You are captain of a cruise ship, sailing on smooth waters that reflect the starry night sky on its mirror-like surface. To make it to your destination on time, the ship is sailing full steam ahead and you’re confident that you will make it to port on time. Everything is smooth sailing until you suddenly spot a towering iceberg that reaches 50-100 feet above water and spreads 400 feet wide. It’s way too close…you won’t have time to stop or turn the ship until it’s too late…
This is the story of the Titanic, the night the “unsinkable” ship sank.
Today, ship captains can detect icebergs with the naked eye, radar, or sonar. If using the proper tools, you’ll be able to avoid a collision with icebergs, sand bars, and a variety of other underwater obstacles with ease. Unfortunately for the Titanic, they relied on vision alone (sonar was still years away) and were sailing through dangerous waters. Considering that 90% of the Titanic iceberg was underwater, the imposing portion that those on the ship saw was quite literally just the tip of the iceberg.
Many entrepreneurs try to sail their business ship much the same way. They navigate their business operations without the proper tools and resources to identify problems that have the potential to do a lot of damage. Or even to put them out of business! You need to install financial sonar to make sure you see what’s coming and can strategically avoid otherwise unseen problems headed your way. While you and your bookkeeper are monitoring the top 20% of the iceberg, hiring a Fractional Chief Financial Officer (CFO) provides you with a complete picture, including the remaining 80% of your business finances. I’m available to be your financial sonar, helping you avoid potential icebergs waiting to sink your long-term business goals.
5 Reasons You Need To Install Financial Sonar
Hiring a CFO to serve as your financial sonar may seem out of reach for small to medium size businesses. Hiring a fractional CFO – a financial expert under a contractual agreement – is much more attainable and provides you with the expertise you need without hiring a costly, full-time CFO.
But you may be asking…do you really need a CFO? Here are five reasons to install financial sonar and hire a Fractional CFO to avoid an under-the-surface collision:
1. You aren’t sure what to do with all the reports your bookkeeper sends you.
You receive an email with the subject line: “For Review: This Month’s Financial Report.” You open the attachment and scan total revenue, total expenses, bottom line revenue – you made a profit this month! Looks good! The following month, you receive the same email, but when you review the top line numbers, something is off. Revenue is down 20%! Hmmm…what are you supposed to do now? Even the best bookkeepers can only tell you so much. Hiring a Fractional CFO will help you unravel the financial mysteries that show up on your monthly financials, keeping everything in check and catching problems before they get too big.
2. You don’t know what a balance sheet is…or if yours is good or bad.
When the value of the balance sheet isn’t understood, owners think it’s not worth the time investment to understand it. You absolutely need to understand the basics of your balance sheet – the top 20% of the iceberg. For example, do you know what to look for when it comes to your Accounts Receivable Balance? The other 80% of your balance sheet is also critically important, and if you aren’t a trained financial expert you need to hire someone who can help you read it and understand what it is telling you about your current and future financial situation. The Accounts Receivable aging report is an example of one important component of your balance sheet that is part of the 80% under the surface.
3. You don’t know what you don’t know when it comes to your finances.
You obviously started your business because you had a great business idea. But running a business means you not only have to be a passenger on the ship, you have to know how to sail it, how the innermost parts of the ship work, and how the outside environment changes your speed and trajectory. That is especially true regarding business finances. Since you aren’t a certified financial expert (hence you’re reading this article!), you need to hire someone you trust to ensure you are taking into account all aspects of your finances when you are making business decisions about where you’re headed.
4. You want a better understanding of what the future of your business holds.
Basic financial reports (balance sheet and income statement, for example) look at the past, but what do you do to look ahead? Last month’s revenue is what we call a lagging indicator, or how your business did in the past. In order to drive forward, we need to figure out what your leading indicators are, or the proactive actions and numbers that will tell you exactly how to reach your financial goals. This is where financial sonar really gets exciting, because looking at prior month and year lagging indicators with a skilled eye can help you with forward projections – and avoid icebergs that may be in your path that you can’t see with the naked eye.
5. You want to hire a new employee and aren’t sure if you can afford it.
There is a lot more than salary to consider when it comes to hiring a new employee. The answer to your question is in your financial statements and projections, but it’s hiding deep at the bottom of the iceberg. You need someone to help you find the answer that is already there. Hiring a Fractional CFO can put your mind at ease about hiring because you’ll be able to see the return on investment a potential new employee will bring to your business.
Don’t be fooled by how smooth the financial waters look as you sail your business boat towards your short- and long-term goals. While everything may look like it’s going well now, there may be a big iceberg up ahead that looks small and avoidable above the surface, but below it’s only a matter of time until it sinks your business. Install financial sonar to ensure you are seeing the complete picture, and let a financial expert like me help you avoid a collision that might just put your company out of business. Contact me today to set up a free consultation!
