Traditionally, all of a business’s executives are full-time employees of the company. However, in recent years, this trend has begun to change. While the CEO’s role hasn’t really changed, some of the other executive positions have begun to evolve. One option that has become increasingly popular among business owners, especially small business owners, is bringing in a fractional (less than full-time) CFO.
These experts are outsourced and only work part-time for the company. However, they do bring the same knowledge and skills to the table that a full-time CFO would without the higher cost of a full-time CFO. By hiring a part-time CFO, a business can benefit in numerous ways.
Here are four reasons why a business may want to outsource its CFO position:
It’s a Way of Acquiring Expertise You Might Not Otherwise Have
For most small businesses, the accounting department (if one even exists) is focused primarily on basic bookkeeping. However, that’s not the focus of accounting departments in larger businesses. Those departments and the CFO that supervise them are more focused on proactively guiding the business financially. They provide the CEO and other executives with financial information that helps them make decisions as well as an experienced partner with whom to discuss key business issues.
Small businesses may not be able to attract or cannot afford a CFO with the knowledge and talent needed to do this. That’s where an outsourced CFO can be helpful. These experts can assist a business in making the transition from a tax-focused accounting department to one that plays a larger role in the decision-making process.
Brings Broad Experience and Objectivity
With a CFO providing financial guidance, a business is less likely to face some of the more common growing pains. Making use of a fractional CFO brings another point of view to the table. They typically have a broad base of experience and are very objective, so they may see opportunities for improvements or change that the CEO and others don’t see. This external point of view and deep experience is often the key to growing a business without running into difficulties.
A CFO Is an Investment that Pays Off
By investing in a fractional CFO, a business is investing in its future and current financial health. Many business owners consider a CFO a luxury that they simply cannot afford. Unfortunately, without a CFO to provide sound financial advice, the business may make costly mistakes. A CFO is there to help business owners make more informed decisions and avoid common pitfalls. By bringing in a fractional CFO, business owners can be proactive in their decisions.
A business’s return on investment on a fractional CFO can be immeasurable. Finances are one of the most crucial parts of a business, yet many small business owners take on this chore themselves without any training. A CFO can take on this additional work, completing it more accurately and quickly than an overworked business owner. It also allows the owner and other management team members to focus on their respective areas of expertise.
Avoid Expanding Your Team Too Quickly
Businesses that follow the traditional growth model don’t bring in a CFO until the budget supports such a move. This means they don’t have access to the knowledge that a CFO provides during the crucial early growth periods. On the other hand, companies that do try to expand too quickly, often build an executive slate that’s too large for the company. This ends up being an ineffective use of resources.
That’s where a part-time CFO can shine. There’s less cost to the business, yet the CEO can make use of the advice a trained expert can provide. Many fractional CFO services are also quite flexible. The business can bring in one of these professionals for more assistance during periods of growth, then reduce their level of service once the CFO isn’t needed as often. This ability to scale up and down with demand is very cost effective yet allows the business to get the expertise it requires.
A Fractional CFO May be the Best Move
With these major advantages and more, it’s clear that small businesses can benefit from bringing in a fractional CFO. With access to these experts, the business will be able to grow more quickly and with fewer problems than it would otherwise. Fractional CFO’s bring many skills to the table, and they do much more than simple accounting. Business owners would be wise to consider a fractional CFO, especially during a period of growth and change.
If you’d like to learn more about fractional CFO services, you can contact Lauber Business Partners. We offer fractional CFO services that are affordable and provide your company with an experienced CFO. Our services are flexible, allowing you to scale up and down resource levels as required.
You can find more information on our website. Feel free to contact us with any questions at 414-273-8060 or via an email at firstname.lastname@example.org.
