I am speaking to anyone who owns a business.

Many businesses track their sales numbers. Salespeople are acutely aware of these numbers and it is seldom a secret when a business is having “record sales” or conversely that sales have tanked.

A review of your financials does occur when you bring your books to your accountant at the end of the year for them to do your taxes for you. They will ensure that you have proper backup for all transactions and perform corrections on anything that has been misclassified throughout the year. They will file your tax return and let you know how much you owe the government. In this process you will receive a compiled version of your year-end statements which will tell you how your business did that tax year.

If this is the only time a professional accountant is looking at your financials, you are not reviewing your financials enough.

Let’s look at how the big guys do it

Large corporations have gotten that way because they have figured out how to charge the most amount for a product or service for the minimum cost possible. In order to make decisions and alter their offerings, they first determine if it will be financially wise to do so. There are financial statements produced monthly - at minimum - which are broken down by business unit so that all managers can review whether things are going according to plan. For a bit of a refresher on the ‘typical’ structure of an accounting department, see this blog post.

There is more to the innerworkings of a finance department than just preparing periodic financial statements. They also spearhead the annual budget process where all departments come to the table with their plans for the following year(s) and crossed fingers that their plans will be included in the budget. Once you have a budget that is a “best guess” scenario for the following year, you then use that budget as a benchmark from which to compare the actual financial results as they come in.

Some relatively fixed cost items, such as rent and utilities, are fairly easy to budget for and the actuals line up with budget fairly well. Other items, such as certain volatile revenue streams, can be very difficult to properly estimate. For the most part, the act of budgeting is a big “guesstimate”.

When revenues are tracking less than expected, there might be tough decisions to make on the expense side of things, to trim down expenditures so that the business stays in a profitable position. If you aren’t looking at your actuals versus budget on a regular basis, you are missing the opportunity to make those cost-cutting decisions before its too late and the financial trouble has gotten really bad.

How do I get myself an accounting department?

Large corporations can employ departments full of accountants whose sole purpose is to help steer the organization through timely financial reporting and analysis. If your business is growing, this may seem like the next logical step for you to take. However, this is very costly.

Let’s take a look at some excerpts from the Robert Half Finance and Accounting 2022 Salary Guide, for the roles I outlined in the blog post linked above. (CFO, Controller, Financial Analyst, Accounts Payable Clerk, Accounts Receivable Clerk)

To fully staff a “bare bones” accounting department, you’re looking at around $500k in base salary. This is definitely not feasible for a business that is just starting out! However the value that dedicated accountants provide to steer your organization cannot be denied.

What is my alternative to an accounting department?

A fractional CFO. They act in a way which allows the smaller businesses to compete with the larger ones.

This is the model I am following with my own firm, and it is becoming more commonplace as technology in the finance space advances. In this model, you are subcontracting out the monthly roll-up of your financials (read: financial analyst upwards) while also gaining a resource for your internal team to leverage throughout the month with specific questions they have surrounding accounting treatment of various items.

Since every business is different and has its own unique needs, the services provided are tailored by customer, which is why you don’t see a detailed listing of what is included anywhere on my page.

My Fractional CFO services are performed in a fixed-fee monthly subscription model, tailored to your specific business needs. If you’d like to learn more about these services please visit this page.

Still have questions or need support? Click here to reach out!

I LOVE banishing the “finance scaries” by teaching entrepreneurs in an easy-to-understand way. If you’re reading this, you might benefit from my FREE Financial Health Check, which will assess how you’re doing with the financial management of your business, and provide you with customized resources that will hopefully resonate with you.