Debunking the Myths About the SME Finance Function

Small business finance function misconceptions are common and can lead to missed opportunities for growth. In this blog, we aim to debunk these myths and provide valuable insights into the SME finance function. Join us as we uncover the truth and help you understand how to optimise your small business finance function.

Myth 1: I need a CFO in my SME

In some cases, businesses may not require the level of expertise that a CFO provides. This could be due to various factors such as the company’s size, the complexity of the financial operations, or the current financial stability. Instead, businesses can consider working with a manager or controller who can handle day-to-day financial tasks such as budgeting, forecasting, and financial reporting. This strategy can help save costs and ensure the company’s financial operations run efficiently.

As the business grows and financial operations become more complex, it may be necessary to bring in a CFO to provide strategic financial guidance and oversee the financial team. However, by starting with a manager or controller, businesses can gradually evolve their financial operations in a cost-effective manner. This approach allows companies to focus on their core competencies while ensuring that qualified professionals are handling financial tasks. Ultimately, the decision to hire a CFO should be based on the needs and goals of the business, and the level of financial expertise required to achieve those goals.

Myth 2: My SME doesn’t need a CFO as the owner has a finance background

Small and Medium Enterprises (SMEs) may still require the assistance of a CFO, even if the business owner has a financial background. This is because a CFO brings a wealth of experience and knowledge to the table, which can help the business owner make informed decisions. For example, a CFO can help the business owner with financial forecasting and budgeting, which can be crucial in ensuring that the business remains profitable in the long run. Additionally, a CFO can provide guidance on financial matters such as tax planning, risk management, and cash flow management, which can help the business owner make more informed decisions.

Managing Directors and business owners, even those with financial backgrounds, still need time to put into other areas of the business. By having a CFO, the business owner can free up their time to focus on other important areas such as operations, marketing, and sales. This can be particularly important for SMEs, where the business owner may be responsible for multiple areas of the business. Furthermore, a CFO can provide a fresh perspective on financial matters, which can be invaluable in identifying new opportunities and areas for growth. Overall, even if the business owner has a financial background, having a CFO can help ensure the long-term success of the business.

Myth 3: It would be easier to hire a finance generalist who can do everything

While it may seem convenient to hire a finance generalist who can handle all aspects of financial management for a SME, it is not always the best solution. The expertise of a finance controller, finance manager, or CFO may be necessary depending on the specific requirements of the business.

For instance, a finance controller could be required to oversee the financial reporting and compliance needs of the organisation. This role focuses on ensuring that the financial statements and reports are accurate and comply with regulations. On the other hand, a finance manager may be needed to analyse and interpret financial data to make informed decisions about budgeting, forecasting, and investments. A CFO may be essential to develop and execute financial strategies to achieve the company's long-term goals. Therefore, it is crucial to assess the business needs and determine the level of expertise required to navigate the complexities of financial management effectively.

Myth 4: There are few cost savings to a part-time, interim or fractional CFO

Recruiting a part-time CFO can actually lead to significant cost savings for a company. Firstly, a part-time CFO can provide the necessary financial expertise and support to a company without the high cost associated with hiring a full-time CFO. This is particularly beneficial for small and medium-sized businesses that may not have the budget to support a full-time CFO.

Secondly, a part-time CFO can help a company identify areas where cost savings can be made, such as reducing unnecessary expenses and improving financial efficiencies. They can also help with cash flow management and forecasting, which can result in better financial planning and decision-making for the company. Overall, recruiting a part-time CFO can be a cost-effective solution for businesses looking to improve their financial performance and achieve their financial goals.

Support for SMEs with their finance functions

With many misconceptions about SME finance, it is crucial to debunk the common SME finance myths so that SMEs should not feel intimidated or overwhelmed when it comes to managing their finances. With the right support and guidance, they can make informed decisions that will help grow their business.

If you are unsure of what support your SME requires, you can arrange a complimentary consultation with The Finance People to assess what financial support is best suited to their business. This could range from outsourcing functions to part-time, interim or fractional CFO. Don't let myths hold you back, take control of your finances and let The Finance People help you achieve your business goals.