Navigating Growth: The Power of Outsourced CFO Services

In this episode, we’ll uncover the advantages of outsourced accounting services. Hear from industry experts about how these solutions can lead to improved financial decision-making and drive operational efficiency.

About Our Guest
Robert Stephens, CPA, is a Partner with Mauldin & Jenkins in the Atlanta office. He brings 30+ years of fractional Chief Financial Officer experience to growing privately held businesses and non-profit organizations. 

About Our Host
Brandon Smith, CPA, is a Partner based in the Atlanta office and the Advisory Practice Leader.

Learn more about our Outsourced Accounting and CFO Services here: https://www.mjcpa.com/services/consulting-advisory-services/outsourced-accounting-and-cfo-services/

Transcript

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Introduction

Speaker 01 0:06

Welcome to Beans Talk, M&J's podcast, where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience. Welcome to this episode of the Mauldin & Jenkins podcast, where we discuss critical business challenges facing all of us, how we navigate them with our clients and how we navigate them as a firm. At your organization, have you ever been in a situation to where you feel like you're growing? You're landing bigger contracts, you're getting more customers, but you look at your bank account and just not really feeling like you're experiencing that growth and success. Maybe even a situation where you're getting ready to pay payroll for your growing team and worried about having the funds to do so. Or perhaps you're in a situation to where you're getting recurring reporting from your accounting team, your balance sheet, your P&L, and you're taking a look at it each time it comes your way, and you're not quite sure how to interpret the information that's put in front of you, or how to really analyze and use it to understand the story it's telling about your business. Well, I assure you, you are not alone. Those challenges and so many more are common issues, and it's exactly what we're gonna be talking about today. My name is Brandon Smith, and I'm the segment leader for advisory services at Mauldin and Jenkins. We're a full-service accounting and business consulting firm. And for today's episode, I'm very excited to be joined by the leader of our CFO Navigator practice, Robert Stephens. Hi, Robert.

Speaker 02 1:36 Speaker 02 1:36

Hey, Brandon. Thanks for having me.

What is CFO Navigator and how does it help businesses

Speaker 01 1:38 Speaker 01 1:38

So, Robert, will you just give our listeners a little bit of a background about your experience and what you do with your CFO Navigator practice?

Speaker 02 1:45

Sure. Well, CFO Navigator started with a vision of providing higher-level financial advice than just the typical accounting or bookkeeping services. As an organization grows, they typically outgrow their capabilities, in particular their financial capabilities. As you said in your intro, having enough cash to make payroll is a common growth challenge. It's not that there's anything wrong, but you need to understand why it's a challenge and then, of course, having solutions to overcome that challenge as you continue to grow. So that was the vision for creating CFO Navigator was to provide, I like to say, Wall Street-worthy financial expertise for local Main Street companies.

Speaker 01 2:29

And for me, when I think about kind of this area of folks out there looking for help, or maybe even not necessarily actively looking for help, but just starting to feel something's not quite right. Something just seems a little bit broken. And that's where services like these come into play, right? It might be anything from the accounting services, helping with transactional support, up through that controller, developing the financial reporting packages and putting information in front of us, or even the CFO level support, as you were just discussing, really helping with that direction and forward thinking strategy. And really, that's what's kind of defined by that client accounting services or client advisory services service line that you're seeing trusted advisors providing is really to help be that partner in navigating those challenges.

Accounting services to fit your varying business needs (accountant, controller, and CFO)

Speaker 01 3:14

So Robert, when it comes to organizations who are looking for some support, how do you kind of differentiate the types of services they are? And additionally, when they think about accounting firms, when they can provide, they think a lot about audit and tax, and those might not be the best types of professionals to help with. How do you differentiate these services?

