My Top 5 Priorities as a CFO

Whenever I Sign a New Client, This Is What I Do First

I wrote some time ago about what a good CFO should do for you in their first 90 days. But now that I’ve helped over 75 SMBs myself, I figured now was a good time to discuss the what, why, and how of my first moves whenever I take on a new client.

Before I dive in, here they are.

  1. Reduce expenses

  2. Share insights clearly

  3. Optimize financial processes

  4. Create a strategic financial plan

  5. Improve cash flow management

Let’s get into it.

Reduce Expenses

While spend management should be an iterative process, I like to look first for sources of waste. Doing this before anything else frees up capital and other resources to fund growth.

Most of the opportunities I see to do this are in unused subscriptions, extra licenses—often from users who are no longer with the company—and costs that feel worth it but are not, such as tools and headcount.

Share Insights Clearly

If the books are messy, this means cleaning them up. You can find a how-to guide for doing this here.

If the books already look good, this means putting together the core financial statements, making sure everyone understands what they’re reading, and setting a regular cadence to review them. If you’d like to do this yourself, you can read all about it here.

At this stage, I like to get the whole team involved by opening the curtains wide on the company’s financials. Doing so increases trust and accountability while also being the source of some great ideas on how to improve the business.

Optimize Financial Processes

The big ones here are invoicing, getting the books closed quicker, and monthly financial reviews.

A significant portion of the cash flow issues that I see with clients can be traced back to slow collections. So I like to make sure that invoices are going out in the correct amount and in an easy-to-understand format on the day of service—without exception. From there, we implement a consistent credit policy if one isn’t already in place and working well.

I understand the urge to close the books for the month and move on. But doing so negates the value of all that financial data. The truth is is that clean books don’t mean much if they aren’t studied shortly after closing. Yet close it and forget it is still the norm for most SMBs.

A big reason for this is that closing usually takes weeks, leaving only a few days for owners to review performance.

That’s where I work with clients to get their books ready in about half the time. The secret is a two-pass approach, or a soft close within 10 days and a hard close in 10-15 days.

The soft close doesn’t include full bank reconciliation and journal entries, but it does get the client a working set of numbers within an acceptable variance. The result is ample time for reviewing performance while they wait for minor adjustments in the form of a hard close.

A good financial review means meeting with the accounting team to understand how the financials were prepared, studying the P&L and Balance Sheet line by line, and investigating any columns with more than a 5% budget variance—all before the formal meeting begins.

In the actual meeting, whoever owns each high-variance line item should be asked to explain in detail. If they don’t have good answers, either further review of the books or more transparency will be needed going forward.

Your goal is to explain each variance and put together an action plan to reverse any concerning trends. Check out this post to read more about conducting a good financial review.

Create a Strategic Financial Plan

At a high level, this means setting goals and KPIs, determining what’s doable, and coming up with a specific, stepwise roadmap to make success inevitable.

Clients often want to see a considerable increase in net income. Most of the time, this is doable by cutting the fat identified in my previous steps. But it typically can’t happen overnight.

This is where we combine quick wins with longer-term moves. This two-pronged approach gets results fast enough to keep the team motivated while ensuring stability in the business as bigger changes are implemented.

In practice, this could mean renegotiating with suppliers and cutting down on office space while the overall product mix is rebalanced.

The key here is twofold. For your strategic plan to work, it needs to tie back to the financials, and it needs to be broken out into manageable steps with clear owners. That way, you’ll know exactly where to adjust if you’re not quite performing to plan.

Improve Cash Flow Management

While strong cash flow in and of itself won’t get you rich, it’s a non-negotiable when it comes to staving off liquidity issues and avoiding unnecessary debt. I’ve also yet to work with an SMB that didn’t have any room for improvement here.

While collections tend to cause the lion’s share of cash flow issues, clients often overlook the other side of the equation: when and how they pay their own bills.

While it’s pretty common for most owners to pay bills as soon as they get them—or to pay bills once a week as they arrive—I don’t recommend it. Waiting until the day they’re due and setting them up for autopay keeps cash in the business longer without running the risk of dinging your credit.

You can read more on sound cash flow management here.

Putting It All Together

Here are your top takeaways from this week’s post.

  1. The first thing I do with a new client is reduce their expenses. Doing so provides a quick win while also freeing up resources that can be redeployed later.

  2. With the team newly energized, we get the books and core reporting in order. From there, I make sure everyone understands the statements in front of them and feels comfortable speaking up if they don’t. This sets the stage for greater accountability and a flood of good ideas coming from every level of the business.

  3. Next, I work with clients to streamline invoicing, closing the books, and monthly financial reviews. These moves result in quicker collections, fewer outstanding accounts, books that actually get studied, and review meetings that allow for early course correction.

  4. Using the efficiencies and insights unlocked in the previous steps, I work backwards with clients to determine the short- and long-term actions that will get them to the end goal. The result is big change over the long-term without sacrificing stability in the immediate term.

  5. Finally, I optimize cash flow—even if there aren’t any liquidity issues at present. The reason for this is that there’s always room to improve here. And stronger cash flow means avoiding unnecessary debt, growing faster, and fetching a higher price should a buyer reach out.

Hungry for More?

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‘Til Next Time,

Connor