Next week marks WrightCFO‘s 10th anniversary, and it’s got me thinking back to my first gig as a Fractional CFO, also known as CFO As a Service (or as it was called back then, a part-time or portfolio Finance Director).
I stumbled upon this Fractional CFO opportunity through a LinkedIn group that no longer exists but was specifically for Fractional CFO Services. It was a stroke of luck. I introduced myself to the group, and a small media business with a pressing issue reached out. They had recently fired their Finance Director due to suspected fraud and theft.
My task was to investigate and gather evidence for legal action. Using their Paprika software, I quickly discovered a pattern of suspicious transactions. Money was beingmoved between bank accounts like sheep from field to field, with one account being suspiciously off-limits.
But as I spent more time in the office, I noticed other concerning issues. Despite good sales and profitability, the cash balance was dangerously low. Finance assistants were constantly stressed about making payroll and tax payments, while the sales team celebrated new client wins. Something didn’t add up to this Fractional CFO.
Problem 1: Un-invoiced Revenue
A quick analysis revealed that over £200,000 in sales had not been invoiced. I proposed a new process to ensure timely invoicing and collection.
Problem 2: Unpaid Invoices
The company had a high volume of outstanding invoices and was relying heavily on invoice finance. Credit control was a mess, with a remote credit controller who was overwhelmed and underutilized. I visited her in person to understand her challenges and implemented a solution: hiring a part-time assistant to focus on sales invoicing, credit control, and debt reduction.
Problem 3: Lack of Insightful Reporting
The existing CFO, who was also part-time, presented confusing and unhelpful financial reports. I discovered that the board members didn’t understand these reports, and one client was on the brink of leaving due to dissatisfaction.
Solution: I presented a more meaningful analysis, highlighting the concentration of revenue from a single client group and the urgent need for action. The Chairman stepped in, addressed the client’s concerns, and essentially saved the business.
CFO as a service- Lessons Learned:
- Fresh Eyes Bring Value: An external perspective can uncover hidden issues and inefficiencies.
- Fractional CFOs Are Problem Solvers: While I initially went in to investigate fraud, I ended up addressing broader financial and operational challenges.
- People Matter: Understanding the people involved is crucial. By observing the stress levels, celebrating wins, and complacency, I was able to identify the root causes of the problems.
Fractional CFO Services- Key Takeaways:
- Don’t rely solely on numbers: Look beyond the data and talk to people.
- Proactive credit control is essential: Prevent late payments and reduce reliance on invoice finance.
- Clear and actionable reporting is vital: Ensure that financial information is understandable and drives decision-making.
This first experience offering CFO as a Service, taught me invaluable lessons that have guided my career as a Fractional CFO. It’s been a rewarding journey of helping businesses overcome challenges and achieve their goals.