Business owners are often unsure what to expect from their financial person. All financial people are not created equal. There can be significant differences due to experience and aptitude. In companies with revenues between $5 and $50 million financial people generally perform at two different levels. In the context of this example the levels are:
Bring the Numbers to Life:
Provide The Metrics for Success
Manage the Cash
Project and Protect
Supply the Financial Perspective
The old business adage that “cash is king” seems more important in this challenging economy. While it’s always important to be in a good cash position, it’s more critical to understand the lifeblood of your business in these uncertain times. A 13-week cash forecast will help give you that understanding and put you in a more powerful position to make business decisions. The forecast should be updated on a weekly basis, so you always have an informed outlook of the coming months. While a 13-week forecast is common and represents a reasonable time horizon, you can create a cash forecast for a different time period. The number of weeks you include is not as important as having a report that gives you a reasonably accurate picture of the road ahead.
To begin you’ll need to identify expected cash inflows and outflows, as well as your beginning cash balance.
Inflows normally include: Allocate each of those inflows to the week when you expect the cash to be received.
Next, identify outflows, which could include:
Items on the expense side are usually easy to identify, and can be pulled from your monthly accounting records. Receivables are often less clear, and thus become the item in the forecast that is most challenging for a business to accurately project.
A good approach to get a handle on these numbers is to create three categories.
Once you have projected when your receivable will be paid, you need to add in your projection of cash receipts from future sales. In some businesses, seasonal activity must be considered in the 13-week cash forecast. For example, a construction company may have rising payroll in the spring and the related collection of receivables several weeks later in mid-summer.
The more challenging your cash position is, the more valuable this tool becomes. The insights from a 13-week cash forecast will not only help you better manage your business but also would be helpful when you need to communicate with your banker or other outsider. Let’s say you have a significant receipt due in Week 11 but your business will be in a difficult cash position prior to that. This tool gives you the ability to see what you might be able to shift on the schedule to deal with the shortfalls. It also gives you the ability to proactively communicate your situation so that your creditors know what to expect. You will find this goes a long way in gaining cooperation. Click here for a sample 13 week cash forecast. It’s worth taking the time to establish the process. Once it’s set up, it’s just a matter of plugging in the current numbers. The report becomes even more powerful when you compare its estimates with actual inflows and outflows. With that actual data, you can adjust the report to increase accuracy.
One of the wisest sayings in business is that you haven’t really made a sale until you have the money in hand. So if having good sales practices is important for a company, having good credit and collection policies is even more important.
We’re sure you’re familiar with the problem; every business, at some time and for a variety of reasons, has trouble or fails to collect invoices.
In worst-case scenarios, unpaid accounts receivable can cripple or bring down a business. A much greater amount of new business must be generated to make up for the lost profits of an unpaid invoice. If the invoice is paid but late, the cash flow impact can be costly, eroding your profit margin. And remember, the longer an invoice goes unpaid, the harder it is to collect.
You may not be able to escape the problem, but there are steps you can take to reduce losses from unpaid invoices.
Maintaining an up-to-date analysis of effective labor rates for different categories of employees in your business is an important tool. It can be used to monitor the labor cost used for:
While this tool has always been important, we believe having this information will become more critical because of the unknown impact on employee costs of health care reform..
To calculate your Effective Labor Rate, you accumulate for a year all of the costs that go along with the pay rate including benefits, taxes and insurances and divide by the actual hours worked. This can be done by individual employees or on an average basis for a group or class of employees.
The Components of the Effective Labor Rate:
How overtime is incorporated in an Effective Labor Rate Calculation will vary from company to company. When calculating overtime costs, only the hourly rate paid an employee ( typically time and a half ) plus payroll taxes, workers compensation and retirement plan match are considered. All other benefits are already absorbed in the straight time rate. Often the overtime cost approximates the fully loaded straight time cost, but, depending upon your individual circumstances it may be more cost effective to work OT than hire new employees, or vice versa.
Click here for a calculation for an employee making $18.00 per hour.
When a business is forced to deal with rapidly changing conditions or an uncertain future, an “Interactive Financial Model” is an invaluable tool.
Think of it as a projection for your business, driven by key assumptions that can be easily changed. Use the power of Excel to recalculate a projection of future results based not only on historical trends but your best estimate of what will happen.
What is the value of an Interactive Financial Model?
Key components of a financial model:
Establishing solid assumptions is a key to building a credible financial model.
