Many small and medium-sized businesses assume they need a CFO to reach their financial and business goals. The reality? Most just need robust accounting, insightful reporting, advanced analytics, and a strategic partner who can challenge their assumptions. 

Here's why zeroing in on these focus areas—and leveraging data to improve decision making—can be more impactful (and less expensive!) than a CFO for most businesses.

The Role of Accounting, Reporting, and Analytics

1. Accurate Accounting:

• Foundation: Accurate accounting forms the backbone of any business. It ensures that all financial transactions are recorded correctly and timely.

• Impact: Good accounting practices provide a clear and accurate picture of the financial health of the business, helping to spot errors and avoid potential financial pitfalls.

2. Insightful Reporting:

• Transparency: Regular financial reports offer transparency into business performance. Key reports include profit and loss statements, balance sheets, and cash flow statements.

• Decision-Making: These reports help business owners understand where money is flowing, empowering leaders to make informed financial decisions.

3. Advanced Analytics:

• Data-Driven Insights: By examining financial data to identify trends, forecast future performance, and uncover actionable insights, businesses can use data to chart their path forward.

Challenging Assumptions: The Key to Better Decisions

Role of a Strategic Partner:

• A strategic partner can be a financial consultant, an experienced accountant, or a part-time FP&A professional who understands the business and its market.

• This person’s role is to challenge assumptions, question the status quo, and provide a fresh perspective on the business’s financial strategies.

Benefits of Challenging Assumptions:

• Identifying Risks: By questioning existing assumptions, businesses can identify potential risks and mitigate them before they become significant issues.

• Uncovering Opportunities: Challenging the status quo can reveal new opportunities for growth, efficiency, and profitability.

• Improving Accuracy: Regularly questioning financial assumptions leads to more accurate financial planning and forecasting.

Working with Data: Connecting the Dots

1. Gathering Data:

• Comprehensive Data Collection: Collect financial data from all relevant sources, including sales, expenses, payroll, and inventory.

• Real-Time Data: Implement systems that provide real-time data to ensure timely and accurate decision-making.

2.  Analyzing Data:

• Trends and Patterns: Use analytics tools to identify trends and patterns in the data. This can include seasonality in sales, cost fluctuations, and cash flow cycles.

• Comparative Analysis: Compare financial performance against industry benchmarks and historical data to gain context and insights.

3. Communicating Data: 

• Clear Reporting: Present data in a clear and understandable format. Use visual aids like charts, graphs, and dashboards to make complex data more accessible.

• Regular Updates: Provide regular financial updates to stakeholders to keep everyone informed and aligned.

4. Making Better Decisions:

• Informed Decisions: Use data insights to make informed decisions about pricing, budgeting, investment, and strategic planning.

• Scenario Planning: Develop multiple scenarios based on different assumptions and data points to prepare for various outcomes.

• Continuous Improvement: Use feedback from data analysis to continuously refine and improve business strategies.

Example Scenario: Data-Driven Decision-Making

Imagine a retail business experiencing inconsistent monthly sales. The owner works with a strategic partner to leverage data for better decision-making:

1. Gathering Data:

• Collect sales data, customer demographics, inventory levels, and marketing spend.

2. Analyzing Data:

• Identify trends showing higher sales during specific months and a correlation with marketing campaigns.

• Notice a pattern of stockouts during peak sales periods, affecting overall revenue.

3. Communicating Data:

• Create a report highlighting sales trends, marketing impact, and inventory issues.

• Use visualizations to show the correlation between marketing spend and sales increases.

4. Making Better Decisions:

• Increase inventory levels before peak sales periods based on historical data.

• Allocate more budget to marketing campaigns that have proven effective.

• Develop a contingency plan to address potential supply chain disruptions.

By focusing on accurate accounting, insightful reporting, advanced analytics, and a strategic partner to challenge assumptions, businesses can connect the dots and make data-driven decisions. This approach not only enhances financial performance but also drives sustainable growth and long-term success.

Think you need a CFO? 

You might just need to get back to the basics.