Speaker 02 3:31

Well, typically, when you think of a public accounting firm, you think of audit and tax. But there is a third leg to that stool as well, which is the accounting services. And you alluded to a couple of different roles in accounting: the accountant, the controller, and the CFO. Each of those roles have a specific skill set. And I use the analogy of a ladder. And at the bottom of the ladder, the accountant handles a lot of the transactions. The middle of the ladder is the controller bringing that structure and the process, the organization to the accounting function. And at the top of the ladder is the CFO role, the strategy, the what does it all mean role, providing information that the business can use to actually navigate the process. forward using their numbers. So most companies think about the accounting role, the bookkeeping role, and that's really all they know: accounting and bookkeeping. Well, there are those other two roles that really become essential as an organization grows. And the ladder analogy is really helpful in thinking about one rung at a time. Start on the bottom rung with your basic bookkeeping, and as you grow and you climb the ladder, you'll need to augment with with more higher level accounting skills through the controller and the CFO.

Speaker 01 4:54

And I love that kind of portrayal of the growth and using the latter to show as our organization grows, what becomes more of a priority for us. Because that's something when you think about all of our business, organizations, agencies, whatever shape or form we have, we're not all the same, right? We all have unique challenges and we're at different points in our cycle of what we're really going for as an operation, as an enterprise. So with that said, I imagine when it comes to us growing as an organization, the needs of us might be a little bit different so how do we differentiate sort of how we're scaling the support we're looking for to tackle our challenges is that more of a what are our specific challenges we're navigating or what size we're at as an organization or how do we kind of differentiate okay I'm feeling a little bit of pain something isn't quite right i need some support at my size and sophistication and maturity, what kind of support might I be looking for?

Speaker 02 5:50

What is that, right? What am I missing? And again, the latter analogy is beautiful because as you think of rungs, what rung am I missing? And what we're building through the CAAS practice at Mauldin & Jenkins is the ability to provide whatever rung is missing to your organization. For example, even 10, 15 years ago, if you needed a controller, you needed a body and a seat in your office. Now, that's not necessarily the case. If you don't have a 40-hour job for a role, you don't need to pay for a 40-hour job for a role. You can outsource. And I describe it as fractional support, fractional accounting, fractional controller, fractional CFO. Just the amount that you need for that stage that you're in. And as you need more, you can add more. And so within our practice, we are building the capabilities to provide just enough. What do you need now? And obviously, we can scale as the organization scales.

Speaker 01 6:56

I love that thought about how these services can really scale to a company's needs based off of where they are in their growth cycle and additionally what resources they already have on site, whether they have that controller in that seat or maybe they don't yet and they're wondering, how do I get somebody to fill that valuable role without allocating an entire new body to our team?

Starting with fractional CFO support

Speaker 01 7:17

So thinking about that, I'd love to just chat with you about some success stories about different organizations of different sizes that you've worked with that had different types of needs. Maybe it was more that controller level or perhaps they even had a pretty well functioning accounting department and just need that extra oomph at the highest levels to help senior leadership and ownership help them navigate financial strategy.

Speaker 02 7:42

And that's actually where I started. I started at the top with the fractional CFO support. There's two challenges with hiring a CFO. If you're going to flat out hire one, number one, they're going to cost. It's more than six figures to hire a CFO. But number two, and probably more importantly, is your organization at a stage that will keep them busy? Is there enough CFO work to justify their salary and to honestly keep them engaged. So as a fractional CFO, I was able to bring just enough, whatever they were missing in their strategy and their projections, their forecasting, whatever they were missing from their, whatever role they had in the accountant or the controller. It's providing that forward-looking view. That's where I started the CFO Navigator Service offering, but also there's opportunities to fill in fractionally, and typically it's a controller level. Most organizations have their bookkeeping their accounting taken care of. Somebody's processing payroll, they're paying the bills, they're making the deposits. Typically, the next need comes at that controller role, which is how do I organize all of this? How do I make it efficient? How do I put the controls, which is where the controller role name comes from, how do I put those controls in place to ensure that the organization isn't losing money or having its assets put in jeopardy? So providing fractionally as they grow is kind of the model of whatever you need, whenever you need it, we're able to plug in along the runs of the ladder, if you will.

