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7 Things To Ask Your CFO

If you have grown your business to the point that you feel you need some Accounting firepower, then this post is for you. Maybe you are considering hiring an accountant in-house. Or maybe you are looking into CFO services and aren’t sure what you should be asking them as you interview potential services. 

Here are 7 things you should ask your CFO. 

How’s my Cashflow?
How can I Increase the Accuracy of My Cash-flow Forecasting
At a Quick Glance, What Stands Out?
How Does My Capital Structure Look  For The Next 5 Years?
Am I Using The Right Metrics To Measure Business Performance?
What Is My Most Important Metric?
If And When the Going Gets Tough, Where Can I Tighten The Screws? 

How’s my Cashflow?

Regardless of what your business size or margins, your cash flow position is a vital metric to keep track of. Taking a daily look at your cash position allows you to develop a better idea of the seasonal ebb and flows of your business. 

When your balances are running tight, it puts your payments and obligations at risk. When your cash levels are really high, you are potentially losing out on investment opportunities that can keep you ahead of inflation. Having a high cash flow can also allow you to put money into vital areas of your business operations. 

Increasing the Accuracy of Present Cash-flow Forecasting

It is important to ensure that your company actually has a cash forecasting process. Without a well-crafted forecasting process, your cash flow will be unable to accurately reflect what you see on the reports. 

Having an accurate system of tracking cash-flow can significantly improve your business function. Being able to have a good estimate of cash balances projected for the following months and quarters makes for very smooth operations. 

A forecast that takes into account inputs from marketing, sales, operations, R&D, and other company functions reflects a more complete picture of the overall business. A good forecast can help your spot periods when your business would require new financing. 

At a Quick Glance, What Stands Out?

With more and more Accountants building visual dashboards in off-the-shelf business intelligence softwares, having a quick read of an organization’s health and pain points is easier than ever. And that’s why you should ask your CFO about metrics that stand out from a quick glance. 

Make it a habit to review reports and metrics with your CFO so you can pick on his or her brain. It’s not easier than ever to track positive and negative trend lines being formed out of company data in real-time. 

How does my capital structure look for the next 5 years?

A company’s capital structure reflects money invested in establishing the business and growing it.  

Some start-ups get initial funding in the form of owners’ equity and then expand their operations through self-funded growth. Other companies  will consist of a mix of equity and debt. You can review the current balance sheet of your business with your CFO to obtain an accurate overview of what your business capital structure looks like.

As your business grows, you’ll need to think about where your company is headed. Having a detailed strategic plan for the near future will help you identify if and how much you need to alter your capital structure for future growth. 

That could mean anything from putting in additional capital of your own to taking in outside investors. Or maybe the earnings coming in would be enough to check off those targets. 

A competent CFO can do all the heavy lifting for you by modeling earnings, cash flows, capital expenditures, and more. He or she would be able to project if your future capital would need any significant changes down the road. That will give you head start as you prepare for your changes in the near future. 

Am I using the right metrics to measure business performance?

Are you looking at the right metrics to measure the overall performance of your business? 

Does your reporting and analytics reflect the nature and scope of your business? 

Are you on par with the reporting standards of your industry?

A competent CFO would understand your metrics and can advise you on whether your reporting is giving you an accurate overview of your business performance. He or she can accurately identify your business risks and concerns. 

What is my most important key metric?

In most businesses, increasing an organization’s success can be tied to effectively tracking and optimizing a handful of important metrics. And those metrics usually tend to be revenue, profitability, and the productivity of different operations within the company. 

However, a business owner has to know what his or her most important metric is. What is that crucial activity, resource or sales event that has the biggest effect on business success? 

Your CFO should have a broad overview of all your operations and day-to-day oversight.

If and when the going gets tough, where can I tighten the screws?

This is a very important discussion to have with your CFO. Business is an unpredictable space. New companies enter and exit into the market all the time. 

And if that wasn’t enough to think about, the markets are also constantly changing as well. Hence you as a business owner need to be prepared for all the unknowns. 

Layoffs, cutbacks and other decisions in reactions to a dip in sales and cash flow can be difficult decisions to make. Especially if you don’t see them coming. And with the current market conditions and factors beyond your control, you would want to stay prepared for any turbulence down the road. 

You would want to ensure your CFO has a plan set up for you and that they have considered all the different options for different financial scenarios. A good CFO would have an inventory of ways to preserve cash if and when the need arises.