Everyone wants to predict the financial future. Right now that is even more true with uncertainty about politics and the pandemic seeming to affect every area of life and business.
We will never know for sure what is coming next. But that doesn’t mean we can’t approach it with confidence in our ability to respond in the moment.
The key to being prepared for the future is to have a clear understanding what is happening now. Then you are better positioned to quickly assess how future changes will affect you.
An MLA Outsource CFO can help you plan for the future by understanding your finances today. Our financial expertise gives us insight into your business, and our experience helps us apply that insight to the decisions you need to make.
MLA’s model of Business Redeemed is designed to get you back to building your business. That means protecting what you have, getting you information when you face uncertainty, and providing leadership that empowers your future decisions.
Most business owners are not financial experts, but finances place a unique burden on business owners that only they can carry. The right guidance can lighten that load and reveal greater opportunities.
Tom Miller is a fractional CFO with MLA Companies. “I work with small companies that don’t have a full-time Chief Financial Officer, or CFO,” Tom states.
Tom has worked as a CFO through the 2008 downturn, and now through the 2020 pandemic. “We’ve seen unprecedented changes which no one could accurately predict,” Tom says. “But the CFO’s role is to not be surprised.”
While events outside the company may be unpredictable, that doesn’t mean you are at a loss to understand their impact inside your company. A good CFO will be able to separate those events from the factors that are going to impact your business.
Two key tools a CFO uses to do this are a budget and a financial forecast. A financial forecast is a prediction of your future, and a budget is a plan for how to get there.
A company creates a financial forecast to state of its goals and priorities in concrete terms. This tool helps create alignment around these objectives and identify the resources needed to achieve them.
It may seem like wasted effort to do a forecast in the midst of so much uncertainty. But even a short range forecast of three to six months can help you weather the ups and downs of a turbulent season.
A budget is simply a plan for how you will use scarce resources in the future. We often think of budgeting money, but budgets also apply to labor and raw materials. Thinking through what you will need in your ideal future better positions you to respond when demands change, or resources are unavailable.
Update your financial forecast or a budget as new information is available. These updates can happen monthly or quarterly, depending on your business cycle.
Now you have a rolling budget or forecast, and means you always have 9 to 12 months or more of projections of what your current situation would mean in the future.
“Most of the companies I’ve worked with didn’t have a good budget or forecast,” Tom comments. “They may have some kind of budget, but if it’s not a rolling budget, so it has limited use.”
Helping a business owner create and use these tools is one of the most important, and satisfying roles of an MLA Outsource CFO. “Finding ways to project growth is the most fulfilling part of my job,” Tom says. “You’ve got to dig in, figure stuff out, and decide how to go forward.”
That approach makes a financial professional into a trusted advisor. And a trusted advisor can help you get back to building your business.
At MLA, we call that Business Redeemed.