Matching the right level of support to the specific challenges your business is facing

Speaker 01 9:25

Now, when it comes to the organizations who are feeling some challenges and looking for some help to navigate, it might not just be the position they're seeking, right? The type of service and the type of assistance they need might be different too. So I think for me, obviously, it's first off important to have a pulse on the health of your financial operations activities, right? To be getting recurring, timely, periodic, and accurate financial statements, just to make sure that you have a good view on what's happening at your own company. But beyond that, there's an endless list of things a company or an organization might be navigating. Some that come to my mind are federal compliance, right? If they have different types of awards with restrictions on how they can be using the funding or different types of expectations, what they need to be doing, or maybe even sustainability. That's becoming more and more of a topic of conversation. And we're finding that accountants are a great plug to help you navigate that because our accounting teams, they know how to meet deadlines , how to track data, how to keep records, how to put the reports and lift that information up.

Cash and funding challenges

Speaker 01 10:29

So what are some things you've experienced of companies who have needed a certain kind of help that may not have been just your traditional financial reporting that is table stakes of value, but something else that you and your teams have helped companies navigate?

Speaker 02 10:42

I think a lot o f it revolves around being able to anticipate what's coming next, whether it be with compliance or regulations or honestly, where I've seen it the most is in cash, being able to provide the cash that an organization needs to grow. There are several things that an organization faces once they start to grow, whether it be providing funding or adhering to new regulations. Funding is probably the biggest one that I've encountered. And as an organization grows, their need for cash or capital grows with it. And I have a saying that I share with clients that are planning to grow that you need to understand that growth eats cash like a goat eats grass. And if you're going to grow, you better know how you're going to feed the goat. And there's various ways that you can do that, but that essentially means you need to plan ahead and anticipate how you're going to fund the growth of the organization, whether that's lines of credit, more capital, taking on equity investors, whatever it is. if you're on a Wednesday afternoon trying to determine how you're going to make payroll on Friday, that's not anticipating the growth. So being able to think about what the financial future is going to look like as opposed to just looking in the rearview mirror and looking at the financial statements that have already happened. It's being able to forecast and predict what those financials are going to look like.

Speaker 01 12:08

I think those are amazing points because something I'm ready to talk to organizations about is obviously we want to be profitable. You work at our P&L, we want to run a profitable enterprise. But really when it comes to our operations, if, even if we're profitable, if we're not cash flowing, we're going to run into challenges. So that's something that does need proactive management of. And additionally, it might take the perspective of if we are finding ourselves in situations to where we have an arrangement that requires us to front load some resources for a project or for any type of commitment that we've made, maybe line of credit. There are other opportunities, too, to help us manage our cash flow appropriately to maintain that profitable business without sacrificing profit for cash. But those are absolutely things that need to be monitored and managed actively.

Speaker 02 12:58

And I'd just like to add, as you think about growing, I've had several clients who have told me, "Robert, I am opposed to debt. I do not want to take on debt. I've never had to take on debt". But they're growing. And the challenge with that is, as you grow, you're spending more today on... items or services that you're not going to collect from your customers or your clients until later. So you're spending today's dollars in anticipation of making them down the road. You need to be able to fund today's dollars. So thinking about how you're going to do that, debt is not necessarily a bad thing. If you know you're going to make $2 and it's going to cost you $1 today, borrow $1 today to get paid back whenever the client pays, and then you can pay that debt off. That's the revolving lines of credit. So while I appreciate the conservative nature of not wanting to have debt, if you're going to have a growing organization, chances are you're going to need to have some sort of debt, at least to fund the timing cycle of your revenue.

Speaker 02 14:02 Speaker 01 14:02 Speaker 01 14:02

Absolutely.

Securing your financial data

Speaker 01 14:03 Speaker 02 14:03

Well, Brandon, I've always been concerned about as an organization grows and their financial sophistication grows, what about security? What are those things that they need to make sure they have in place, two-factor authentication, whatever it may be? How can they ensure that they are securing their financial data?

