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How Outsourced Chief Financial Officers Analyze the Balance Sheet

Posted by Joerg Joergensen on Jan 15, 2020 7:15:00 AM
Joerg Joergensen
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The balance sheet contains a wealth of information and tells a story about your client’s business. But are your clients looking at the story behind the numbers? Accounts receivable, inventory, and other assets and liabilities will paint a picture of what’s going well - and what hidden factors need addressing.

Ready to uncover the hidden story, and make a great impression with your outsourced CFO client? The following is an excerpt from our webinar, Top 10 Outsourced CFO Quick Wins, where we offer expert tips to help you make an impact fast.

How Outsourced Chief Financial Officers Analyze the Balance Sheet

Analyzing Accounts Receivables

Many companies focus on sales and revenue, but what about Accounts Receivable? AR holds the key to cash flow, so understanding who pays, who doesn’t, and cash receipts timing is the key to keeping your client’s business moving.

An aging schedule is the first step in your AR analysis. Most accounting systems can produce this report for you, but if not, it’s time to open up a spreadsheet, grab the outstanding invoices, and do some manual work. 

How many invoices are outstanding for 30, 60, 90 days, or longer? Is there a process for delinquencies, or do you need to implement a collections process? Are there any customers with unusual or delayed payment patterns? A quick call to your customer might reveal a simple issue (like invoice coding or supplemental information) that could be easily solved and open up cash flow.

The Inventory Story

Like AR, inventory is an asset to analyze. If your client sells products, what is the inventory turn? Are there items that move slowly, or have been forgotten? This is an opportunity to work with your peers in sales to see how to get inventory moving.

Is the value of the inventory accurate? When was the last time a physical inventory was taken? If the answer is “we’re not sure,” it’s time to evaluate existing inventory and identify any impaired inventory or items that should be written off. Keeping inventory value current helps the balance sheet reflect the accurate value of the business.

Concluding the Balance Sheet Story

Besides current assets, other items deserve investigation. Are current or long term debt agreements fairly represented? Are there documents on file that show when these agreements originated, and is there an opportunity to renegotiate better terms?

Is your Accounts Payable up to date? Are there any forgotten invoices that haven’t been paid or vendor agreements to revisit? Each item on the liability side of the balance sheet deserves a review.

Don’t forget about capital assets like buildings, leases, or equipment. Make sure they’re up to date, and their proper value is reflected on the balance sheet.

The balance sheet tells the story of “what we own” and “what we owe.” By updating and correcting the balance sheet, you’ll bring the value of the business into the present, and provide a basis to make better business decisions.

Ready to Learn More?

For more tips on how to make an impact as an outsourced CFO, watch our webinar recording, Top 10 Outsourced CFO Quick Wins, and leave us a reply below with any comments you may have.

Top 10 Outsourced CFO Quick Wins | Watch the Recording

Topics: Outsourced CFO

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