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Should Outsourced CFOs Review Expenses Line By Line?

Posted by Joerg Joergensen on Feb 5, 2020 7:45:00 AM
Joerg Joergensen
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In the olden days, accountants wore a green eyeshade and looked for every infraction, down to the penny. But with today’s large, high volume transactions, is it worth doing a detailed review of your client’s expenses? The answer is a resounding, maybe, as long as you are looking for the right expenses.

Do outsourced CFOs review expenses? You may be surprised. Find out how outsourced CFOs responded to that question in our webinar, Top 10 Outsourced CFO Quick Wins. If you currently offer or are considering offering outsourced CFO services, this webinar is an ideal way to get up to speed with your new client.

Should Outsourced CFOs Review Expenses Line By Line?

Reviewing Expenses May Be Easier Than You Think

In your first 30 days as an outsourced CFO, your priority should be to review the profit and loss statement (P&L). Was your client making money? What were the major revenue sources and expense categories? This valuable analysis is the first step to conduct an efficient line-by-line review.

One of the reasons CPAs don’t review expenses is that they think it is too time consuming and has little benefit. Should you spend an hour looking at expenses only to find a savings of $20? The key is to look at the significant expense categories that you identified in your P&L review. This approach will help you to hone in on the right items and conserve your time.

Your keen eye will be able to identify questionable items in the last 30, 60, or 90 days that need further review, allowing you to prioritize your time. It’s also another way to add value as an outsourced CFO.

Where Are The Big Expense Opportunities?

Reviewing large expenses may have the most significant benefit, especially since they are often associated with contracts. A large expense may lead to a contract review, which may, in turn, lead to an opportunity to renegotiate terms of the agreement. In our previous blog, Which Contracts Fractional CFOs Need to Review, we outline which contracts you should look at first to ensure you make a big impact. 

Another critical area is not just the expenses themselves, but how they are processed. Is the accounts payable (AP) staff manually inputting monthly payments? Or is there an opportunity to streamline their tasks? Is your client still paper-based and taking up valuable real estate with low-value archived paper? The entire payment process may be ripe for change opportunities as a result of how expenses are handled.

Finally, make sure your client is getting what they pay for in those big payments. Is the vendor living up to their terms of the agreement? Has the market price for contracted products and services declined, creating an opportunity to renegotiate terms? You may find that not just the expenses, but the drivers behind them are an area where you can make a profound impact.

Should Small Expenses Be Overlooked?

If a review of AMEX statements indicates a series of small yet frequent charges, it’s a red flag. It may mean that company credit cards have fraudulent charges that will spread to other accounts. Sometimes these charges are overlooked by the merchant card processor, but a pattern of small charges may lead to a more significant issue.

What about monthly subscriptions? While $10 a month for a streaming service or annual credit card fee may not seem to be a big deal if everyone has these charges, but no one is using them, it can amount to thousands of dollars annually. Small costs, which are easily forgettable, may have a larger impact on your client’s bottom line.

Ready to Learn More?

For more tips on how to make an impact as an outsourced CFO, watch the 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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