Right now, it’s survival of the fittest for energy service firms. 2021 may be the most challenging, complex, and dynamic situation I have seen in my 25+ years of working in this industry. And for that reason, I believe business owners need CFO services now more than ever. But that doesn’t mean you must go out and hire a full-time CFO to survive 2021. Hiring an outsourced CFO firm or CFO advisory and consulting service is just as effective – and less costly.
Why hire an Outsourced CFO or CFO Advisory & Consulting Service?
A strategic CFO sees the big picture of your financial situation – in real-time. The 50,000 feet altitude picture, which is what’s needed at this point in the game to get through this year. From this birds-eye view, a CFO can analyze your 2021 monthly financial trends, quickly forecast or update your 13-week cash flow, and help you map out a 2021 strategy and its corresponding financial forecast for the rest of the year.
When you are knee-deep in your own operations, someone on the outside looking in provides a new perspective and insight into your best next moves. If you are stalled in your decision-making process, a CFO can run multiple scenarios to see what the financial impact would be with each case. Or dive into P&L details and operations to generate recommendations for revenues. An outsourced CFO also offers:
Recommendations for reducing high customer concentrations risks
Opportunities your organization can take to creatively reduce costs
Strategies to squeeze the cash conversion cycle from both ends
Assess your lending or equity investor situation for ways to inject more cash
Not all Outsourced CFO services are the same – here’s what you need to know!
As good as this all sounds, it’s important to note that not all CFO services operate the same way. Many firms offering these services provide a one-size-fits-all-CFO-service focused on your accounting or Controller Services. They are kind of like an “accounting factory” if you will.
These operations generally charge a fixed price that includes an agreement on how and when the work is performed. Essentially, they aim to standardize the widgets. It’s easy to recognize because they’ll outline things such as the number of “touchpoints” or limit discussions with you to a 30- minute monthly meeting (to keep their costs low and profit high).
Companies involved in new pipe sales for pipelines, geoscience mapping data, energy software, or solar equipment product manufacturing could work under this model because their businesses are relatively commoditized. But this isn’t the case for midstream and renewable service companies, engineering and construction service firms, or developers/operators of oil and gas infrastructure where operations are more complex.
What to look for in an Outsourced CFO Service?
If your business model doesn’t fit with the one-size-fits-all type service (which most energy companies don’t), you should look for a service with a more customized approach.
An outsourced CFO or CFO advisory and consulting service should target finance disciplines – which is future-focused yet builds on historical backward-looking accounting and help you make decisions about the business in this dynamic and ever-changing landscape. He or she can find ways to shrink the cash conversion cycle (which is critical right now) and deliver advanced corporate finance services, including:
Financial Planning and Analysis
Financial Reporting
Business Processes and Internal Controls
Transaction work
Capital funding – be it securing debt or equity
Your CFO Services should be tailored to your needs and requests
The bottom line is, your business doesn’t fit into a one-size-fits-all box. And your outsourced CFO shouldn’t attempt to put it in one. Look for a CFO firm that custom tailors its services to your business in areas such as:
Sales nuances (pricing, bidding, T&M, SAAS, % completion, netbacks, royalties, oil price)
Cost activities and complexity
Man-hours (1000's of employees on construction sites, subcontractors vs. shifts/crews)
Utilization
Productivity
Procurement or supply activities
Warehousing, inventory, and field dispatching
Chemical mixing and production
Profitability
Working Capital
The Energy CFO offers a white glove customized CFO Service
At The Energy CFO, our approach to outsourced CFO services is a win-win policy with your best interests in mind. It’s intentionally designed to wrap around your accounting or Controller Service provider, whether it’s in-house or outsourced.
Our definition of traditional CFO work comes from the corporate energy finance world where our team is trained in areas such as:
Establishing corporate governance or institutionalizing the company
Advising and presenting to company boards
Corporate and Business Unit Planning
Corporate Finance adapted for private family businesses – or entrepreneurial finance
Investor Relations
Financial Planning and Analysis (including financial and economic modeling)
Management Reporting (covers financial and operational data)
Risk Management
Controllership (covers Accounting, Tax and Internal Controls)
Project Accounting, Job Costing, Oil & Gas or Energy Accounting
Operational P&L (running businesses, understanding drivers of the P&L, connecting the dots between operations and finance)
Working with us means you only pay CFO Rates for CFO work. Our approach leverages the work performed by your accountant and ring-fences the finance work that our experienced energy finance team performs, to assess your financial situation from a big picture, birds-eye view – and move forward.
Now, we do still need the numbers from your accountant and its not unusual for our CFOs to make accounting and tax recommendations to you and your accountant (our CFOs have both finance and accounting backgrounds). If you don’t have an accounting provider and need one, we can recommend one of the firms we have developed relationships with through our Strategic CFO Alliances or find one that meets your needs.
We encourage you to do your research on this topic. The award-winning Energy CFO and its sister company, The Healthcare CFO, have a reputation for providing excellent and affordable on-demand service to our clients. For more about our customized client service approach, check out our Services page.