CFO Strategies: The Evolution of The Part-Time CFO

By Jeff Reardon, financial analyst, White Commercial Corp. in Stuart, FL/Kansas City, MO; 800-327-7000;jreardon@whitecommercial.com

Sometimes it seems like a grain business is built on distractions - very few people are responsible for only one job.

A recent grain industry survey showed that for grain companies with 3 locations or fewer, the role of the CFO is typically one of several filled by the owner or GM. 

One survey respondent commented that it is “approaching the point where it’s a whole job to do all this”. 

When retiring owners and general managers are asked what they wish they had known 40 years ago, exposure to financial concepts and terminology is a common answer.

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In working with hundreds of grain companies over the past decade, I’ve discovered that the role of CFO has evolved into a necessity, not a luxury, and someone is filling that role with or without the title. 

A look at the important functions of the CFO role helps clarify its importance.

The most important CFO duty is preparing accurate and timely financial statements while communicating the effects of mark to market entries and timing on grain margins. 

This fundamental step opens the door to quality grain lenders that provide access to capital based on grain inventory and grain contracts. 

However proper accounting is not the end, but rather the beginning of the CFO responsibilities.

The next step for the part time CFO is to start using financial data to make business decisions. 

The volatility in the grain markets has made cash flow planning critical to establishing grain position limits. 

Preparing locational and divisional break-even analysis allows management to set realistic and achievable profit targets. 

These profit targets help make important decisions about how to approach grain origination and how to set appropriate fee structures for drying and storing grain. 

Analysis of potential new projects’ effects on your current financial statement assists with evaluations of potential capital improvements.

It may take a little more time and exposure, but eventually the part time CFO will integrate grain merchandising and finance fully into strategic decision making. 

If your lender or CPA does financial ratio analysis, it will provide more information for strategic decisions. 

Financial efficiency ratios can help with labor decisions, leverage goals may influence capital projects, and liquidity targets can impact the allocation of capital.

“I didn’t get in the grain business to be an accountant” is a common refrain of part time grain company CFOs. 

That’s an understandable response to a role you didn’t ask for, and its true this part of your job may not be your passion, but the benefits of spending the effort to understand this role over time are clear.  

Growth and expansion will come on your terms.

Communication with your external finance team will take less time and will be at a much higher level, and you may find you know a lot more about your business as well.