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THE 5 MINUTE FRACTIONAL CFO

062: The Four Services a Fractional CFO MUST Offer

Oct 13, 2023

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062: The Four Services a Fractional CFO MUST Offer

Oct 13, 2023

The market changes all the time. 

The economy goes up.
The economy goes down.

It seems like it's either feast or famine. No middle ground.

Despite what's happening in the economy, I've found that there are a handful of services that fractional CFOs need to be offering their clients in every season. 

Don't let the drama of the economy confuse your mission as a fractional CFO: to help your clients understand their numbers so they can make better decisions. 

What are those requisite services?

Let's dive in... 

Review of the Financials

I like to review the P&L, Balance Sheet, and Statement of Cash Flows on a rolling 12 month basis.

What we're looking for are: 
• Trends
• Outliers
• Unexpected results
• Major deltas from industry averages or historical averages

It's important to stay as far away from the decimal as possible during these reviews.

Also, avoid the temptaion to dissect things at the transaction level during these reviews. This is NOT the time to haggle over if an expense should have been categorized as meals and entertainment or travel. 

Cash Flow Forecasts

I don't care if your client is on top of the world or if they're in the deepest hole ever - they need to have a cash flow forecast in place.

The only question to answer is what time horizon should that cash flow forecast cover. 

For businesses that are doing well, a 12 month forecast is usually sufficient. 

But for businesses that are currently tight on cash, expect to be tight on cash soon, or are otherwise nervous, a 6 or 18 week cash flow forecast may be approrpriate. 

In either case, it's important to remember that the client HAS to be involved in the process of updating the forecast. They have operational insights that a fractional CFO alone just won't have. 

Budgets and Projections

I take a different approach to budgets and projections than a lot of other fractional CFOs. 

I don't subscribe to the latest trends in AI modeling.
I don't stress over three-way forecasts. 
Accuracy down to the decimal? Meh.

My goal for projections is that they give the business owner and decision makers a clear (not exact) understanding of where they're financials headed.

More importantly, I want to give them a tool they can use to "sandbox" ideas and see how they'll impact profitability and determine affordability. 

🤷‍♂️ Can you afford to hire a CMO? 
Put it into the projections.

🤷‍♂️ What's the impact of pricing on margins? 
Put it into the projections. 

🤷‍♂️ How much do you need to cut costs by to increase net profit by 5%
Put it in the projections. 

I've found that as I empower my clients to use the projections tool more and more, they become less and less reliant on me to answer simple questions. 

This allows me to spend my time with them on higher level, higher value conversations. 

This is invaluable in good times - and in bad.

Goals and Accountability

Every business needs goals.
Some actually have them.
Few have written goals.
Very few have a plan.

As fractional CFOs, we are in a unique position to step into our clients' businesses and help them not only get written goals, but also help them understand EXACTLY what needs to happen to make those goals become a reality. 

We get to give them the roadmap that they desparately need. 

Make (written) goal setting part of your services for every CFO client.

...but make sure accountability is part of your services as well. 

As goals are written and action plans identified, make sure that your clients can count on you to help hold them accountable.

Support them when they need it.
But sure as heck call them out when they need it.

You've probably noticed that there's nothing too sexy in my list of the four required services. That's intentional. I like to keep things simple because simplicity makes things understandable. And when we understand what's going on and what needs to happen, there's a higher chance action will get taken. And action unlocks impact.

I'm here to make an impact, not to be sexy.

Hope this is helpful my friend.

Your coach,
Michael

Whenever you are ready, here are 3 ways I can help you:

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