoned CFO under terms that are flexible, affordable and within each client’s budget. What really sets Focus CFO apart is their CFOs work exclusively onsite at the client’s office under a recurring schedule. Typically, engagements range from two days a month to several days per week, and many clients are in the $2 to 6 million revenue range when they initially engage with FocusCFO.

855-236-0600