|On October 26, The New York Times published an article titled, “When Should a Small Business Hire a Finance Chief?” This piece deals primarily with growing businesses and some of the major issues they confront. I recommend this article as a good summary of the complex range of issues that all small businesses face.The article defines a number of tipping points that confront companies as they grow. But the primary issue was summarized by one business owner, who said: ”I needed to hire someone who could function as my business partner and allow me to step away from the books so I could manage other aspects of my business.”
Among the challenges that organizations face, the Times identified the following:
I would add cash flow and working capital management, as well as human resources and IT management, to the list. And the CFO is critical to exit planning.
Can’t Afford or Don’t Need a Full Time CFO? Hire One Part Time
As the Times points out, “no matter how small, any company can benefit from having a finance chief to help organize its finances and track its performance.” But a full time CFO usually commands a six figure salary plus benefits. The solution, say the Times, is to hire a part-time CFO. It is sort of like a time-share condo: you get the high quality seasoned finance leader you need for a fraction of the cost of a full time CFO.
- The Chances Are Pretty Good Someone Is
|Recently one of my client’s employees picked up a check from a customer and cashed or deposited it (not sure yet). While this type of theft was pretty brazen (and stupid), it does give me an opportunity to remind people of the obvious ways employees steal from them.It is not a nice thing to think about but employee theft is rampant in small to mid-sized businesses. It never ceases to astound people that a trusted employee could steal from you. It angers you and makes you sad, but it is happening every day. Large amounts are being stolen from businesses both small and large.After the Enron debacle, Congress passed “Sarbanes Oxley” to tighten the responsibility of the accountant to detect fraud. Talk to someone in the accounting community about SOX and they will roll their eyes and heave a large sigh. In all levels of the attest function performed by accountants (compilation, review and audit) SOX has had an effect. The result of this increased testing is that more employee theft than ever before is being uncovered. In fact, the AICPA (American Institute of Certified Public Accountants) released a recent study that has some astounding statistics. According to their survey of members, up to 82% of small to mid market businesses have or will experience employee theft. Of the incidences of theft uncovered, the average theft amount equals $125,000!! And believe it or not, most of these thieves are not prosecuted.
Are you a victim?
Most of us would immediately say “No, all my employees are completely trustworthy.” But, what about the next employee you hire? What about the employee who has had an unexpected life change (divorce, death, or other experience) that has affected his/her financial stability? What about that employee’s spouse who you might not quite trust? Could that person have undue influence to convince your employee to do something?
I recently met a woman who told me that her husband’s long-time partner stole $250,000 from their business, putting it into bankruptcy. It could happen to you.
Employee theft can come in many forms. Look at the following ways employees can steal from you.
How can you stop this?
There are many ways an employee can steal from their employer. There are also many ways an employer can prevent this activity. Being aware is the first step.
A CFO or Chief Financial Officer is the person on your executive team who sole purpose is to increase cash flow, improve profits and help in improving the bottom line. The difference between a CFO and part-time CFO is only the hours. Unfortunately, many companies who have a need for a skilled CFO do not have the funding to actually hire one. Another senior officer on the payroll might just be a bit too much. In these cases, they might bring on a CFO temporarily to get them running in the right direction and teach them how to keep it up.
The main responsibilities that are performed by a part-time CFO include overseeing all of the company’s financial and accounting practices. This can include such jobs as preparing the budgets, preparing timely and accurate financial statements or even being the long-term trusted business advisor for the CEO. It includes developing systems and tools to give the CEO of the company vital information about the finances as well as give recommendations on the operations of the company and strategies. A CFO will also oversee the budget planning and put into motion any strategic plans for managing the company’s costs. Sometimes it requires a specialist to really look at the business functions and make authoritative, educated decisions.
Some of the other duties include taking care of the cash flow of the company, and making predictions on where those profits will go, or where they will need to go. They must also optimize and maintain good relations with any banks they do business with. The part-time Executive will also take on the responsibility of mentoring your designated staff so that the procedure setup by them will be carried out properly; allowing the CFO to leave the business in your hands.
Many companies are taking the option of hiring part-time to help solve their money woes. Very often, this simple measure can turn a company’s financial standing right around and set them on a far more profitable path. The cost that the company will pay for a part time CFO will be significantly lower than hiring a full-time financial professional that they would have to offer benefits to as well as other factors that need to be taken care of when you hire an employee.