As a manufacturer, you’ll likely face many decisions that impact your company’s finances. Whether it’s analyzing the potential ROI on a new piece of equipment, determining payment terms on a new large customer contract, or weighing different business models or strategies, manufacturers need financial professionals in their organizations to work through complex financial decisions that will impact your manufacturing and business operation.
Manufacturers experiencing or planning to grow often ask themselves the same question. “Do we need a full-time CFO and can our company afford the position?”
A recent trend has organizations looking at fractional or outsourced CFO structures to fill these needs and advise on financial decisions.
In this installment of Empowered Chats, we sat down with two Consultants of CFO Services, Jerry Benjamin, CPA, CGMA and Melissa Rood to discuss how working with a fractional CFO could benefit your manufacturing business.
If you don’t know where you’re going, any road will get you there
Knowing where you want your business to go is the first step. You need to develop a strategy and a CFO is there to have those conversations with you. They will help you evaluate the financial impact of the decisions that you are making. Whether you’re looking to move into a new market or expand your manufacturing line, a CFO is there to consider your investment in terms of manpower, capital, and systems. Is there a sufficient return for the risk involved? When working with a CFO you aren’t left to answer these questions alone. With your roadmap in place, a CFO partner, using tools like financial modeling, “paints” the financial picture of the strategic plan.
Financial modeling
There are several types of financial modeling from financial forecasting and budgeting to liquidity and investment in capital. If you’re new to financial modeling, start simple. Consider your basic goals and design a model around them. If your goal is growth, you could create a one-to-five-year sales forecasting goal. Remember these models are meant to be regularly reviewed and assessed. If you create a model in October for next year’s budget, it doesn’t mean you can’t adjust that model down the road. In fact, you SHOULD be monitoring your models closely and adjusting as needed. Start with what you know and work towards expanding your forecast window. As you continue developing the process, you will start to create more robust models that produce more accurate projections.
Take a holistic approach
Creating a strategy and forecasting are not just exercises for your business’ financial team. These processes should involve all disciplines of the business, from human resources to sales and marketing and everyone in between. If you’re not including these disciplines in the conversation, you’re missing out on adding their expertise to the strategy. Once your strategies and goals are in place, your next step will be communicating them to all members of your organization who will be influencing the strategies. Define the milestones and ensure everyone knows how they’ll create change and impact. Your strategy should be a living document with consistent check-ins, not something you complete and leave on the shelf once it’s done.
It is imperative to identify a person responsible for a goal or target. It doesn’t mean this leader is working to accomplish the goal on their own. They’re in charge of overseeing the plan and lead others to achieve that goal. This will ensure ownership of the goal to increase the chances of completing the goal on time. Lastly, if your targets are too hefty or overwhelming, people may get overwhelmed and discouraged if they know the goal is out of reach. Stretching your team to aim high is good for the business, however pay close attention in the status update meetings and adjust goals accordingly if needed.
Are you positioned for the future?
In the end, all manufacturers need to find a way to get CFO-level capabilities into their businesses to ensure they are well positioned for the future. Fractional CFO relationships can allow manufacturers to match the right level of CFO support within their budget.
Outsourcing has been functional and cost-effective across IT and human resource departments. Moving your CFO role to an outsourced structure can shift the focus of your entire back-office operation and allow your managers to focus on what they do best.
If you’re interested in learning more about how Rehmann can partner with you to reach your goals, contact us today!
