While many might think of a Fractional CFO simply as a number-cruncher working behind the scenes in a manufacturing business, the right financial leader can play a big role in your operations as well. 

A Fractional CFO will be the forward-thinking strategist you need to grow and succeed. They’ll ask tough questions like “Are we doing that because we’ve always done it this way, or are we doing it because it’s the most efficient way?” It’s hard to shake up tradition, but if you have a good strategic reason and a solid plan of execution, it can transform your business.

That big-picture perspective is especially important when it comes to two crucial factors in manufacturing success: a deep understanding of cash flow and strategic supply chain management. Of course, they’re tightly intertwined, and a Fractional CFO can help you understand if the way you’ve been handling them so far is really working after all. 

Balancing risk: cash flow and inventory

When I meet with a manufacturer, I know inventory management is going to be a high priority. Optimizing inventory levels to balance on-time delivery while minimizing cash output is a never-ending challenge and is best achieved through collaborative supplier partnerships.

While the manufacturers I talk with are rightly focused on their profit and loss statement and margins, many don’t realize that it’s just as important to properly manage your working capital and cash flow cycle. CEOs are often relieved to get a tighter grasp on where their business really stands thanks to three important tools: 

• A 13-week cash forecast: With the volatile cash cycles manufacturers experience, forecasting cash flow quarterly helps you keep profitability on track.

• Revenue forecasting: Your revenue shouldn’t be a surprise each quarter. This is where a good CFO develops a partnership with the sales team to get in sync and hold them accountable to their numbers.
  
  
• Quarterly dynamic financial modeling: Manufacturers need a full financial model each quarter, including the balance sheet, profit and loss statement, a cash flow statement with actuals and a forecast update. A lot of small companies will have a budget to start out the year, but as the months pass, the less relevant and helpful it is. Looking at your actuals and modeling out what happens next is an essential quarterly practice.

When it comes to inventory, manufacturers should never stop preparing for and managing the impact of unexpected events and outside forces. Events like the pandemic or the current issues around tariffs are notable examples, but if you put strong fundamentals in place, you’ll see fewer surprises no matter what happens.

A Fractional CFO can help insulate you from financial shocks with:

• Diversified sourcing from vendors in different countries, including onshore alternatives
• Modeling for different supply chain scenarios and re-evaluating them continuously
• Contingency plans to manage risk and maintain profitability, such as ordering ahead, optimizing product design or shifting some of the risk to vendors

A Fractional CFO can ease the operational ups and downs of manufacturing

From working with your sales team to modeling inventory risk scenarios, the right Fractional CFO will play just as big a role in your operations as they do in your finances. They’ll help you take a big-picture look at your business to ensure you’re not missing any opportunities for growth — and preparing for any challenges that might lie ahead. 

If you’re a manufacturer in Kansas City looking for strategic operational guidance from an experienced financial leader, contact Kerry George at [email protected]. We’ll work with you to find just the right trusted, expert Fractional CFO for your business.