A Virtual CFO can help you spend your money wisely

How do you make the most of projected profits? We recently explored how a Virtual CFO is best placed to help you avoid vague and inaccurate budgeting and forecasting. Once you have drawn up a realistic and reliable budget, you may find that spending money on outsourcing a CFO will grant you more money in your bank account in the coming year than you previously expected.

So now you will need to wisely spend these additional earnings. After you have a reliable budget, you can create a plan. How much do you invest back into your business? How much should be set aside as dividends? This all depends on how you plan to use your forecasting to grow your business and its returns.

Let’s say that on the back of an astute budget, you want to invest half a million dollars into your business over the next three years. You can see where some, if not most, will come out of projected profits in your budget. But can you be sure? Should you restructure your financing and business in order to make this wish a solid plan? Your accountant can give you some help, but this is when you need to hire an expert business advisor such as a CFO. And outsourcing a CFO for such a specific task will help ensure you get the best strategic support without spending more than you can afford.

A Virtual CFO will first measure your planned investment against your past activity. How reliably has your budget taken into account both your past profits and your past dividends? This will give you a realistic scope as to the long term value of your projected earnings in your budget. From there, you and your outsourced CFO can examine the specific financial value of this scope. Based on past history, how much of your earnings will be evident as cash? How much is likely to be caught up in debtors, stock, currency exchange loss, etc? How much was dependent on fluctuating factors which you do not control, such as R&D grant value? In the end, this will realistically predict your cash flow. This in turn determines in detail how much money you will actually have to spend on your business out of all your budgeting earnings.

If it becomes clear that you are unlikely to get the half a million dollars you need only from your business earnings, you can think beyond your bank account. How will financing impact your business? A Virtual CFO can help you look at all the options. Do you ask the suppliers and sellers of items and services you intend to invest in to finance your investment through instalment payments? How will the interest on such payments impact you? Should you go to the bank or find a new investor? How will the loss of equity from an investor impact your business in the long run? These issues and more will need to be balanced against your projected expenses and dividends. Timing, not just numerical value, matters. When will you have the cash during the year to pay your dividends? Have you discussed with your accountant if and when you should frank them? The timing of your expenses and projected tax payments is vital to consider, so that your plans to earn and spend are not hit by any surprise costs over the course of the financial year.

Your outsourced CFO is ideally posited to manage this from beginning to end. They not only have the broad and deep business and financial expertise to answer all these questions, but will also sit with you once or twice a month to work on this in a cost-controlled manner. Your budget and your plans for spending future money need to be accurate and exact, especially when you depend on small business grants. Likewise, they need to be monitored over the coming years and adjusted according. Many small businesses have found that turning to a Virtual CFO has not only shown them how they might increase their future profits, but has also ensured they spend this money wisely and precisely.

Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants to discover new options for your business in Australia and beyond.

Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.