“He said he could make twice what we were paying him at his new gig. What were we supposed to do? So. He quit. Yeah, he gave us two weeks notice, but our books are a mess and no one can figure out how to get things back on track.” 

The awkward pause as if I was supposed to have a clever retort. I’ve learned that waiting for clients to process their thoughts and present a clear question issue proves more valuable than filling the gaps with insightful anecdotes or helpful solutions. Sure, I have dealt with this situation before. Happens all the time; a CFO being disgruntled, for any number of reasons, choosing to find another place to hang their hat. The solution rarely looks the same though. 

From the tone of this troubled business owner, I could hear the frustration. The worry of who was going to take on this task must have been troubling her for a while. She took an audible breath and continued, “I think what makes me the most frustrated is that I didn’t see this coming. I had no idea he was even upset let alone to the point of searching and accepting another job. But, what was I supposed to do? I can’t afford to match the pay. I’m not an accountant. I didn’t go to school for that. I don’t even know how to tell if a CFO knows what they’re doing or if the financials are accurate. Honestly. The whole thing is making me ask some serious questions.” 

Now her tone was shifting. Sometimes when people get an opportunity to vent, clear their heads a bit, they think clearer and can refocus on the task at hand. She wrapped up her thought with this question: “Matt, what do you recommend here?”

I’ve found that when business owners are dealing with complicated emotions, especially when they’re abandoned by their trusted advisor, it’s critically important to speak clearly so as to instill trust and confidence. I proceeded carefully and said, “There are four elements to the approach that my team and I take to supporting business owners with their finances. From these four elements, we aim to teach, perform, and inspire.” 

I then listed out the four elements on the whiteboard.

1. Preparation of the Financials
2. Interpretation of the Financials
3. Aligning of Business Objectives
4. Forecasting the needs of the business

When I meet with business owners, there’s always part of my presentation and communication that leads into teaching. Many clients tell me that’s their favorite part of the relationship; they don’t feel talked down to. Instead, they feel inspired and equipped to guide and lead their organization forward. 

The Preparation of the Financials is a task that some CFO’s delegate to their team. This could be internally or externally. Sometimes, it includes an AP Person (Accounts Payable), an AR Person (Accounts Receivable), or a bookkeeper. Other times, and especially with small business owners, these three jobs are done by one person and it might even be the business owner. 

One thing I told a client recently, a client who runs a $13M marketing business that specializes in offering their services to other businesses, is that if she thinks that she’s going to go from being an expert marketing strategist and project manager to an accountant, that journey is long, daunting, and totally unnecessary. This isn’t to say she couldn’t do it, but the real question is “Why would you want to do that?” She could add a heck of a lot more value to her business by selling a couple more accounts and providing an excellent service to her existing clients than she could by becoming an accountant. I didn’t advise her to be totally ignorant to her finances though. Many small business owners need to be reminded of the delicate balance between “knowing enough about their finances to make decisions,” and “getting in the weeds of their books and trying to update their financials themselves.” 

Our team approach is customized to the business so that we can handle the preparation of the financials ourselves, if necessary, or we can collaborate with an existing team of employees at our clients’ businesses to fulfill this first element of a CFO’s job; Preparation of the Financials.

There’s not much to further discussions without having a solid, reliable set of financial statements, which needs to include, at a minimum, the Profit and Loss Statement and the Balance Sheet and could include the

• AR Aging Report (report that shows who owes you money)
• AP Aging Report (report that shows who you owe money to)
• Cash Flow Statement (statement showing how your business’s cash balances are being impacted based on various business decisions)
• Debt Schedule (report that shows all the various debts a business has, payments of those debts, interest rates, maturity dates, etc)

That is why our first priority is to understand the flow of information, the software used to gather and distribute various data points, and who is currently or ideally responsible for which function. More often than not, the preparation of the financials is a team effort.

Once we’ve completed the preparation of the financials, it’s time to begin the interpretation of the financials. This stage is typically where the CPA’s and the accountants of the world begin to speak “accountant.” When this happens, and business owners hear things like EBITDA, Earnings Ratios, Quick Scores, Debt Service Ratios, and other various accounting jargon, their eyes roll into the back of their heads. Business owners, unless they specifically went to school for accounting, often times don’t have a frame of reference for these terms, their respective relation to the business’s “healthiness,” or what they’re supposed to do next. 

This is why our team aims to use clear, non-accountant speak when we’re interpreting the financials. Yes, we can and do provide the necessary ratios and other various accounting scores, but our philosophy is this; what good is any of that without a set of action items as they relate to the implications of each ratio, term, or report. Telling a business owner their DCR, for example, is less than 1.0 and expecting them to understand not only the context there, but also to see the value in working towards correcting it is not our approach. Our interpretation of the financials phase is often where we spend the most time because we want our clients to fully understand their business as much as they want. This is often the missing gap that CFO’s or CPA’s or other highly intelligent accounting professionals miss because they lack the ability to break down the complicated nature of the inner workings of the business into simple steps in simple terms.

After successfully completing the interpretation of the financials phase, we move towards the aligning of business objectives. This is where we shift from evaluating what has already happened to ensuring we’re going to accomplish all the things the business owner wants to do. During this phase, we list out goals of the business and then build an action plan based on these goals. 

These conversations quickly shift from goal setting and defining business objectives to the final phase; forecasting the needs of the business. 

Because of our deep rooted history in finance, accounting, and private equity, these conversations often turn into discussions of applying for credit, seeking outside capital for various business expansion opportunities, hiring additional staff for the anticipated work, implementing business processes that will aim to increase profit, drive revenue, or improve customer satisfaction. 

If you’ve found yourself asking this question, “My CFO quit, now what?” It’s maybe time to consider if you’ve been getting all the value needed from this pivotal position at your firm. Our customized, outsourced CFO Packages are tailored to meet the needs of our clients as they grow or pivot.