Ag Case Study: An Embedded Approach To A CFO Vacancy
Title: Ag Case Study: An Embedded Approach to a CFO Vacancy
GC Niche: Ag
GC Team Member(s) Involved: Jeff Bowman, Clive Grimbleby
Type Of Industry: Agriculture
Date Project Completed: Ongoing
Situation
An agriculture client asked for assistance when their part-time Chief Financial Officer retired. The client, citing a need for more responsive service, also used the opportunity to make a CPA firm change.
The client asked us to provide financial guidance that would typically be provided by a CFO or Controller, including advising the board of directors regarding paying down extra debt, investing money in equipment, paying distributions to owners, and other areas of concern.
The transition period after the client’s former CFO retired allowed us to observe the client at work to determine the best path forward.
Challenges
- The board typically received both a budget and a forecast, but the amount of information was overwhelming, and the board found it difficult to use.
- In the absence of both the CFO and the client’s original accounting firm, we would need to begin the relationship from scratch and hit the ground running at the same time.
- The client needed to make informed decisions that would affect the business in the years to come but did not fully understand the implications of those decisions.
Considerations & Tactics
- Board meetings: We offered to attend monthly board meetings, just as the previous CFO did. Our presence allowed board members to ask targeted questions.
- Modeling: Board members understood that their choices would affect other decisions, but they needed context to determine the eventual impact. We modeled and forecasted how much cash the client would have on hand at the end of the year based on each potential decision. For example, if the client chose to pay extra distributions rather than investing in equipment, how would that affect the business over the coming months? What about the tax implications? We interviewed managers to get the full picture and presented potential scenarios to the board.
- Credit context: We carefully analyzed past financials to create a realistic picture of the business’s potential cash flow, allowing the client to see how much was typically needed to avoid dipping into credit. We also modeled the amount of excess cash the client would need to use before the end of the year.
- Simplified reports: We created easy-to-understand, one-page spreadsheets to aid in the decision-making process and were on hand at every board meeting to answer questions. A rolling forecast is now part of their monthly statement.
Final Recommendation And Outcome
It took a year of interviews, observation, and board meetings to determine the best solution for this client, and the results show the benefits of taking an embedded approach to accounting.
Our simplified plan and consistent presence made it easier for the board to make critical decisions and to understand the overall financial direction of the company. Now, the board knows what to expect at an end-of-year meeting and feels more prepared and confident in their decision-making process.
In addition, the client now has a team of financial professionals they may tap for assistance rather than one part-time CFO. This model has been a great success for this organization, as it has been for a number of our clients who do not have a full-time CFO or controller on staff.
By taking the time to immerse ourselves in the company financials and start with a clean slate, we set our client up for a fresh start and an understanding of their overall financial health. Our hope is that this resonates and guides you when making pivotal decisions as a leader in your business.
If your ag business anticipates changes in financial needs or has a need for an outsourced controller, CFO, or other important financial roles, you can “count on us” to help you understand your options. Contact Jeff Bowman (jbowman@gccpas.net) with any questions.