Speaker 01 14:22

Yeah, and that's a really timely question, especially these days, because the unfortunate reality is the folks who are working with us for accounting and finance strategies are targets today. They know that those are the folks who have valuable data and also potentially access to our financial resources. Now, when we're talking about data security in today's day and age, it's really not economically practical to harden every single system and every store of data in our entire environment. We need to be strategic about it. We need to be mindful of where is the sensitive and valuable data in our environments, and that's where we focus our energies to making sure we keep ourselves safe. So when it comes to our accounting and finance, the first thing that comes to mind is obviously our financial institutions banking system, the portal that we're using in order to do bill pay, to check our bank accounts, to manage and monitor cash flow. We want to ensure that we have proper controls, security controls around that platform. And these days, financial institutions have a lot of great functions for us to be able to use. We just want to make sure we're leveraging those properly. Additionally, our accounting system and any integrations we have with those systems, we want to make sure those are built appropriately and that we're controlling those with access and authentication restrictions such as multi-factor authentication and also the roles we have assigned in our systems. A lot of times our accounting departments are the ones who sort of own their systems, right? We want to make sure they're only setting up the appropriate users in those systems and give them the right access to the right modules that they need to do their business and nothing beyond that and obviously when it comes to us just managing risk as enterprise we absolutely want to evaluate cybersecurity insurance. These days, that's absolutely something you want to make sure you're covered on. And consider things like business email compromise is something you want to be mindful of, ransomware events. Just specific to your environment, talk to your trusted advisors about where your risks lie, and that's how we'll make sure you're keeping the right type of data secure.

Speaker 02 16:22

Well,

Accounting industry security and technology in the next 5-10 years

Speaker 02 16:23

as long as we're on the topic of technology, Brandon, where do you see security and technology going in the accounting industry in the next five to ten years?

Speaker 01 16:32

Yeah, and I know that all of our and all of our businesses are thinking about this a lot because these days there are so many headlines about these emerging technologies, artificial intelligence, AI, everything coming our way. And pretty much every time these technology concepts are discussed, accounting is always right there toward the top of the list about a profession that's going to be disrupted. So we absolutely want to keep a pulse on what are these technologies and how are they potentially impacting us. Now, for me, I find it to be very exciting. These are going to be great opportunities for us to leverage new ways to make our businesses more successful and to make progress on our strategies. And along those lines, the ones that have me the most excited are the data technologies, right, looking at things that are helping us do dashboarding, not just getting our P&L or balance sheet out of our accounting system every month and using that in order to help us understand our business and make strategic decisions, but also using tools that are more real-time, giving us a good, comprehensive look at the story our financial data is telling us from an easily digestible dashboard. Now, that can be something that can be a project to get that implemented and up and running. For example, usually the starting point is going to be we want to have a centralized location to have good structured data. Our accounting system is a great starting point for that. But as we're getting more mature, we can look into developing like a data warehouse or a data lake and bringing in information from even more than just our accounting system, other systems around our enterprise, and then having all of that feed into our real-time business intelligence platform. And once we're going through that journey of thinking about our data a little bit differently, looking to consolidate it together, ensure it's accurate and structure it to help with visualizations, but also introduces a lot of new challenges we're going to encounter and navigate through this journey. For example, what is really the health of our data? And also other more automation tools we can bring into our environment to help streamline that. So obviously from a business owner perspective, we just want to make sure that we're keeping an eye on getting the data that we need and then looking to the right partners and having the right training for our people to make sure we're on the path to be leveraging these technologies that are at our fingertips in an appropriate manner of investment to get the outcome from them that we want. But there's a lot of exciting things you can do on the technology front these days.

