Business growth is great, but it comes with added challenges and complexities. While an accountant can help manage financial operations for some time, it can get to a point where things like tax compliance and auditing become overwhelming. That’s when hiring a chief financial officer (CFO) can help.
A CFO protects your business and keeps it growing by identifying sustainable growth opportunities, ensuring tax compliance, carefully assessing risks and managing cashflow. In short, they manage the financial health of your business.
But how do you know it’s time to hire a CFO? After all, they don’t come for free; it’s an additional business expense. You want to make sure your business can really benefit from having a CFO before hiring one. But hiring a full-time CFO isn’t your only choice; a virtual CFO or outsourced CFO services could be the ideal solution.
At PCR Accounting & Advisory, we have helped many businesses make the transition into working with a CFO at the right time. Over the years, we have identified four signs that usually indicate it’s time for a business to hire a CFO.
What is a CFO and How Can They Help Your Business?
You may be wondering why you need yet another finance professional when you already have an accountant. But a CFO’s job goes beyond basic accounting.
Sure, some of their roles may overlap, for example, a CFO might be involved in some accounting tasks like budgeting, overseeing cashflow and preparing tax returns. However, a CFO is more concerned about the future of the business. They are there to guide your business through growing pains and handle complexities that go beyond the scope of your trusty accountant or bookkeeper.
A CFO will take on big-picture and forward-looking roles that accomplish two main things: protecting your business from potential financial risks, including compliance issues and maintaining sustainable growth.
Some of the typical tasks they are involved in are:
- Marginal analysis to assess and improve a company’s profitability
- Cashflow management
- Growth planning and strategy
- Regulatory compliance
- Risk management
- Investor relations
When to Hire a CFO: 4 Signs To Look For
1. Tax Compliance Has Become Complicated
As your business grows, tax compliance can quickly get complicated. PAYG instalments, PAYG withholding, payroll tax, GST, capital gains tax…there is a long list of tax obligations you have to meet.
Many businesses end up overpaying tax rather than risk non-compliance and penalties that could disrupt cashflows.
A CFO can help make sense of the many and complicated Australian tax reporting requirements. They make sure you are fully compliant without paying more tax than you need to.
They can also assist with ongoing tax compliance as your business expands and changes. For example, you may face new tax obligations when you buy new assets such as property, take on or dispose of investments, hire more employees or work with contractors.
2. The Auditing Process is Overwhelming
Auditing takes up a lot of precious business time and resources. With more growth, your business faces potentially more intensive audits that could overwhelm your employees.
It’s not just tax audits from the ATO you need to think about; your business may also receive audit requests from lenders, investors and other parties. A virtual CFO can make the auditing process easier in several ways:
- Provide guidance on how best to prepare for an audit including what information and reports you need to collect ahead of time. They make sure all necessary documents are available for an audit.
- Advise on how to reduce the chances of a tax audit. If you can avoid an audit in the first place, it saves you a lot of headaches and time.
- Work as an extension of your finance team, helping them manage the auditing process in a smooth manner that minimises disruptions to your business.
- Address any risks and concerns ahead of time before they cause problems during auditing.
3. Risk Management Requirements are Getting More Complex
Business growth comes with increased risks, both internal and external. Some of these are financial risks such as poor cashflow, compliance risks that could expose your business to legal problems, and strategic risks that threaten business survival.
While risk management might be somewhat straightforward for smaller businesses, it becomes progressively more complex as you hire more employees, open multiple locations, increase your inventory or take on debt.
A CFO will identify what risks your business faces, assess them to determine their level of priority and come up with an effective risk management strategy.
4. Your Business is Growing
Another tell-tale sign that you need to hire a CFO is if your business is rapidly growing. Generally, businesses that have surpassed $1-$5 million in annual revenue should consider hiring a part-time CFO.
More revenue usually means more financial complications in areas like cashflow, tax compliance and credit management. Having a CFO around prevents the growing revenue from bogging down your business.
Revenue is not the only determinant of when to hire a CFO. Other stages of business growth when a CFO might come in handy include mergers, raising capital, entering a new market or adding a new product line. These changes bring in new complexities and risks that a CFO is perfectly suited to handle.
Ready to Hire a CFO?
If you feel you are ready to hire a CFO, PCR can help. We offer flexible and personalised virtual CFO services to support the growth of your business, whether just starting out or a long-established business looking to grow.
Contact us on 03 9847 7516 to get a one-on-one virtual CFO service that’s tailored to your needs.
Disclaimer: This blog post is for informational purposes only and should not be considered as financial or legal advice. Consult with a qualified professional for personalised guidance based on your specific circumstances.
Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.
