Nationwide Communications' owner and president Jim Usher knew his firm's finances were in a tangle. But like most small-business owners, he didn't have the wherewithal to sort them out. And he surely didn't have $200,000 to $300,000 — the average salary that a full-time chief financial officer at a small business in the U.S. commands today — on hand. So, what was he to do?
Hire A Temp
Secretaries and industrial workers are no longer the average temps. This labor pool has become “professionalized,” and financial pros are one of the fastest-growing segments. Temp financial executives — typically seasoned professionals with 15 to 20 years of financial and accounting experience — have long been used by venture capitalists to support businesses in which they have invested. Researchers at Staffing Industry Analysts estimate their popularity has spiked some 70 percent since Congress passed the Sarbanes-Oxley Act, as companies struggle to adhere to the stricter financial controls required.
Bobbie Monroe, financial advisor, CFP and owner of Atlanta, Georgia-based Fraser Financial, frequently refers her small-business clients to temporary CFOs. That's because if her small-business clients have messy books and finances, it becomes a lot harder for her to offer them valuable advice. Planning must be done around a set of books that have been tightened up. “Otherwise it's garbage in, garbage out,” she says. “You have to have faith that the information you're looking at is accurate so you can do good planning based on solid info,” she says. “It's better for clients to farm out the nitty-gritty financial details so I can then look at the big picture, and discuss important issues such as plans for expansion and growth.”
Many temporary officers are self-employed, or come from a growing number of staffing firms that specialize in providing businesses with savvy financial pros, such as Robert Half International and B2B CFO. They don't come cheap: Hourly fees typically range from $125 to $300. Some are willing to offset 10 to 20 percent of their fees with stock options. However, even small businesses living on a limited operating budget can reap benefits. Usher, for example, relies on his part-timer just six to seven hours a month, and says the fee is “worth the price in spades.”
Apart from helping them meet more stringent government regulations, part-time or temporary CFOs can often offer small businesses additional benefits. For example, they might help the firm draft and implement business models, make cash-flow forecasts, create budgets and install accounting systems, among other things. They can also bring poise and confidence to meetings with prospective investors, establish lines of credit with vendors, and help secure loans among bankers who have tightened their lending standards, and now require greater and more complicated proof that a company is credit-worthy.
“Most small companies that hire us have financial statements that are in error,” says Jerry Mills, author of Danger Zone: Lost in the Growth Transition, and founder and CEO of B2B CFO, which provides temporary financial experts for small businesses. He finds these businesses are often overpaying taxes, and are frequently denied credit simply because their records aren't in order. Running a business based on erroneous information is a dangerous way to operate, but it can be a simple thing to fix.
This was the case for Nationwide Communications. Usher decided to hire a part-time CFO, who soon realized that QuickBooks, the accounting software the firm was using, had not been set up properly. During the past two years, Nationwide's temporary CFO has cleaned up the books, assisted with acquisitions, and spotlighted areas of strong and marginal profitability. In turn, Usher and his partner have been able to adjust business processes, expand revenues to $8 million from $2 million, operate at a profit and pay down debt. He credits his CFO with much of his success.
Let's face it: Most small business owners didn't go into business because they enjoy sorting through the financial nitty-gritty — unless, that is, they were already accountants or CPAs. They went into business because they had a passion, or recognized an unfulfilled need in the marketplace. Help them get the help they need.