Over the past few weeks, I have observed a lot of evidence telling me that Rockhampton is about to boom. Whether it is the flow-on from Gladstone or an extension of the existing support network for Bowen Basin mining, the signs are good that Rockhampton (and the Capricorn Coast) is facing a period of unprecedented opportunity.
While this is good news for the business community, being in a position to take advantage of these opportunities may be unfamiliar territory for many businesses. Expansion and growth cause rapid changes within the financial (and possibly physical) structure of the business.
Our research has shown that it is often the financial aspects of running a business that are least understood by business owners. Unfortunately, this is why so many small businesses fail in the first years. To really stay on top of financial matters, it is important to have access to reliable and trusted financial advisers.
As far as financial advisers go, accountants may be all that immediately comes to mind. But for comprehensive advice and support on the wide scope of business finance, you need to think about a CFO (Chief Financial Officer). Here are 3 reasons why:
1. Impartiality
A CFO is not involved in the day-to-day operations of your business, and is therefore able to take a broader ‘big-picture’ view of the financial implications of any decisions you make. I have seen situations where business owners have made investments in people or facilities without serious analysis of the likely outcomes, let alone whether the investment is the best option.
2. Independence
A CFO is able to establish budgets and forecasts to guide the business into the future, without relying on gut-feelings or the uncertainties of the economy and your competitors. Having a clear picture of the direction the business is headed makes a world of difference, especially in a fast-moving (or booming) economy.
3. Accountability
A CFO can establish controls over the accounting systems to ensure that they operate efficiently. They can also meet management’s requirements for information in a timely and accurate way. A one-page scorecard KPI (key performance indicator) system is also great in this area to help achieve targets and maintain accountability, while driving growth at the same time.
But how does this apply to local business? At what stage of growth does a CFO become necessary? This will, of course, depend on the financial skills existing within the business. Any organisation employing more than 5 people will have a need for some input from a CFO.
Your CFO does not need to be a full-time, internal employee. We act as external CFO’s for a number of our business clients, meeting regularly to consider the financial state of the business and to plan future direction. Knowing the outcome of a decision before the decision is even made (through financial models set up by your CFO) will often reduce the astronomical stress levels of operating a business.
To be ready for 2012, consider whether the financial decisions you have made during 2011 have been the best possible. If you find room for improvement, maybe it’s time to look for a CFO.
Terrific work! This is the type of information that should be shared around the web. Shame on the search engines for not positioning this post higher!