CEO Wavelength
Top 10 Signs Your Finance Function Needs an Overhaul
Melanie Litoski, Fractional CFO Consultant, Aspire CFO
November 2024
If it’s not broken, don’t fix it... Many business leaders live by this saying. But how do you know it isn’t broken? Held together with duct tape or sheer force of will, ready to implode at any moment? The signs are there. Do you know how to recognize them before it is too late?
Here are the top 10 signs it’s time you find the right fractional CFO to transform your finance function, pronto:
10. Chaotic, undocumented processes. This is the, feel your way through every decision, every day, through informal conversations, email reconnaissance, and anything else that fits this bucket. It’s time to press pause on this style of operation and the constant reinvention of activities that goes with it. You’re missing a lot of opportunity for growing your bottom line. An expert will pull you out of this mode of operating, giving you confidence that things are done right, every time.
9. Non-repeatable, manual processes. People make mistakes, often. Great businesses are built on steady, predictable, operating processes with the appropriate level of automation and control. If you do not have the confidence that your finance function is running accurately and smoothly, it’s time to call an expert.
8. It’s always, the “Hero” to the rescue. Does it require long hours and “heroic” effort to get important tasks done on time? Tasks like month-end reporting, year-end reviews, ad hoc activities can require your hero finance staff to go beyond human capabilities to complete. What if the Hero doesn’t come to the rescue the next time? Get a predictable and reliable company financial operation, with a transformational CFO expert to design, implement and operate the operation – and a fractional CFO with the right pedigree will do this with you and your team, brilliantly.
7. Transaction-focussed. You know that saying, can’t see the forest from the trees, or vice versa? Well, same thing. Details matter, but your finance team should also consider the overall context of the big business picture. If your finance team is spending all their time in the day-to-day transactional weeds, e.g., Payroll, AP processing, billings, you just can’t realize your company’s best chapter. A transformational CFO can cut back all those weeds so that processes work efficiently, allowing your finance team to provide insight and value to the business.
6. Historical information-only is what drives decisions, no forward-looking information. Big warning on this one. The market is dynamic and having both historical and forward-looking information equips the very best companies for their future success. The value of a highly functioning Finance operation is that they are able to provide the warning signs of future challenges. Whether it is cash shortfalls or bank covenant breaches, you need to know the anticipated issues well in advance in order to correct the direction of the company, now. An expert who knows how to design models, forecasts, and budgets is critical for success.
5. Delayed - greater than 15 days reporting, or unpredictable reporting. When either of these things are the norm in your company, it’s time for a properly-designed finance function. The normal practice should be no more than a 10-day close and report cycle. It’s game-changing when you have prompt, predictable financials. This is easier said than done and often requires a complete redesign of the accounting processes and expectations. Make sure it’s an expert fractional CFO who has the background in leading this change.
4. No KPI’s. Choosing your own journey is fine for a board game but not for business. And if the business is chasing “rocks”, the same thing… crush the rocks and get some KPI’s. KPI’s help you navigate to the next level of business success and provide you with the tools to measure that success. The correct KPI’s also provide the early warning signs if your business is getting off track. Some KPI’s are table stakes - imagine driving a car without a fuel gauge. Others are leader-specific - do you need that lane departure alert turned on or off? An expert can help build a compass for your company’s success – and you’ll need it to manage the market changes you navigate.
3. Significant year-end adjustments. A well-designed and operated finance function makes for limited, minor year-end adjustments. Major adjustments are a no-no. There is no good reason to cycle through another fiscal year with this risky way of operating a business. You should not be flying blind through the year and relying on your year-end accountant to give you “true” results several months after the year has finished. Contact a transformational expert, right away – and transformation is what you need to make the numbers stick.
2. Antiquated tools and systems. Antiquated… sounds antiquated, right? And, you’ll know right away whether your business is caught in1995 pre-internet age. A transformational CFO expert will help streamline your processes using tools and systems that meet your company’s current and anticipated future needs – this will save your company money, time, and build morale – truly, it’s a triple win without an exaggeration of the benefits. An expert is someone who has “been there and done that” numerous times and can identify the right tools to fit your business.
1. Tax reassessments and penalties. Nothing is certain in life, except death and taxes. Tax risk is a risk that can permeate through the corporate veil and impact you personally as a business owner or director. If you are regularly being reassessed for any level of tax (sales taxes, payroll taxes, corporate taxes), incurring late filing penalties, or just unsure if your taxes are being managed effectively, then it is time for some serious expert support.
And, here’s a bonus round: No succession plan if your key person leaves. The rubber bands and masking tape that hold it all together with this key person will vanish in a flash when your key person leaves. Don’t leave your business to the hope that your key person will stay forever – hope is not a strategy. Set up your finance function with a transformational fractional CFO expert who can leave a legacy – because when they leave, another expert can step in and operate your finance function, smoothly.
Most transformations take 6 months to 1 year with the right leadership and direction. A trial and error approach can take years or ultimately fail. As the saying goes, “You don’t know what you don’t know”, so hire someone who does.