The more effort you put into your assumptions the more valuable your model will be.
Other assumptions required will vary by business but should include:
Laying this all out in an excel worksheet so that assumptions can be changed to show what happens under different scenarios will make this a powerful tool for managing the business and reacting to changing conditions. For an example of an Interactive Financial Model in Excel format click here.
A key part of the financial plan process is to report actual results against that plan and to investigate deviations to determine if corrective action is required. It is beneficial to periodically update the plan to account for real-life changes in assumptions and business conditions.
Consider saving a copy and updating it with actual results. Then reforecast the balance of the year so you always know what your year-end results will look like.
Creating a model from scratch may seem like an overwhelming task. To begin to gain the value, start with a few basic assumptions and use historic average information for the rest. Each month as you review, you can replace some of the average information with more refined assumptions.
Wisconsin’s Unemployment Insurance (Tax) is a complicated and often confusing system. In this Tip we will address the funding side of the program, how the amount an employer pays is calculated. We will leave the benefit eligibility side for another issue.
What is the unemployment insurance program?
What is the relationship between Wisconsin’s Unemployment Insurance Law and the Federal Unemployment Tax Act (FUTA)?
When is the tax paid?
How is the Quarterly Tax (contribution) Calculated?
What are the State Statutory Rates?
What is Eligible Payroll?
How is the Statutory Rate Adjusted for Experience?
Some business owners question whether it is better to lay off employees and pay the higher tax in the future needed to replenish their reserve account or keep the employees on the payroll. The straight financial answer appears to favor lay-offs especially for higher paid employees.
A question we often hear is: “How do we determine the appropriate staffing level in our Accounting Department”? A helpful tool to facilitate this evaluation is a Department Staffing Analysis.
In the example below we take a look at an accounting department that needs to add staff, but this tool can also be used throughout the company and can be very helpful in situations where the goal is to reduce hours due to downsizing or a lean initiative.
To create a Department Staffing Analysis, list all the tasks done in the department and estimate the time required for each task, by person.
Getting credible information is the difficult part. It is helpful for people to maintain a daily diary or time sheet to help determine where they are spending their time. It also requires a healthy dose of discussion and input from the supervisor.
Employees often fudge on the time because they anticipate what the manager wants to see. You need to reassure them what the goal is. Emphasize that accurate information is important and that their job is not in jeopardy.
To get started:
This would be a good time to retrieve the sample. Click here for a sample Department Staffing Analysis and follow along.
We have found it is easier if you break down the tasks into broad categories. This may vary depending on your unique circumstances but a simple scenario would be:
The Situation at Sample Company:
Being a good human resources employee, executive, or consultant requires a particular set of skills. Lauber Business Partners often helps businesses with fractional HR and part-time human resources. Through countless HR assessments, we’ve learned that a lot of companies want to have an effective and strong human resources function. However, many companies lack the experience and expertise actually needed to do so.
Bringing the right HR competencies into an organization is a key step to driving the company along the path to growth and prosperity. The right HR competencies helps drive the right culture and help provide the key resource and talent to accomplish the objectives of the business. You have to find the right employees with the exact skills you need. The same is true if you’re looking to hire fractional HR or part-time HR assistance. You have to find the right skills. Wondering if you or a prospective employee has what it takes to be an effective HR manager?
Let’s dig in.
Be able to Compartmentalize
A good HR manager must be able to compartmentalize. Human resource challenges never end. The HR manager is often dealing with difficult employee issues, managing talent, and planning how to boost company morale. These challenges often involve friction and emotion and require objectivity and the ability to compartmentalize things. Keeping the big picture in mind, even while mired in problems, is crucial.
Often, it helps to bring in outside parties through fractional or part-time HR. This way, they can provide an outside perspective and offload some of the burdens that your company faces. Further, outside HR specialists will have an easier time staying objective and neutral.
Possess the Needed Legal Knowledge
Employment and workplace laws are complex legal fields. An HR professional likely won’t be able to develop as intricate of an understanding of HR law as a career lawyer. However, it is important that your HR professional understand key employment laws and regulations in order to ensure legal compliance.
