Do you ask your CFO questions to better your business often? You should! Your CFO is like a second set of eyes that sees the big picture of your business. They hold a ton of information, all of which is data and reports you could be using to help your business grow.
However, to reach these new levels of growth, you will need to know the best ways to communicate with your CFO, this includes letting them know what data you need and asking the right questions to get you there.
It can be difficult knowing what questions to ask and what information is important, so to help you avoid missing out on potential growth, we’ve put together a list of seven questions that will help you mine value from your CFO and the data they are collecting.
Questions for your CFO
1. What are the Key Metrics that Drive our Growth?
Growth is always on your mind as a new business. While there are many ways to achieve growth, there are four levers that should stand as a foundation in your questions for the kind of growth you are looking for:
Cash Flow
- Improving cash flow will point you towards more profitability, give you the opportunity to increase budgets on profitable processes, and attract a wider range of investors.
Budgets and Expenses
- For maximum value in this category, be sure to be specific in your expenses, build on previous budgets (but don’t copy and paste), and include your forecast.
Forecasts
- Like in budgets, forecasts are far more useful when you include detailed expenses, incorporate marketing and sales data, and create multiple scenarios.
Stock Incentive Utilization or Adoption
- Focusing on this area will give you better buy-in and adoption and provide resources for employees. Consider using non-qualified stock options (NSOs) instead of incentive stock options (ISOs) for easier use.
Your CFO holds the key to all of these metrics and the data that coincide with them. Once you’ve asked your CFO this question, they can get to work on putting together reports to help you better understand each of these metrics and how they influence your growth.
2. What are Our Most Successful Distribution Channels?
Your distribution channels include all of the ways you get your products/services to your customers. Knowing which channels are the most successful will allow you to shift the way you distribute your products, making delivery more efficient.
Here is a list of the primary distribution channels your CFO will likely refer to when you ask them this question:
- Direct Sales
- Retailer
- Intensive distribution
- Selective distribution
- Exclusive distribution
- Dual distribution
- Wholesaler
- Channel partners or value-added resellers
Again, once you and your CFO have narrowed down your top three, or even two channels you can begin to focus on distributing in those ways as opposed to the ways that are not as efficient or effective.
3. Which Marketing Campaigns Have the Best ROI?
Closely related to your distribution channels, there are plenty of different marketing channels you are or could be using to better reach your customers. It’s likely each of your channels is benefiting you in different ways; however, asking your CFO which campaigns have the best ROI will allow you to narrow down your marketing efforts and spend time improving the channels that are most effective.
4. How Accurate is Our Forecast, Compared to Actual Performance?
You’ve likely sat down with your CFO to create a forecast for your business’s future. For many reasons, it is important your forecast is as accurate as possible. You can achieve this accuracy by using previous data, keeping it simple, and being less precise.
Oftentimes, precision becomes the Achilles heel of a good forecast. When your forecast is too precise, it leaves less room for error and unexpected costs, making it look like you are overspending or off track. This isn’t to say you should leave large room for error, just be sure you are not forecasting down to the penny.
Asking your CFO how accurate your forecast is will help you determine if you are on track for growth and where you need to make adjustments to get to where you want to be.
5. What are the Action Items from Our Budget to Actual?
This is a follow up question to number 4 above. If the budget to actual reporting is happening, the next step is to learn from it. The actual never matches the budget perfectly.
So where are things off track? Where are things outperforming expectations? Hidden in the budget to actual are the exact action steps to take to achieve your goals.
A good CFO is going to provide this information, and make it clear which levers are having the greatest impact.
6. What is the Best Way to Mitigate Risks?
Pulling from the previous questions, your CFO should have multiple forecast scenarios that show not only goals but potential downturns to help navigate the tougher potential roads ahead.
Being prepared for these situations is essential in ensuring you can still achieve your growth goals.
7. How Can We Improve Our Financial Situation to Attract More Investors?
Investors drive quickly growing startups and you should always be looking for new ways to attract them. There are several key points investors look for before fully supporting a business.
]These include:
- Growth potential
- The amount of time it will take you to grow
- How much funding you will need to reach your goals
- Your competitive landscape
- What makes you and your team better than the competition
- Financial accountability
- A strong business plan
- Healthy cash flow
- An exit strategy
Your CFO should have the info they need to prepare these reports and the tools needed to make the required adjustment. That way, when you pitch to potential investors, you will have detailed accounts of everything they are looking for and each indicator will be in tip-top shape.
Partner with an Experienced CFO Service
Asking your CFO each of these seven questions will redirect your finances towards a place of growth and help you mine maximum value from the data and reports they are collecting and creating.
If you do not already have an in-house CFO, consider working with an outsourced CFO service, like Pasquesi Partners. With plenty of experience in assisting and guiding startups and small businesses to greater growth, Pasquesi Partners will delve deep into your financial data to uncover real and actionable financial opportunities that can help your business grow with cost savings far greater than hiring a full-time CFO.
For more information on how Pasquisi Partners can help you grow, get in touch with us here!