Published: June 2025
For a growing Australian business without a Chief Financial Officer (CFO) or a formal financial strategy, establishing one is a critical step to ensure sustainable growth and financial stability. Without a clear financial roadmap, rapid growth can lead to cash flow issues, inefficient resource allocation, or missed opportunities. This article outlines how to create your company’s first financial strategy, including setting goals and targets, tracking progress, achieving return on investment (ROI), and leveraging fractional CFOs cost-effectively.
Why a Financial Strategy Matters for Growing Businesses
A financial strategy provides a structured approach to managing finances, aligning resources with business objectives, and mitigating risks. For a company that’s never had a CFO or formal strategy, this framework ensures growth is supported by sound financial decisions, preventing common pitfalls like cash shortages or uncontrolled costs. It transforms ad-hoc financial management into a proactive, data-driven process that drives profitability and long-term success.
Components of a First Financial Strategy
A financial strategy for a growing business without prior CFO leadership should focus on clarity, simplicity, and actionable goals. Here’s what it could look like:
1. Define Clear Financial Goals
- Short-Term (6-12 months): Ensure sufficient cash flow to cover operational needs, establish a baseline budget, and improve profitability by 5-10%.
- Medium-Term (1-3 years): Achieve sustainable revenue growth (e.g., 20% annually), reduce operating costs by 10%, and build a cash reserve equivalent to 3-6 months of expenses.
- Long-Term (3-5 years): Reach a target revenue milestone (e.g., $5M-$10M), achieve a specific profit margin (e.g., 15-20%), and prepare for potential expansion or investment opportunities.
2. Set Specific Financial Targets
- Revenue Targets: Project realistic revenue growth based on historical data and market trends (e.g., 15-25% year-on-year growth).
- Profitability Goals: Target a gross margin improvement (e.g., from 30% to 35%) through pricing optimisation or cost efficiencies.
- Cash Flow Objectives: Maintain positive cash flow and a minimum cash runway of 6 months by optimising payment terms and inventory.
- Cost Reduction: Identify and eliminate 5-10% of non-essential expenses through vendor negotiations or process automation.
- Breakeven Point: Calculate and aim to reach breakeven within 12-18 months if not already achieved, focusing on fixed and variable cost management.
3. Establish Key Performance Indicators (KPIs)
- Financial KPIs: Track gross profit margin, net profit margin, operating cash flow, and working capital ratio.
- Operational KPIs: Monitor customer acquisition cost (CAC), customer lifetime value (CLV), and inventory turnover.
- Growth KPIs: Measure revenue growth rate, return on investment (ROI) for key projects, and debt-to-equity ratio.
4. Create a Budget and Forecast
- Budget: Develop a detailed annual budget covering revenue, expenses, and capital expenditures, with monthly breakdowns for operational costs, marketing, and staffing.
- Forecast: Build a 12-18 month financial forecast, updated quarterly, to project revenue, cash flow, and expenses based on growth assumptions and market conditions.
5. Implement Cash Flow Management
- Cash Flow Monitoring: Track cash inflows and outflows weekly to avoid shortages.
- Optimisation Strategies: Negotiate better payment terms (e.g., 30-60 days with suppliers), accelerate receivables, and maintain a cash buffer.
- Contingency Plan: Set aside 5-10% of revenue for unexpected expenses or economic downturns.
6. Focus on Cost Control and Profitability
- Cost Analysis: Review all expenses to identify inefficiencies, such as redundant software subscriptions or overstaffing.
- Profitability Drivers: Analyse product or service profitability to focus on high-margin offerings and eliminate low-performing ones.
- Cost-Cutting Measures: Implement automation for repetitive tasks or renegotiate contracts to reduce costs by 5-10%.
Tracking the Financial Strategy
To ensure the strategy delivers results, consistent tracking and reporting are essential. Here’s how to monitor progress:
- Monthly Financial Reports: Generate reports on revenue, expenses, cash flow, and KPIs to compare against targets. Use tools like Xero or QuickBooks for real-time insights.
- Dashboard Setup: Create a simple dashboard (e.g., via Excel, Google Sheets, or accounting software) to visualise key metrics like gross margin, cash runway, and revenue growth.
- Regular Reviews: Conduct monthly or quarterly reviews to assess performance against goals, adjusting the strategy based on market changes or internal performance.
- Variance Analysis: Compare actual results to budgeted figures to identify discrepancies (e.g., overspending in marketing) and take corrective action.
