Become Your CFO

Budgets and personal finances are not most people’s favourite topics, and certainly not one of mine. Even bank executives have problems in this area, but if you’re an entrepreneur so do you. You’re concentrating so much time on your business, your chequebook takes a back seat. Then one day you are met with the startling fact that you’re not saving enough for lean times and you panic. Before we move further, you need to know who an ideal CFO in a company is.

Who is a Chief Financial Officer

According to Investopedia, The chief financial officer, or CFO, of a company is the top-level financial controller, handling everything relating to cash flow and financial planning.

Although the role of a CFO can be rewarding, there are legal considerations that must be strictly adhered to.

CFOs oversee taxation issues for their companies.

Often, a CFO is the third-highest position in a company, playing a vital role in the company’s strategic initiatives.

Chief Financial Officer

Well, just apply your professional talents to the situation and become your CFO. By using your CFO eyes on the situation, it somehow tempers the pain of dealing with your own money. To get started, here are 5 rules for treating your finances like a business:

1. Be Your Board of Directors: To make good decisions, you must know what you’re trying to achieve. In business, the Board of Directors writes mission statements to keep the company on track with goals. At home, it’s up to you to define your mission and make sure you’re fulfilling it by writing down your goals. Not just your financial goals either, but your “life” goals.
2. Know Your Operating Costs: Do you know what you spend every month on average? Businesses do because they base their budgets on historic spending patterns. Most people, however, don’t know what it costs to keep their lives running. You can make out detailed budgets, but find out at the end of the month that you haven’t stuck to it. So instead of doing a budget that dictates how much to spend, do a “cash flow statement” that records how much you spend each month broken into several categories.
3. Know Your Net Worth: Companies measure progress toward goals through balance sheets which list their assets and liabilities. Your net worth is your balance sheet where you list everything that you own. That means your checking and savings accounts, investments, car, house, etc. minus everything you owe. Track your net worth quarterly to make sure you’re moving toward your personal goals. Without this step, you might not see the impact of your money decisions until it’s too late.
4. Forecast Money Decisions Results: When a business makes important decisions, they use a process called “scenario planning”. They look at the possible outcomes of one choice compare to another. You can use the same process to make smart money decisions. For any choice, pick two options, and then look at what each answer would do to your cash flow and net worth. Remember, there are no “good” or “bad” choices — only choices that put you closer or farther from your goals.
5. Track Progress by Annual Reports: Just as companies assess their progress in their annual reports, you need to review your list of priorities every year. Have you accomplished any goals? Have your spending patterns changed? Did you spend less than you earned? Did you save as much as you planned?

You need to treat your money like you treat your business. Give it the time it deserves, because, in the end, the time you spend is an investment in yourself and your dreams.

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