This is an area where hiring an outside HR consultant can often be vital. Consider working with an HR consultant to catch yourself up on the relevant HR laws, regulation, and requirements. Doing so will help you mitigate risks.
Understand Benefits and the Industry
While the main goal of every business is to turn a profit, the benefits package can be a fundamental element in attracting and retaining talent. Each industry has different market conditions and has alternative ways to stimulate their employees. It is important to understand what in your industry sparks engagement among your staff, and provide that accordingly.
The benefits arena is rapidly changing and has many new innovative offerings. Being aware of these new offerings and the prevailing practice in your industry is important to crafting the most attractive offering to attract talent. The war for talent is real and your performance in this war may determine the level of success your company achieves in the future.
Management Skills Are A Must
Due to the tightening labor market and skills gap, HR is playing an increasingly important role in helping companies achieve success. This is moving HR to a more central role in companies. As HR’s profile rises, they need to be adept managers, able to facilitate change and deliver and develop the resource and talent, that truly drive a company’s performance. This requires working with all areas in the business to truly understand their needs and be a partner helping them succeed. Being the person that has to work cross functionally in a business where he or she does not have line control is a challenging task and requires a person with advanced managerial skills.
Recruiting and Retaining the Right Talent
The human resources department is vital to attracting talent. Often, it’s the HR department that leads the recruiting efforts for new employees. The HR resource needs to deeply understand the needs of the company and the market in which it operates. This person also need to be able to clearly illustrate to candidates why the company is an attractive place to work and be able to articulate the business vision. Additionally, the HR resource needs to be able to help the company use interview techniques that truly get at the skills and behaviors of the candidate.
HR managers need to know how to juggle a dozen things with their hands tied behind their back. Often, HR managers in smaller companies have a lot on their plate and resources are stretched thin. For this reason, HR managers need to be multitasking gurus—capable of tracking numerous issues, providing support when needed, and helping to guide fellow company employees.
An HR Manager Must Be Discrete
An HR manager isn’t a lawyer by practice, but in practice, they are constantly dealing with confidential matters and potential legal liabilities. Knowing what to say and when—and when to share what—is essential for any HR manager. HR managers must also be confidants that employees can trust and on whom they can rely.
HR managers represent the company, its policies, and its issues. However, HR managers must also be advocates for employees. When an employee comes forward with a complaint, suggestion, or issue, the HR manager must listen, investigate and resolve issues. Further, HR managers have certain legal obligations when it comes to advocating for employee’s and their best interest.
A Jack of All Trades, and a Master Too
Human resources are one of the most sensitive aspects of running a business. HR managers have a lot of high-profile tasks to perform, and they have to execute them very confidently.
The immense pressure placed on HR departments often makes it necessary to hire outside HR consultants or to put fractional HR resources into play. By doing so, you can relieve burdens and contribute your distinct efforts to another area in the company. Lauber Business Partners can leverage our years of experience and advanced knowledge of HR requirements, laws, practices and policies to help businesses unleash their full potential.
An employee resignation is rarely a “fun” experience. For businesses, such resignations are almost always disruptive. Yet, there are steps you can take to smooth that transition. Just as importantly, there are proactive measures you can take to ensure that the now unfilled position is filled quickly and with the best possible talent.
Why do employees leave?
There are so many reasons that we could never possibly list them all. Maybe they weren’t performing their duties or they got a better opportunity elsewhere. Maybe their spouse landed a big promotion in another city, and the whole family is relocating. Perhaps the employee just needs a change of scenery or wants to change careers.
HR departments and business managers need to consider how they can reduce unwanted staff turnover. However, staff turnover is inevitable. It is always useful to try to truly understand why employees leave. This information can be very instructive in improving the company.
So how can you handle staff turnover? This includes:
Let’s review some of the important considerations to simplify the transition process.
Start the Process Right With a Dated Resignation Letter
Figure Out the “Why” If An Employee Leaves On Bad Terms
As soon as the employee leaves, you need to send out a letter informing the team. There’s no need to get negative or to share unnecessary information, just say something like “the former employee is searching out different opportunities effective immediately.”