- Accountability: Assign a team member or fractional CFO to oversee tracking and report findings to leadership or stakeholders.
Achieving ROI from a Financial Strategy
A well-executed financial strategy delivers measurable ROI by improving efficiency, profitability, and growth. Expected outcomes include:
- Improved Cash Flow: Optimising payment terms and inventory can free up 15-25% of working capital, enabling reinvestment in growth initiatives.
- Cost Savings: Identifying inefficiencies can reduce operating costs by 5-15%, directly boosting profit margins.
- Revenue Growth: Strategic pricing and product focus can increase revenue by 10-20% within 12-18 months.
- Risk Reduction: Better forecasting and controls minimise financial risks, potentially saving thousands in penalties or lost opportunities.
- Scalability: A clear strategy supports sustainable growth, making the business more attractive to investors or lenders.
For example, a $5M revenue business investing in a financial strategy might save $200,000 annually through cost reductions and improve cash flow by $300,000, yielding an ROI of 200-300% within the first year.
Leveraging Fractional CFOs Cost-Effectively
Hiring a full-time CFO is often unaffordable for growing businesses (costing $320,000-$350,000 annually for a $250,000 salary). Fractional CFOs provide a cost-effective alternative, delivering senior-level expertise without the high price tag. Here’s how to engage one affordably:
1. Choose the Right Pricing Model
- Hourly Rate ($150-$400/hour): Ideal for one-off tasks like setting up a budget or forecast. Limit to 5-10 hours monthly to keep costs under $2,000/month.
- Monthly Retainer ($3,000-$10,000/month for small SMEs): Best for ongoing strategy development and monitoring. Negotiate 10-20 hours/month to focus on high-impact tasks like financial planning and KPI tracking.
- Project-Based Fee ($5,000-$15,000): Use for specific deliverables, such as creating the initial financial strategy or cash flow system, ensuring clear scope and cost.
2. Define a Focused Scope
Engage the fractional CFO such as Scale Suite for high-value tasks like:
- Drafting the financial strategy and setting KPIs
- Building budgets and forecasts
- Analysing profitability and recommending cost cuts
- Setting up cash flow management processes Avoid low-value tasks (e.g., bookkeeping) by delegating to affordable staff or software.
3. Start with a Trial Period
Begin with a 3-6 month engagement to test fit and value. Set clear deliverables (e.g., a completed financial strategy and tracking system) and evaluate ROI before committing long-term.
4. Use Technology to Reduce Costs
Leverage tools like Xero, MYOB, or Google Sheets for financial tracking, reducing the hours needed from a fractional CFO. Many offer setup guidance as part of their service.
5. Negotiate Flexible Terms
Work with the CFO to prioritise critical needs within budget constraints. For example, a $3,000/month retainer for 10 hours can cover strategy development and monthly reviews, delivering significant value without overextending finances.
Cost Example
A small business with $5M revenue engages a fractional CFO at $4,000/month for 12 months ($48,000 total). The CFO implements a strategy that saves $150,000 in costs and improves cash flow by $200,000, yielding an ROI of over 700%. This is far more affordable than a full-time CFO while delivering comparable strategic impact.
Steps to Develop Your First Financial Strategy with a Fractional CFO
- Assess Current State: Work with the fractional CFO to review financials, identifying gaps in cash flow, profitability, or reporting.
- Set Goals and Targets: Collaborate to define short-, medium-, and long-term goals, such as achieving a 15% profit margin or 6-month cash reserve.
- Build Budget and Forecast: Develop a detailed budget and 12-18 month forecast, with the CFO ensuring alignment with growth objectives.
- Implement Tracking Systems: Set up dashboards and reporting processes to monitor KPIs, with the CFO providing templates or software recommendations.
- Review and Refine: Schedule monthly check-ins to track progress, adjust strategies, and ensure goals are met.
Conclusion
For a growing Australian business without a prior financial strategy or CFO, establishing a clear financial roadmap is essential for sustainable growth. By setting defined goals, targeting key financial metrics, and tracking progress with robust systems, you can improve profitability, cash flow, and scalability. Engaging a fractional CFO offers a cost-effective way to access senior expertise, with flexible pricing models ensuring high ROI without the cost of a full-time hire. Start with a focused scope and a trial period to build a strategy that drives measurable results, positioning your business for long-term success in Australia’s competitive market.
Ready to create your first financial strategy? Contact Scale Suite for scalable finance solutions tailored to Australian SMEs. Our fractional CFOs can help you build a strategy that optimises performance and drives growth at a fraction of the cost.
