4 Common Business Challenges that CFO Advisory Services Can Help You Overcome

CFO Advisory Services | Christopher L. Zellman | Aug 14, 2023

For business owners, keeping a close eye on financial performance is crucial to ensuring success. However, many entrepreneurs find themselves in a perplexing situation where their business is not meeting expectations and is underperforming and stagnating.

Identifying the underlying issues resulting in under-performance whether reflected in decreased profitability or lack of revenue growth is the first step in addressing performance and profitability issues. It can be a daunting task, leaving you at a loss for finding effective solutions. In such challenging circumstances, seeking guidance from experts can be a game-changer.

Here are four of the most common problems that the Prager Metis CFO Advisory Services team will help finance and other senior executives address:

1. “We have a cash flow problem.”

Cash flow challenges are a frequently encountered issue, particularly during the early stages of a startup when sales trends and peak seasons are still being understood. Additionally, businesses experiencing growth spurts may struggle to maintain adequate cash flow to support their expansion.

Various factors contribute to cash flow problems, including unforeseen outlays of cash due to poor forecasting, improperly budgeted bonuses and other expenses, late customer payments, inadequate inventory management, high-interest debt, and fluctuations in the marketplace to name a few.

To address these cash flow concerns, our CFO Advisory team provides you with valuable expertise in developing comprehensive cash flow & budgeting models. These models clearly illustrate the inflows and outflows of cash, enabling you to identify critical pain points and bottlenecks. By closely monitoring cash flow statements and building cash reserves, you can then focus on generating the necessary liquidity for future growth and investment endeavors.

2. “Our profits aren’t what we thought they would be.”

There could be several reasons why profitability is falling short of expectations. For instance, an imbalance in sales between lower-margin and higher-margin products can significantly influence the overall financial performance. Additionally, it might be necessary to reassess the existing pricing model to ensure its effectiveness in maximizing profits.

Unexpectedly high costs could also be contributing to the reduced profitability, warranting a thorough analysis of major expenditures. Vendor and supplier contracts could create higher costs than necessary hiding potential cost-saving opportunities. Moreover, the recent inflationary environment poses unique challenges for smaller businesses, demanding a prudent approach to financial management.

While some may view increased sales as a simple remedy, a more nuanced strategy is required to address the fundamental issues impacting profitability. Getting your cost structure properly aligned with sales is a necessary step in improving profitability so that as revenue grows so do margins and net profit.

Our specialized CFO Advisory Team can be instrumental in efforts to improve profitability by conducting a comprehensive evaluation of product profit margins to aid in identifying an optimal product mix that bolsters financial performance. Furthermore, our expertise enables us to explore avenues for cost reduction and operational efficiency enhancement through a unique model to identify waste throughout the organization. Emphasizing a data-driven and methodical approach, we assist businesses in formulating strategies that foster sustainable profitability in the long run.

3. “I think my key performance indicators are not telling the whole story.”

Key performance indicators (KPIs) serve as vital metrics for assessing an organization’s progress in various domains, including gross margin, overall business operations, marketing, employee productivity, and customer satisfaction. KPIs should reflect a clear story that tells you why profit is what it is and more importantly, provide an understanding of the leading indicators that will forecast future results unless actions are taken to improve the leading indicators.

By leveraging KPIs, you gain valuable insights into the areas performing well and those requiring attention. In times of struggle, organizations may find that their KPIs lack alignment with the overarching goals and mission. Accurate measurement, insightful extraction, and practical application of KPI data can present challenges if not properly identified and measured.

To address these complexities, our CFO Advisory Team offer expert guidance. We aid businesses in comprehending and understanding the impactful KPIs for their unique circumstances and assist in evaluating KPIs over time and deciding on actions to take based on the KPIs. Setting realistic improvement goals and devising strategies for achieving these objectives are pivotal components of our comprehensive support. With our specialized assistance, organizations can harness the power of KPIs effectively, gaining clarity on their performance and charting a course toward sustained success.

4. “Our budgeting and forecasting are unreliable.”

The unfortunate reality is that many organizations do not have a sophisticated budgeting and forecasting model, which can lead to the problems discussed previously with cash flow, profitability, and KPIs.

Factors such as erroneous data, shifts in customer behavior, and overly optimistic assumptions can render budgets and forecasts unreliable.

One of the core challenges lies in the fact that budgeting and forecasting processes are often driven primarily by financial personnel, with limited input from key stakeholders on the frontline—such as

sales, marketing, and executive team members. These individuals possess valuable insights into the factors driving sales, revenue, and costs, and their perspectives are crucial for comprehensive planning.

To overcome these hurdles, our CFO Advisory Team can step in to assist companies in developing a best practices-based model for budgeting and forecasting. By incorporating all pertinent perspectives and data, we assist businesses in creating more accurate and reliable financial projections. This approach not only reduces surprises but also can provide the necessary flexibility to adapt swiftly to changing market conditions.

With our expertise, organizations can foster a more robust financial planning process, making informed decisions and charting a resilient path towards sustained growth and success.

Get an Independent, Unbiased Perspective

Business owners and senior management often face difficulties in pinpointing the root causes of issues because of their close involvement in day-to-day operations, leaving little time and resources for a comprehensive evaluation.

Our CFO Advisory Team brings a wealth of deep, real-world experience in assisting organizations ineffectively addressing the above challenges. What sets us apart is not only our years of experience as CFOs and operational executives, but also our ability to provide a fresh set of eyes and objectivity, enabling us to fully evaluate both the financial and operational aspects of your business.

Allow us to partner with you in identifying and correcting the underlying causes of the common business problems noted above. Through meticulous analysis, we develop targeted strategies that tackle issues at their source, recommending lasting solutions. Furthermore, our expertise enables us to establish robust systems and processes that safeguard your business from falling back into potential traps, empowering you to achieve sustained success.

Remember, the road to success is often smoother with a trusted advisor by your side.

To schedule a free consultation, contact Christopher Zellman, Principal, Prager Metis CFO Advisory Services, at 212-643-0099 x10203 or czellman@pragermetis.com.