Many Families business still have their traditional way of working and culture and many time do not hire or afford full time CFO's, however they can go for CFO Advisor consultant whereby CFO will be available on demand to them for the growth journey of the entity.
In the realm of family businesses, the Chief Financial Officer (CFO) plays a crucial role in steering the company towards financial success and sustainability. The CFO's responsibilities go beyond just managing numbers; they are instrumental in shaping the financial strategy, driving growth, and ensuring the long-term financial health of the business.
In MNC or Advance Company with corporate culture they have all processes and policies in place and adherence to those policies where in family businesses there are informal way of operating and communicating. We will delve into the vital role that External CFOs play in family businesses and explore the key aspects of their contribution.
Financial Clarity and insight
One of the primary functions of a CFO in a family business is to provide financial clarity and insight to the business owners and stakeholders. As the financial expert within the organization, the CFO is responsible for developing and implementing financial strategies that align with the company's overall goals and objectives. Since many families' business may not have CEO or CEO with right skillset, it involves analysing financial data, identifying trends, comparing with peers and providing recommendations and strategy to improve financial performance.
Enhancing MIS and Financial Planning & Analysis (FP&A)
Moreover, the external CFO is tasked with managing the company's finances and ensuring proper budgeting, forecasting, and financial reporting which is known as Financial Planning and Analysis (FP&A). Family businesses do not have processes in place for strict month end closure. External CFO can oversee the financial operations of the business, including budget planning, cash flow management, risk assessment, and performance analysis and can review month end financial operations in a detailed manner which can lead to creating solid pillar for future growth. By maintaining accurate and up-to-date financial records (monthly, quarterly and yearly), the CFO enables the business owners to make informed decisions and monitor the financial health of the company on a regular basis.
Supporting Growth and Expansion
In addition to financial management, the external CFO also plays a critical role in driving growth and expansion within the family business. They collaborate with other members of the leadership team to identify growth opportunities, assess investment options, and develop strategic plans for future growth. Because of their wide network and industry knowledge, active participation in various forums, CFO advisor's consultant can give better input for entering new markets, launching new products, or acquiring other businesses, the CFO provides financial expertise to support decision-making and ensure the financial viability of growth initiatives.
Managing external stakeholders
Another key responsibility of the CFO in a family business is to manage relationships with external stakeholders, such as banks, investors, and financial institutions. The CFO represents the company in financial matters and is responsible for building and maintaining strong partnerships with external partners. This includes negotiating financing agreements, managing investor relations, and ensuring compliance with financial regulations and reporting requirements.
Case Study: Transforming a Family-Owned Pharma Business
Coinmen was recently engaged with pharma entity of family businesses for CFO advisory and noted that entity was not having proper MIS reporting, FPA (budgeting and forecasting) not realistic and far away from actual numbers and projects in the pipeline, compliance were too weak and month end closing was also not happening rigoursly which resulted into huge losses for the company and promoter was not in the position to take decision whether to shut down or pump more money into business .
We did deep dive analysis and carried out various restructuring measures, cut down transportation cost, improved GP margin by focusing on sale of higher margin product, improved working capital cycle, cut down other cost to bring an efficiency, outsourced back-end work with good cost saving, identified entity for acquisition also improved collections from debtors. We also developed standard template and dashboard for regular reporting and placed strong approval processes in place which further resulted in higher corporate governance which resulted in employee satisfaction as well as. We involved our CS for compliance related matters and fixed all open compliance matters and regularise all filling with better accuracy. In 6 months, client turned into break even and the growth journey is still continuing.
Conclusion from above recent experience is whenever entity is facing challenges they should involve right expert which can turnaround and improve the entire current position of the organisation.
Furthermore, the CFO advisor plays a crucial role in succession planning within a family business. As the business owners prepare for the transition of leadership to the next generation, the CFO provides financial expertise and guidance to ensure a smooth and successful transition. They help create a financial roadmap for the future, establish financial policies and procedures, and mentor the next generation of financial leaders within the organization.
In nutshell, the CFO advisor plays a crucial role in supporting family-owned businesses by providing valuable financial guidance and strategic insights to help them thrive and succeed in the competitive business environment. Their expertise and advice enable these businesses to make informed decisions, improve financial performance, manage risks effectively, and navigate complex financial challenges. By collaborating with a CFO advisor, family-owned businesses can establish a solid financial foundation, achieve sustainable growth, and ensure their long-term success and legacy for future generations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.