You also need to reassign responsibility and to reassure the team that you are working to find a new team member.
Next, you will need to determine why the employee is leaving on bad terms. Assuming your investigation reveals legitimate concerns, the goal is to eliminate or reduce such problems in the future. It is important to consider the following questions:
What To Do When a Good Team Member Leaves
Sometimes, you will not want to see the employee leave and he or she will fulfill their duties until the end of their notice. In some cases, there are conditions you can “mitigate” to keep the employee on staff. For example, you might offer them a pay raise or a change in their current status. When good employees leave it is, again, necessary to find our their reason(s) for leaving. If you are able to keep a desired employee by some action, what do you need to do to ensure other desired employee don’t get to the point of quitting. This is valuable learning for the the company.
However, the employee may have made a firm decision to leave. In this case, let them know how much you appreciate their contributions and that they were a valuable part of the team. A good employees is normally very respected by his or her peers. While you may be frustrated that he or she is leaving, remember that how you treat this employee on their way out will be seen and internalized by many others in the organization. Being respectful and appreciative to this valued employee upon exit will enhance your and the company’s standing in the eyes of the other employees.
The soon-to-be ex-employee can use that two weeks to train team members to take over their responsibilities. Of course, even a valuable employee won’t necessarily be valuable during their final two weeks. If they are going to be a distraction, it might be better to let them resign immediately.
If you do require their expertise for training purposes, make their exit as easy as possible. They will not respond in a positive manner if you slap an enormous workload on their desk on top of asking them to show someone how to do it. Leverage their notice to tap into their skill sets they have developed over their career with your company.
Handling the Notification Process/ Exit Interview
Often, HR departments are the first to learn of an employee’s resignation. This means you may have informed his or her department. At this stage, you need to provide a timeline both for the employee’s departure and also a tentative timeline to replace him or her. Always be gracious as it sends a powerful message to other employees.
Next, conduct an exit interview. The goal is to find out why the employee is leaving and if you can avoid similar situations in the future. Exit interviews can be immensely helpful for self-improvement.
Finally, if the employee is a respected member of the team, you can let them send out a farewell email approved by management. It may also be appropriate to allow them to hold (or even have the company host) a farewell lunch or to invite team members out after work.
Have a Referral Letter Ready
Never overlook a valuable employee’s considerable contributions. If the employee is leaving without a next job, send him or her off not just with a farewell letter but a recommendation letter as well. This will help him or her further their career. Even if you don’t want them to leave, it still makes sense to help them in the future.
It’s quite likely that they’ll recommend your firm to potential clients and future employees. It’s wise to have a basic template and approach for your recommendation letters.
Fill the Position With the “Right” Replacement
It’s smart to ask both the departing employee and their team to list out responsibilities. This will help you when looking for the right future employee. Often, job roles change so the responsibilities may have evolved. By figuring out how the role may have changed, you can better identify your next great employee. This is also a perfect time to reassess departmental structures and look for opportunities to promote from your employee base.
While seeking a replacement it may be smart to use an interim external resource to fill the gap if you do not have the right resource to plug in or if there is just too much work to accomplish with the remaining employees. A bungled transition can weigh down your company, reducing productivity and even hurting your company culture. However, a well-managed transition will ensure that your business continues to hum along. Lauber Business Partners can frequently fill such interim positions with experienced resources that can hit the ground running.
Transitions are a Challenge but also Provide Opportunity
Transitions are rarely a good thing in and of themselves. Even if it’s an undesired employee who’s leaving, you have to ask yourself how you got to that point. Bad hiring practices? Office politics? If it’s a desired employee, you need to figure out what you could have done to retain their talents. Pro-actively managing the transition can help ensure a smooth process while also learning lessons for the future.
When it comes to high-skill positions, such as senior software developers, key executives, or business leaders, the transition will be even more difficult. However, by working with HR consultants and fractional HR companies, you can smooth even these transitions.
Give us a call at 414-273-8060 or contact us via email at email@example.com to learn more about what will work best for your company.