Friends and family

Sign post with arrows that say help, support, advice and guidance pointing in different directions.

We often talk to business owners who have been utilizing the free services of a family member for budgeting work and accounting advice.

Friends and family are a great source of support when starting a business. They often come through with resources such as seed money, connections, and consulting. The services they offer are typically cheap, if not free, and they provide a comforting sense of trust. After all, these are friends and family, they have your best interests at heart.

But, here are some things to consider as the business grows:

  • A proper CFO with an accounting degree and experience providing strategic financial advice understands that the numbers on the page should tell a story about where the business came from, where it is headed and how it will get there. It should consider growing complexity, market conditions, tax considerations, and capital needs. This is a document that should help a business owner meet their growth objectives and it should also serve as a communication point for future lenders.
  • A good budget should be a living document. The business owner should be sitting down with their CFO monthly to compare budget to actual results to understand how the business is performing relative to expectations. This allows the business owner to make adjustments and keep the business on course. At the very least, they should understand why actual results may vary drastically from what was budgeted. There is nothing worse than showing a projection to a lender 5 months into the year with actual results that come nowhere near to budget and have no explanation.
  • A CFO should be part of the team. Not only do they keep the business owner informed about the health and wellbeing of the company from a financial perspective, but they are also responsible for making sure the business has the capital available to support growth. Especially for a business owner who is not a numbers person, a CFO can determine when additional capital will be required, source potential lenders, provide the financial reporting, and facilitate the discussion. They can tell the story and field specific questions around the finances of the business that the business owner may have trouble understanding.

Cheap or free help is a great way to get a business started, but as the company grows it is important to bring in qualified experienced help. Someone that is part of the team, vs someone that is helping their friend as a side project.