AI for Accounting and Finance Blog

How to Review Financial Statements Like an Outsourced CFO Pro

Posted by Joerg Joergensen on Dec 11, 2019 8:15:00 AM
Joerg Joergensen
Find me on:

If you’re an Outsourced CFO or are considering it, you know that you have responsibility for more than just the numbers. You also need to understand the story those numbers tell about the business. Financial statements are the primary means of communicating financial results to executives, stakeholders, and investors. So you must take a deep dive into what’s behind the numbers.

How to Review Financial Statements Like an Outsourced CFO Pro

Discrepancies and Expectations

An Outsourced CFO must not only know their numbers but how to present those numbers in a way that company leaders understand. That’s not an easy task. The CEO may have told you that everything’s fine, but you’ve found you may not have enough cash for next week’s payroll. You may have asked department heads to reduce spending, but found that the IT department just spent $100,000 on new software.

The former CEO of IBM once said, “You get what you inspect, not what you expect.” What people tell may be different than what the numbers mean, and it’s your job to communicate what’s off course and how to correct it.

Your Financial Statement Arsenal

Once you’re confident you have accurate information for financial reporting, here’s what questions you should ask.

  • Balance Sheet. What are the main assets and liabilities? Are there any items that may affect future profitability or cash flow, like long-term debt or outdated assets that will need replacing?
  • Income Statement. All levels of profitability are important, including gross margin and operations. Compare those margins to industry averages to find out where your client may need corrective action.
  • Cash Flow Statement. Cash is the lifeblood of the business. Comparing a historical 13-week average to 13-week projections will help you see if the company is flush or barely treading water.
  • Management Discussion and Analysis (MD&A). If your client is a larger company with audited financials, take a look at the MD&A to reveal historical insights or future impacts that may not have been included in your executive discussions.
  • Budgets. Does your client have a budget? If so, is it communicated and adhered to? Budgets provide needed structure and discipline, so engage top-down support for company-wide compliance. Budget-to-actuals show where resources may be leaking.
  • Key Performance Indicators (KPIs). Historical and current KPIs reveal if your client is on track with planned performance. And if no KPIs exist, be a strategic advisor and suggest metrics that help leaders make informed decisions.

Communication is Key

As a strategic partner, you’re in a unique position as an Outsourced CFO to provide information that guides the trajectory of the business. You’ll also be an educator who uses real-life examples that tie together operational and financial performance.

As an Outsourced CFO, you’re part detective, part educator, and 100% strategist. We’ve developed a webinar that helps leaders like you understand what you need to do on day one to be successful as an Outsourced CFO. Watch our webinar recording, Top 10 Outsourced CFO Quick Wins, to find out more about serving your Outsourced CFO clients.

We love your comments. Share your story below on how you used your expertise to educate and inform your client to improve operations.

Top 10 Outsourced CFO Quick Wins | Watch the Recording

Topics: Outsourced CFO

Download Free eBook: The Future of Accounting Technology
AI Can Be a Game-Changer for Your Firm’s Growth and Profitability | Schedule a Complimentary 30-Minute AI in Accounting Consultation

Recent Posts

Privacy Policy