One of the most crucial aspects of Finance and financial management in any organisation is how it can – and must – influence wider strategic decisions in order to deliver better business outcomes.

Implicit in this is the importance of strong financial leadership and disciplined strategic planning, but to achieve both there needs to be a place for a ‘Finance brain’ at the decision-making table – and in many SMEs and start-ups, this expertise simply isn’t available, and costs too much to recruit into the business on a full-time basis.

The vital role we’re talking about here is that of the Chief Financial Officer (CFO), and in this piece, we’ll explore how and why this function drives strategic planning, what that planning consists of and delivers, and – critically - why SMEs don’t have to pay a full-time CFO’s salary to access CFO services.

Demystifying strategic planning

Strategic planning is, perhaps surprisingly, not a complex concept. In its simplest form, it is working out how to take the business from point A to point B in a specific time frame, and indeed what point A is and what point B should be.

That might sound more like business than Finance, but as we mentioned above, the two are indivisible, for the simple reason that any and all of these plans and actions, at whatever stage of business growth, require financial resources.

• Do you want to open a sales office in the US before the end of the financial year? How much will it cost, and where’s the money coming from?
• Do you want to double revenues from £2 million to £4 million in the next 12 months? How much do you need to invest in systems, processes, people, and marketing to get there? And – again – where’s that money going to come from?

There’s no achievable business strategy without a sound financial strategy behind it. To prove the point, around 20% of businesses fail in their first year, and 60% in the first three years, with much of this being due to poor strategy.

In short, wherever the business is headed, it’s getting there on sound finances – or not at all. But how does the CFO make this happen?

The CFO: where financial leadership and strategy meet

It’s important to remember that a CFO typically brings with them immense experience, learned over many years in senior Finance and business roles, so there’s a strong element of prior insight and seasoned know-how in how they react to data and detail.

And this is precisely what the CFO will go looking for - financial data and facts from within the organisation and its systems, processes, applications, tools, and databases.

Where these are lacking, the CFO will also often initiate and oversee projects to implement them anew or improve what’s already there.

Why? Because hard financial data is the basis of the management information (MI) and reporting that the CFO uses to validate or change the business’s strategies.

And the impacts (and benefits) of this hard data can be far-reaching. It can, for example, show you which products, services, and activities you need to offload because they’re not profitable and it can show when the business is hitting goals in one area but missing them in another – growth versus profitability, for instance.

But it can also identify ways of increasing funding and strengthening cash flow, to provide a more solid platform for growth. Opportunities to bill earlier, get paid quicker, maximise upfront revenues, and approach sources of external finance can all present themselves off the back of strong Finance data and the CFO’s detailed analysis of it – and the bottom line will be the stronger for it.

Typically, the CFO will also use this data to create a business plan with a three-year horizon, broken down into one-year chunks. But modelling finances is a constant and ongoing process, so the CFO is also focused on monthly or even bi-weekly (depending on the sector) cash flow management and forecasting.

Financial reality underpins every strategic decision – which is why involving the CFO in discussions at every level, from peripheral stakeholders to Board-level decision-makers, is indispensable.

Risk and improvement: the CFO’s invaluable dual input

It stands to reason that a CFO who spots, in the data, opportunity for change and improvement will lobby to deliver these. In practice, this can be about everything from changing customer billing and subscription routines to reshaping the entire business model, in manageable time scales.

But whilst the optimism of this green-light thinking is key to the CFO’s financial and strategic leadership, so is red-light thinking: that is, the ability to understand what could go wrong, what its financial impacts might be, and how to most efficiently and cost-effectively guard against it.

The watchword here is ‘risk’ – and having the right trading terms and conditions and insurances in place, for instance (professional indemnity, public and employers’ liability, product liability, business interruption, cyber and data, to name but a few of the latter) is key. It’s a sobering fact that many SMEs are underinsured.

At the same time, strategic planning sometimes means having to take more radical risk management decisions. A CFO won’t shy away from proposing pulling the business out of an excessively risky sector, for example.

Nor will they hesitate to suggest say, rebalancing staffing levels using outsourcing (Finance is actually a very good example), as this can maximise access to expertise at far lower cost – an excellent risk outcome!

What else a CFO delivers – and why it needn’t cost the earth

The CFO is the ‘finance brain’ in the boardroom, furnishing the financial facts that support or argue against strategic decisions, and regularly reviewing plans to accommodate change and deliver contingency if things don’t work out as they should.

But at the same time, the CFO brings a much wider field of vision to the table. Typically experienced across multiple sectors, with a broad knowledge of business environments, workings, and styles, they provide financial leadership tempered with pragmatism and real-world awareness.

It’s this unique perspective – Finance viewed through the lens of strategic business outcomes – that makes a skilled CFO a key enabler of the business’s commercial success.

But although every SME needs a Finance brain, they don’t need it all the time – and so they shouldn’t be paying for it on that basis.

This is why, at EFM, we make CFOs and other senior Finance professionals available part-time (you’ll sometimes hear this called ‘fractional CFO’ services), to work as many or as few hours as you need their financial leadership and strategic planning expertise for.

After all, time is money.

For more information on how EFM’s outsourced CFOs and other senior Finance professionals can help your business plan and perform better, get in touch.