Reality-check: Your chief financial officer (CFO) can help you realise the full potential of your business and reach new levels of growth, especially when you disclose essential business information and challenge each other.
It requires mutual work — you need to let your CFO know the present status of your business, where you want it to be and the questions that keep you up at night. Only then can your CFO find a strategic way to guide you towards your goals.
To begin with, here’s a list of questions you may want to ask your CFO to ensure you’re updated with potential growth opportunities.
Questions to ask a CFO
Here are the eight questions to ask a CFO to improve the overall financial health of your business and bring you closer to your goals.
1. Is my business profitable?
A good CFO can provide you with a breakdown of the profitability of different areas of your business. It includes the profits from your products, clients or the channels you’re using. This will allow you to prioritize income-generating areas and activities and figure out strategic ways to boost the low-performing ones.
Always keep in mind that without profits, you cannot survive in the long run. By understanding the profitability and looking for ways to increase it, your business can survive and grow at the same time.
2. What is my cash flow position?
After knowing if your business generates profits, the next thing to know is if it operates with positive cash flow. A positive cash flow translates into longer business continuity where your company is liquid enough to cover expenses while still earning profits to invest in other growth opportunities.
A cash flow statement is used for reporting your cash flow position. This is where your CFO comes in.
Your CFO has the necessary expertise to understand, assess and communicate your numbers in a way you can understand.
When your cash flow is low, they can help you come up with strategies to improve your liquidity, such as being stricter in collecting your accounts receivables or increasing prices. On the other hand, if you have a positive cash flow, they can help you identify investment opportunities so you can accelerate your growth.
3. What products, marketing campaigns, and distribution channels are most successful for our business right now?
The CFO has a finger on the pulse of your business finances. Ask them to give you some helpful information about which business strategies you should focus on based on market and economic trends.
4. What are the biggest threats to our planned profit target and what can we do to minimise the risk?
There will always be some risks in running a business. Your CFO is uniquely qualified to give you the big picture so you can decide which risks are worth it and which can be mitigated. Using information to make informed business decisions will give you and the business the most chance of long-term success.
5. Are we clear on what our growth strategy looks like and how it impacts our profit and loss over the coming three years?
If there’s a person who can tell you how your growth strategies can impact your financial health in the future, it’s your CFO.
Translating your growth strategies into financial projections will provide you with clarity on the impact of your business decisions on your bottom line.
Also, as you try to get nearer to your goals, you may encounter situations that might affect your plans. Take for example the Covid-19 crisis – such unexpected incidents can be better mitigated if your growth strategies are flexible and reviewed regularly. It will provide you with time to work through different scenarios so that you are prepared and ready to be flexible enough to adjust your plans. This will provide you with the confidence that you have a live picture of your financial forecast at all times.
6. What KPIs should I be measuring to drive our growth?
Your key performance indicators (KPIs) measure the performance of your key targets. To know if you’re on track to reaching your goals, you must keep an eye on the right KPIs. Think of your KPIs as the road signs pointing you toward your destination.
CFOs are masters of KPIs and financial metrics. As long as you know where you’re headed, they can provide the KPI you need to watch the most.
Read Next: Key Financial Metrics for Small Businesses
7. How can we improve our financial performance to attract more investors?
CFO’s are strategic thinkers. They do more than number crunching. They’re well-rounded people who deal with all aspects of your financial situation — from overseeing the relationship with your tax consultant to analysing, checking and informing you of your business’s financial performance and results.
They also synthesise all of these pieces of information to create actionable strategies and make informed decisions on how your company can best work with all of this data to be more financially successful.
The better your financial position and business situation look, the more investors you can possibly attract.
8. How do we adapt to growth?
Whether you’re growing fast or experiencing a growth plateau, it’s crucial to have your CFO’s involvement in determining your next steps.
For example, if your company is growing fast, your CFO can give advice on how you can keep up with the growth. Do you have enough funds to cover expenses for new investments? What are your projected revenues if you push through this growth opportunity?
Meanwhile, if your company hits a plateau, your CFO can provide you with insights on the possible reasons (e.g., tighter competition, unsteady economic conditions, etc.)
Sure, your CFO can assess your business and give you advice based on your financial reports. But remember that you’re the only person who knows your business down to its tiniest details. So don’t hesitate to ask questions and share strategy — your CFO has your best interest in mind.
CFOs for small businesses in Australia
Are you looking for reliable CFOs with extensive experience in working with different industries? Look no further; ABJ Solutions is here to help you. Get all the data, analysis and strategy advice you need to successfully run your business through the service of our CFOs.
For more information about our services, contact us today.
This article was first published on 10 June 2019 and updated on 3 June 2022.
