26 MiMfg Magazine May / June 2022
Premium Associate Member
The Fractional CFO Relationship
By Tom Shemanski • Rehmann
As a manufacturer , you face various financial challenges . Whether it ’ s looking at the ROI of a new equipment purchase , determining terms on a new large customer contract or considering various business models or strategies , manufacturers need critical financial thinkers in their organization to work through these and many other financial issues .
Typically , the company ’ s CFO would drive these analyses and business discussions internally . For example , supply chain challenges , or “ onshoring opportunities ,” are putting cashflow pressures on manufacturers to make key decisions with debt and cash management . Your CFO should be modeling various inventory stocking and purchasing strategies , as well as what level of investment in inventory makes sense for the business . It ’ s critical to understand overhead support levels needed for the various operational and inventory strategies being evaluated .
The question many manufacturers face is whether they can afford a high-end CFO when the organization has numerous critical talent needs across sales , engineering and quality . A more recent trend has organizations looking at fractional or outsourced CFO structures to fill these needs .
What does a fractional or outsourced CFO relationship look like ? These relationships can work on an hourly , as-needed , basis or a flat monthly fee based upon a block of hours . Many companies integrate this role into their company ’ s management team and key meetings . These arrangements can have set schedules and structure to establish consistency and a pattern of on-site meetings so everyone can plan workloads accordingly . The combination of scalability , flexibility and access to high-level skillsets allow manufacturers to budget and plan to meet their organization ’ s needs .
A couple keys to successfully finding an outsourced or fractional CFO include properly matching culture , personality and experience to fit for your organization along with clearly defining the focus area and priorities for this role . Below are some attributes to look for when assessing a potential fractional CFO :
• Strategic thinker . What ’ s our value proposition in the marketplace ? Are we focused on the right customer and product lines ? Where do we want to be in five years and how do we get there ? These are questions that a CFO is driving to answer though a collaborative strategic planning process .
• Predictive not reactive . CFOs are forwardthinking and ensure the company has the right tools in place ( forecasting , financial modeling , cash projections ) to navigate the outlook in front of them .
• Drives financial results . CFOs are focused on key financial metrics such as inventory turns , working capital maximization , product and customer profitability , ERP software utilization and proper banking structure and rates .
In the end , all manufacturers need to find a way to get CFO-level capabilities into their business to ensure they are well positioned for the future . Fractional CFO relationships can allow manufacturers to match the right level of CFO support within their annual budget . Outsourcing has been functional and costeffective across IT and human resource departments . Moving your CFO role to an outsourced structure can shift your entire back-office operation to outsourcing and allow your management team to focus on their core competencies and what they do best . 6
Tom Shemanski , a principal with Rehmann , serves clients in an advisory capacity , providing fractional and project-based CFO services , business financing solutions , turnaround management , strategic planning , system implementations , and transactional advisory services . He may be reached at tom . shemanski @ rehmann . com .
Rehmann is an MMA Premium Associate Member and has been an MMA member company since July 2006 . Visit online : rehmann . com .