What Are CFO Services: Which Areas Does the Scope Cover

What Are CFO Services

As companies grow, the number and variety of finance-related decisions increase. Cash planning, budgeting, bank relations, investment decisions and management reports may all come onto the agenda in the same period. Handling these areas from a single perspective and within a defined order supports the decision-making process of management. CFO Services refer to the finance management function of a company being undertaken by an experienced finance executive, with a scope and duration suited to the needs of the company.

The CFO role builds on the accounting function, which covers the keeping of records, and turns the information produced by that function into management decisions. CFO Services are this role delivered to the company as a service. The service may be planned on a full-time, part-time or fixed-term basis. The scope is defined according to the size of the company, its field of activity and the period it is going through.

This article covers the areas included in CFO Services, the working models through which the service is delivered, and the way the scope is defined according to the needs of the company. The aim is to offer a clear framework to shareholders and executives who are considering this service.

Areas Covered Within the Scope of CFO Services

The scope of CFO Services can usually be grouped under six main areas: Financial planning and budgeting, cash and working capital management, management reporting, financing and bank relations, risk management and internal control, and the structuring of the finance team and its processes. Not every company gives the same weight to all of these areas. Seeing them together, however, helps in understanding the boundaries of the service.

Financial planning and budgeting is the first area. The annual targets of the company are translated into sales, cost, investment and cash items. Once the budget is prepared, actual results are reviewed against it every month and the reasons for variances are explained to management. This work keeps targets traceable throughout the year. Updating the budget when conditions change during the year is also part of this area.

Cash and working capital management is the second area. Collection and payment terms, inventory levels and credit usage are considered together. Weekly and monthly cash flow forecasts are prepared, and the cash requirement of the coming period becomes visible in advance. This visibility allows payments to be made in a planned manner and financing discussions to begin on time.

Management reporting is the third area. Accounting records are kept to meet statutory obligations. Management reports draw on the same records and present the information required for decisions. Profitability by product, customer or business line, cash position, indebtedness indicators and budget performance may be included in these reports. Presenting the reports on the same date and in the same format every month contributes to productive management meetings.

Financing and bank relations form the fourth area. Credit limits, collateral structure, maturity profile and financing cost are monitored regularly. Consistent and current information presented to banks helps discussions progress efficiently for the company. The preparation of financial information for investor or partnership discussions is also usually carried out under this area.

Risk management and internal control form the fifth area. Currency, interest rate and liquidity risks are measured and reported to management. Internal control steps such as payment approvals, authority limits and reconciliation processes are put in writing. This order supports the reliability of records and contributes to the readiness of the company for audit or inspection processes. We addressed the place of record-keeping in these processes in our article on the financial and fiscal check-up carried out before a tax audit.

The sixth area is the structuring of the finance team and its processes. Job descriptions, the monthly closing calendar, the software in use and the flow of information between departments are assessed. A finance team that works in a structure suited to the growth plan of the company supports the continuity of reporting and planning in later periods.

Cost and profitability analysis may also be considered within the scope. Allocating costs correctly by product, customer and business line gives pricing decisions a reliable basis. On tax planning and regulatory compliance, the finance executive works in coordination with the certified public accountant and the tax adviser. Seeing the financial and fiscal aspects of decisions together clarifies the options in front of management.

The work carried out under these areas usually turns into the following outputs:

→ Annual budget and periodic updates: Sales, cost, investment and cash targets are gathered in a single document and tracked against actual results during the year.

→ Weekly and monthly cash flow forecast: Collections and payments are tied to a calendar, and the cash requirement is identified in advance.

→ Monthly management report: Profitability, cash position and indebtedness indicators are presented to management regularly.

→ Financing plan: Credit limits, maturity structure and collateral are assessed together with the needs of the company.

→ Risk report: Currency, interest rate and liquidity positions are measured, and the information required for decisions is prepared.

→ Written processes and closing calendar: Reconciliation, approval and reporting steps are defined together with the people responsible for them.

The assessment of investment decisions is closely related to these outputs. When a new machine, facility or market investment comes onto the agenda, the payback period, the financing requirement and the effect on cash flow are calculated. We shared the questions this assessment answers in our article on the financial check-up carried out before a new capacity investment. CFO Services contribute to having such assessments ready at the moment of decision.

Another aspect of the scope is communication with the board of directors and shareholders. Presenting financial results, budget performance and risks to the board regularly allows board members to base their decisions on current information. Preparing presentations in clear language and on a set calendar also supports the sharing of information among shareholders.

