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Managing a company’s resources can feel like a daunting task for some business owners. The challenge becomes even greater for company’s with a high level of annual revenue and a large customer base to account for — without proper financial management, you could be leaving millions of dollars in value on the table.
In a world where shareholders matter immensely to your company’s success, proper financial management will help. The result of poor financial management over time can show itself in a few places, including within funding and capital structure, liquidity management, capital productivity, risk management, and contingency planning. Your shareholders expect the best financial management and if you do not meet their standards, they will be vocal about it.
As companies continue to struggle with good financial management, it can affect their bottom line — but there is a solution. If your financial leaders invest in their tools and processes to help make a difference, they could transform the company’s future opportunities for growth.
Hiring a good Chief Financial Officer (CFO) can change nearly everything about your company operations. Here are a few ways companies can optimize their CFOs use and create greater value for their companies:
First, consider funding and capital structure. CFOs must determine the best capital structure for the company that minimizes the weighted average cost of capital. In doing this they also have to maintain financial flexibility.
CFOs can also move the needle by managing strategic liquidity. By quantifying the cash required to increase your company’s resilience and opportunity they can create more value for your company. This will increase the return on capital by investments, deleveraging, dividends, and less banking charges.
In order to increase long-term returns on investment, CFOs can adjust capital allocation based on risk. If your CFO continuously evaluates investment opportunities and potential mergers and acquisitions while also considering the overall risk of these opportunities, it will help your company considerably.
In order to manage risk when it comes to foreign exchange rates and domestic interest rates, CFOs must optimize hedging through increasing hedge effectiveness and redefining the appetite for risk in these particular situations.
Lastly, CFOs can create greater value in your business by considering your commodities. If you use commodities as an income-generating asset, your CFO should be improving the performance of these commodities through designing, implementing, and managing the risk for profit-generating strategies.
As you continue to create value within your organization’s accounting functions, consider the responsibilities of your CFO. How can you optimize your financial management to create greater success? At TGG, we offer top of the line outsourced CFO services that will help increase your value as a company and run your business more effectively. Contact us for your free 15-minute evaluation!
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
This post contains trusted sources. All references are hyperlinked at the end of the article to take readers directly to the source.
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Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
