The seemingly impossible task of employing help whilst still managing costs poses one of the biggest challenges to Small / Medium Enterprises (SMEs). SMEs, particularly those experiencing exponential growth, quite often don’t know when to hire specialised help.
As an SME grows, their needs usually outgrow what the business’ accountant or bookkeeper is capable of – necessitating the implementation of strategic financial management. To ensure continued success and business growth, an SME needs the right financial advice… a lesson too many businesses learn after the fact.
When to hire a CFO
Companies that are experiencing rapid growth are usually advised to appoint a Chief Financial Officer (CFO). An experienced CFO will be able to navigate the increasing complexity and risk that comes with strong growth, pointing the business in the right direction for the future. Sadly though, many SMEs don’t experience this rapid growth because they are too stuck in old ways. Hiring a CFO is the best chance such a business has of creating this growth in the future.
Outsourcing a CFO is not unique to corporate financial management, and many if not all SMEs benefit from outsourcing.
What is the difference between a CFO, an accountant and a bookkeeper?
In most small businesses, a bookkeeper reports directly to the business owner. They are the traditional number-crunchers who take care of the general ledger, process paperwork and maintain the business’ accounting software system. A bookkeeper generally prepares information to be used by an outsourced tax accountant.
Once growth expands beyond the capabilities of a bookkeeper, a business usually hires an accountant (or accountancy firm). The first main difference between an accountant and a bookkeeper is that accountants are qualified (and thus certified and bound by a code of ethics and many reviewed standards). The accountant usually oversees the bookkeeper, and is responsible for preparation of financial reports to be used as internal business management information and external compliance / statutory reporting. In essence, an accountant focuses on meeting compliance with accounting standards and tax obligations.
A Chief Financial Officer (CFO) is the highest level of financial management for an SME, reporting directly to the business’ directors with accurate, actionable information. A CFO is in charge of managing risk and ensuring sustainable business growth, by establishing new systems, controls and financial policies. CFO’s think outside the box and work strategically, providing advice on productivity and efficiency that can improve a business from within.
A CFO operates across the business as a whole, analysing all areas of the business, supporting the key decision-makers by providing management information, and ensuring the business is using the most appropriate form of finance (debtor finance, bank debt, operating cash flow, angel investment, VC etc). The CFO performs critical financial tasking, such as exploring all possible tax-minimisation areas and identifying a business’ most and least profitable customers.
More akin to a business partner, a CFO will question how things are currently working across the business and then improve them – collecting vital decision-making information, providing support, and appropriately focusing the business’ resources.
With Knight BPO you have a one-stop shop to access these services without it costing your business an arm and a leg.