Connecting our financial data to the business operations

Speaker 02 18:58

In fact, you made me think of something you were talking about, using our data, analyzing our data. And I love to think about connecting the operations, the operational drivers, if you will, of a business to the financials. That's in the data. I frequently say, if you look at your financial statements and you don't like what you see and you want to change it, there's nothing you can do on the statement to change it. You have to go into your operations and change something, change your collections policies, change your invoicing processes, change something you're doing in the operations of the business in order for it to be reflected on the financial statements. So I love to think about how are we going to leverage the data, analyze the data to help us better understand the numbers and make better decisions.

Speaker 01 19:48

That's right. I always like the saying, if you can't measure it, you can't manage it. So we want to make sure we have the right tools and infrastructure in place to help us be measuring our performance and our activities so that we can actively manage it just as you were describing.

Main deciding factors whether to hire a full-time CFO or fractional CFO

Speaker 01 20:02

So Robert, I have a question. When it comes to organizations who are thinking about maybe getting some additional support to fill the gaps on their ladder or the different types of strategic efforts that they need assistance in, whether it's cash flow or any other things that we've talked about, what's the main... What are the main deciding factors in your head in terms of whether to hire a full-time CFO or to look to a fractional CFO? What are the differences that one can expect by getting some fractional support out of a CFO-level person rather than hiring a full-time individual? And what are going to be the differences in experience of those two avenues?

Speaker 02 20:39

A lot of times the need comes from a pain point, right? The president, the business owner knows they're not getting something, but they don't know exactly what it is. Starting with a fractional resource, a fractional CFO, for example, allows you to determine what it is that you need. If you don't need the soup-to-nuts solution, you can start small and build on it. The nice thing about starting with a fractional solution is if you realize I need a full-time solution, now you know. Then you go out and you find the resource that's going to fill that need on a full-time basis. So if you don't know what you need, start fractionally. Figure it out. if fractional works great it's less expensive if it's not enough go and find a full-time resource in fact I used to tell my clients that when you want to yell my name down the hall and I'm not there it's probably time to look for a full-time CFO

Speaker 01 21:39

Robert, I love that example of when they're trying to call my name and I'm not there, that's the time to look for a full-time. I think that's a great indicator that it's time to get a full-time resource on.

Advice on what kind of candidate to look for

Speaker 01 21:50

And as these businesses are looking to seek out that fractional help for this time, because for where they're at right now, that's the right level of support for them, what advice would you give on what kind of candidate to look for, and what kind of expertise for this individual to have, and maybe even the paradigm for how they're gonna approach helping a business and their strategic needs?

Speaker 02 22:11

I tell folks there's three types of CFOs. There are project CFOs that would come in for a specific project, going public. buying a new building, acquiring another company, there's a specific need that a CFO can fill, and then they're gone. That's a project CFO. There's an interim CFO, which is typically my CFO just retired, he just left, I need someone to come in on an interim basis until I find a full-time replacement. And then there's what we do at Mauldin & Jenkins, which is the fractional CFO. You don't need a full one, you just need a fraction of one. And I would also encourage someone to think about what do they need? What are they looking for? If you're looking for someone to just close the books, that's a controller role, not necessarily a CFO role. True CFOs are forward-looking. They look through the windshield. They help the business anticipate what's coming. In fact, with my very first CFO gig, I had the CEO tell me flat out, "Robert, I'm driving this company as fast as I can, and I'm scared to death I'm going to drive us off a cliff. I need you to help me see those cliffs before I get to them". That's really where that windshield analogy came from is helping the business anticipate what's coming so you can make decisions proactively instead of reactively.

Speaker 01 23:42

Yeah, that's incredibly helpful. So we covered a lot today in terms of the ladder, everything from accounting support to controller support up to the CFO level, really having that forward-thinking windshield view that can help us be scalable and customizable to our business. So thank you for listening to this episode of Mauldin & Jenkins podcast: Navigating Critical Business Challenges. Robert, thank you so much for joining me today. I hope everybody listening in enjoyed this conversation with Robert as much as I did. And anybody who has follow-up questions about the challenges we discussed today or even additional business challenges that you find yourself navigating, we want to hear from you. You can find us at www.mjcpa.com and click "contact us".