Working Models Through Which CFO Services Are Delivered

CFO Services can be delivered through different working models according to the needs of the company. Three models stand out in practice: The part-time CFO, the interim CFO who serves for a defined period, and project-based CFO support. The choice of model is related to the size of the company, the existing structure of the finance team and the nature of the matters on the agenda.

In the part-time model, an experienced finance executive works at the company on certain days of the week or month. Regular work such as budgeting, cash planning and management reporting is carried out on these days. The finance executive attends management meetings and guides the finance team. This model is frequently chosen by mid-sized companies and by family companies in the process of institutionalisation. The company benefits from senior finance experience to the extent it needs.

In the interim model, the finance executive serves full-time for a defined period. The departure of the current finance executive, the time until a new executive starts, restructuring periods and periods of rapid growth are situations in which this model is often seen. The interim CFO ensures the continuity of the finance function during the assignment and completes the work required by the period. At the end of the assignment, processes and reports are handed over in writing to the executive who will take up the permanent role.

In the project-based model, the service is limited to a specific matter. The financing of an investment, a company valuation, a partnership discussion, the set-up of a new reporting system or a review of the financing structure are examples of such matters. The scope, duration and expected outputs of the work are defined in writing at the start. When the project is completed, the company is left with documents and methods it can use in the following period.

In all three models, the finance executive works together with the existing accounting department and the certified public accountant of the company. CFO Services do not replace these functions. Keeping the records and preparing statutory filings remain the responsibility of the accounting function. The finance executive uses the information produced from these records in planning, reporting and decision processes. Defining the division of duties clearly at the start supports cooperation between the functions.

The reporting line and the working arrangement are also part of the model. The finance executive usually reports to the general manager or directly to the board of directors. Including authority limits, the role in approval processes and the authority to hold discussions with banks in the contract helps the service run smoothly. The days spent at the company, the work carried out remotely, attendance at management meetings and weekly meetings with the finance team are tied to a calendar at the start.

In situations that require international experience, the breadth of the executive pool may also influence the choice of model. In companies with foreign subsidiaries or foreign partners, a finance executive who knows different reporting standards and multi-country finance structures can make a valuable contribution. As the Turkey partner of Valtus Alliance, NT Finans Partners draws on an international network of executives for such assignments.

The Scope of CFO Services Is Defined According to the Needs of the Company

When the scope of CFO Services is being defined, the first step is an assessment of the current state of the company. The structure of the finance team, existing reports, budget practice, cash management and bank relations are reviewed. This assessment shows which areas have priority. In some companies cash planning comes first. In others, setting up management reporting or organising the financing structure may come to the fore.

The period the company is going through also shapes the scope. In a company in a growth period, investment decisions, the financing plan and the structuring of the team may gain weight. In a family company in the process of institutionalisation, management reporting, the authority and approval order and the information provided to shareholders may have priority. In a company preparing for partnership or investor discussions, the order of the financial statements and forward-looking projections may be brought forward.

When the scope is put in writing, it is useful to define four elements together: The areas to be covered, the expected outputs, the duration of the work and the reporting calendar. Once these elements are set, company management sees clearly what to expect from the service. The finance executive plans the work according to this framework. Reviewing the scope together at the end of the first three months keeps the service aligned with the current needs of the company.

The contribution of the service can be tracked through defined indicators. The time taken to complete the monthly closing, the date on which the management report is presented, the consistency of cash forecasts with actual results, the level at which budget variances are explained and the development of financing cost may be among these indicators. Setting the indicators at the start allows progress to be assessed with concrete data.

It is natural for the scope to change over time. In the first period, core areas such as reporting and cash planning are addressed. Once this order is in place, the budget process, the financing plan and investment assessments can be brought onto the agenda. As the company grows, the duration and intensity of the service can also be planned again. This flexibility helps the company receive the finance support it needs in each period.

CFO Services form an integrated structure when considered together with the other finance work of the company. When the budget, the cash plan and the management reports draw on the same data, the information in front of management is consistent. Addressing these areas together within our financial planning and management service contributes to moving the finance function of the company into a lasting order.

In conclusion, CFO Services offer a scope that extends from financial planning to cash management, and from management reporting to financing and risk. The working model and intensity of the service are defined according to the needs of the company. Defining the scope in writing and reviewing it regularly helps the company receive the contribution it expects from this service.

As NT Finans Partners, we define the scope of CFO Services together with you according to the size, period and priorities of your company, and we support your finance function in working within an orderly structure across planning, reporting and financing; you can contact us via ntfinanspartners.com.