Your Business is Changing and Growing—Why Shouldn't Your Finance Team?
by Kristina McMenamin, on Nov 1, 2018
Are you using your finance team most effectively for future growth?
Your organization’s finance team runs just like many other companies, be it for reporting and compliance issues, as bookkeepers and budget managers, or maybe strictly for by-the-books accounting. But, just because you’re checking the boxes to make sure your company is financially sound now doesn’t mean you’re using your financial team most effectively for the future.
Post-financial crisis, corporate finance teams saw a shift in responsibilities to cost-cutting and short-term planning for a market that was clouded by a near-catastrophic economy. Hesitant financial behavior was very much in sync with a hesitant market.
The ability to be flexible and change course was more difficult for large companies than small- and medium-sized businesses, if not solely because of their size. As a result, large companies focused on standard operating procedure when met with adversity: freezing the pipeline of new hires; cutting existing staff; and shifting priorities away from innovation and expansion to prioritize the bottom line.
Look ahead for opportunities to create value
Ten years later, with a rebounding economy and a healthy environment for businesses of all sizes (see, for example, the increase of funding and first-time financing for private technology companies since 2007), the need to look ahead to opportunities to create value within your company, as well as having research and the confidence to jump into opportunities, isn’t just something to consider – it's a must for future planning.
Your company has yet to utilize your finance teams as value-adding managers, and, on paper, it makes sense: when business owners and CEOs are embedded in the day-to-day operations of their company, it can be hard to imagine their company’s prospects years, or even months, down the line.
Opportunity lies ahead for your company, but you, like so many others, don’t know where to start. Let’s see what a value-focused finance team could add to your business.
When is it time to start using your finance team as value-adding managers?
Start thinking about the future today
If you're not thinking about the future today, this week, and this month, your company won't live to see it. Steps toward maximizing your value should start in the short-term, as your goals–the most obvious among them, earnings–might be emphasized over value creation.
Your company has steady cash flow, a solid customer base (and with it, a strong demand and good feedback), and you’re confident you can weather market uncertainties, all indications that you’re ready to take your venture to the next level, whatever that may be. And, even if you don’t have all those indicators in place, you might be looking to scale and take your business to the next step – where do you begin?
Fictional Case study: Everywhere Rentals
Let’s say you own a fictional company: Effingham, Illinois-based Everywhere Rentals, a 25-employee construction rental equipment company with $100+ million in revenue that specializes in lending large manufacturing equipment to construction companies in rural areas and urban clusters.
Everywhere Rentals is one of the largest construction rental companies in South Central Illinois, and the two-person finance team that is largely responsible for managing the company’s books month-to-month helps maintain its constant revenue.
But the equipment rental market is sure to change.
How could the addition of a value-focused finance team help Everywhere Rentals prepare for the future?
Knowing what Everywhere Rentals is good (and bad) at, understanding its current financial position, and where it stands to capitalize, is where a CFO and/or value-focused finance team comes in.
Everywhere Rentals’s focus is mainly providing construction rental equipment to rural areas and urban clusters, but a CFO might suggest that since there’s a shift toward the majority of people living in urban areas in the next 30 years–as well as a decline or stagnant growth in urban clusters and rural areas, respectively—Everywhere Rentals should take steps to position itself as a provider of rental equipment to construction companies in large cities, especially with its prime location mere hours from several large metropolitan areas.
Strategic Office Location
With this in mind, a CFO could suggest creating more Everywhere Rental offices along I-70 to better serve urban centers; additional equipment whose purpose would be better suited for the construction of taller buildings in cities; implementing new technologies to streamline the rental process and the workflow of current employees; or several other strategies meant at adding value for Everywhere Rentals.
In turn, a value-focused finance team would create a case for why these strategies would work if put into action, be it through a risk assessment model that would pose these potential actions against the market of tomorrow, or a pro forma model that could anticipate the costs and benefits of these potential actions once they’re put into play.
How Paro can help get you there
Shortened on-boarding process
You might think that building out a finance team to specifically add value is a daunting (and expensive) task, but by using freelancers–a part-time CFO or an entire finance team dedicated to adding value to your company–to create new strategies and help implement them for your company will often take less time than it would take to even onboard a new full-time staff member.
Quicker innovation and faster adoption
And, according to report on finance freelancers, the benefit of bringing in top-notch freelance talent who have had experience doing financial planning for companies and planning out a path for a successful future allows “for quicker innovation and faster adoption to environmental changes.”
Your finance team knows you and your company alone. But, by bringing in a value-focused finance freelancer(s) to your team, you’re not only getting the niche expertise of someone who is forward-thinking, but the wealth of experience and knowledge they’ve gathered from other successful, (and unsuccessful), companies alike.