This article compares and contrasts the responsibilities of a CFO versus a Controller, Accountant or Bookkeeper. Many business owners do not understand the differences between the roles and the value a CFO can bring to the business. Additionally, many business owners do not feel they can afford a CFO, however that is where a part time CFO who participates with the business owner and management is critical. A part time CFO can spend as little as a day or two month with the business and add value to the bottom line.
A. CFO Responsibilities:
1. Cash Management
Cash management includes understanding your business 's "operating cycle" (i.e. cash to cash cycle). To improve your "operating cycle" it is imperative you understand what it means, how to calculate it, and what influences it before you can improve it. Cash expectations your cash balance to be in 6 months?" Most of the time companies are fighting cash flow problems today and can 't think about the future past this week. Forecasting and managing cash flow provide a real sense of control over the business. Implement a Cashboard-Dashboard, 13 week cash flow forecast and review cash flow reports at least monthly. The key for any business is to focus on cash, not just EBITDA and Net Income, as Cash is King!
2. General Financial Sophistication
• A sounding board for the owner in making key decisions, as the Trusted Advisor
• Fewer cash flow surprises using a Cashboard-Dashboard and 13 week cash flow forecast
• Better
In order to ensure responsible accounting practices Peyton Approved will be investing in QuickBooks Pro; this accounting software will allow us to make sure all the steps are being followed correctly. We have also hired Fusion Group; Fusion Group is an accounting firm that specializes in new business owners to help with the accounting process. As a company we are also taking classes to get a better understanding of accounting, getting an understanding of why the accounting cycle is important, what the numbers mean for the company, whether or not we are in debt, we owe money, but also being able to get a true sense of the monthly profit (Scheid, J., (2011).
The cash budget is another aspect of budget expectation. The cash budget determines how much cash an organization have on hand, and how much is needed to meet each expense. The cash budget will reveal to companies the availability of any type of surplus the company has for short-term investments.
As a result, holding cash would be essential component of the firm strategy. To develop new products, buy new equipment or expand geographically, firm has to spend money on marketing research, product design, prototype development and so on. Moreover, if a recession hits and the economy start to slow down,
Cash on hand and Assets are important to account for when expanding into a new product line. When an accurate balance sheet is presented and all proper accounting is done, the company is able to leverage their financial strengths and not expose weaknesses when expanding into a new product line. The reasoning for such a strong focus on the balance sheet is to ensure that the capability to expand is present financially. Companies that have cash on hand and assets are displaying a positive indicator because it shows the ability to act and invest on demand. According to (Martin, 2002) “Cash is king regarding solvency, but customers shouldn't overlook a company's cash-burn rate” what this means is that even though there is cash on hand the ability to go through it is present especially when launching a new product lines in which case the ability to replenish cash reserves must present in the form of revenues.
Working capital is the key to a successful business. It is like their blood flow and the manager’s job is to help keep it flowing. Under the Generally Accepted Accounting Principles working capital is simply the difference between a company’s Current Assets, which are cash, inventory, accounts receivable and prepaid items, and Current Liabilities, accounts payable and accrued expenses.
Although the income statement and balance sheet provide measures of a company’s success in terms of performance and financial position, cash flow is also vital to a company’s long-term success. Disclosing the sources and uses of cash helps creditors, investors, and other statement users evaluate a company’s liquidity, solvency, and financial flexibility. Financial flexibility is the ability of a company to react and adapt to financial adversities and opportunities. McDonald’s cash flow is
We need to have sufficient information and right tools for cash flow forecast. Sometimes this cash flowing forecast are likely to be more accurate than other types of complex problem. For example a company started their business with £5,000 and their first month’s sale is £5,500, so their end of sales would be £66,000 and expenses would be £55,440 and their net cash flow is £10,503.
As a result, to promote the financial health of any organization one should know the present value of the investment and have a good ideal of how long that investment will take to mature and give back returns. In order to create a capital budget I have to consider the needs of the organization, look at the finances, goals, and position that the business is. In doing I could make a decision about the needs of that business. Second, I would have to collect, compare, analyze, and evaluate the cash and financial statements in order to compare the cost and revenue. It would give me some lead way into the position of the business when it moves forward to the future. Third, the capital budget would have to be compared to the cash flow, because it will help me to know how important it is to make the investment only if it increases the financial bottom line and increase the total financial performance of the business. I can use the
Cash Budget is the evaluation of cash influx and efflux of a business for a particular period of time.
One great tool is called the cash budget. A cash budget allows you to estimate cash inflow and outflow for a specific period. This tool has been used before to determine if a business has enough cash to operate. Cash budget can also be useful for assessing risk.
You can better plan and manage cash flow. No business can afford to mismanage cash. And simple profits are rarely the same as cash. A cash flow plan is a great way to tie together educated guesses on sales, costs, expenses, assets you need to buy and debts you have to pay.
This report will focus on the main topics and concerns about CFO’s. First, we will focus on the history of the CFO. How the CFO came to be a reality and how different the position is today from fifty years ago. Second, what does the CFO really do? What time of jobs CFO’s have to take on everyday? Third, what are the attributes a person needs to have in order to be a successful CFO. Lastly, we will look at some of the highest paid CFO’s that we have in our country today. This reports purpose is to shed some light on the CFO and the importance of their jobs in the business industry. I was unaware on how much a CFO actually does until I actually did some research about them. I have gain a new respect for them after reading how much time and effort they have to work in order to run a successful business.
Cash Flow Planning will help you understand where your income is going and give you a better idea of your expenses. Your cash flow planning should be realistic and paint a clear picture.
First and foremost, it is important to know exactly what a CFO does and how he or she goes about doing it. The chief financial officer position is accountable for the administrative, financial, and
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.