Financial Matters with Fairhurst Accountants: it's important to think like a CFO
This week Fairhurst Accountants look at why thinking like a CFO can help shape your business.
For many small and medium-sized business owners, bookkeeping, payroll and VAT returns are seen as a necessary part of their routine.
These tasks are essential, but in terms of shaping your business, they can only tell you what has already happened.
It can give you a real advantage if you also spend some time thinking like a strategic chief financial officer (CFO).
That means using your financial data to plan and forecast so that you make smarter decisions for your business.
A bookkeeper’s job is to make sure that the numbers are complete and accurate, but a CFO takes those numbers and asks questions like:
Which customers or products generate the most profit?
How much cash do we really need in the next six months?
Where should we invest resources for maximum impact?
Adopting this kind of mindset can transform how you run your business.
The good news is that it’s not that difficult to develop some core skills that will help you to do this.
Financial literacy: Understand profit and losses, balance sheets and cash flows. These aren’t just for accountants; they can be your roadmap for understanding the financial performance of your business.
Forecasting and budgeting: Forecast what your business income is likely to be, plan for expenses and prepare for seasonal variations.
Key metrics: Track metrics that matter to your business - cash flow, margins, costs to acquire customers - so that you can make decisions based on data, not just gut feelings.
Risk awareness: Identify risks to your finances early on, whether it’s a slow-paying customer or an investment that’s costing too much.
Just picking one of these areas and making a small improvement can pay dividends.
You don’t need fancy software or a finance degree. You could begin with:
Weekly checks on your cash flow.
Reviewing profit margins per product or service.
Setting simple financial goals for the quarter.
Gradually, these habits build the foundation of strategic financial thinking, allowing you to run your business more confidently and proactively.
If you’d like a sounding board to help you step back, see the bigger picture and plan with confidence, speak to your accountant who will be happy to help.