What Does A CFO Do For Ecommerce Businesses?

If you have been seriously considering setting up an ecommerce business, it is fair to say that you would have various compelling incentives to follow through with this idea.

In 2020, the COVID-19 pandemic supercharged the online retail sector, as lockdowns saw a large number of brick-and-mortar stores temporarily closed and customers purchasing non-essential goods by tapping on smartphone screens rather than handing over physical coins and banknotes.

Even in 2021, when vaccine rollouts enabled the world to gradually open up again, the UK’s ecommerce market was more than twice the size of the nearest European competitor’s.

The picture continues to look promising for new entrants in the ecommerce space. As recently as April 2023, data revealed that British online retailers had increased their spending by 43% since 2022’s fourth quarter, indicating growing confidence in the market’s prospects.

That market’s B2B segment is just one for ecommerce firms to potentially exploit. In a recent survey of 250 buyers from large and small UK companies, 57% reported doing at least 40% of purchasing online, while 78% felt that B2B brands’ ecommerce capabilities had improved since the pandemic.

The takeaway from all of this is that, if you choose to set up an ecommerce business now, you will be entering a buoyant market that has strong potential to grow over the coming months.

Still, how large a slice your own business takes of that market will largely depend on how well-prepared you are to compete in it. A key part of this will be securing talented C-level executives — including a Chief Financial Officer (CFO).

A wide range of responsibilities customarily fall under a CFO’s remit — such as watching out for areas of financial weakness in the business and reporting back to the CEO about those found. How, though, would a CFO’s responsibilities apply in an ecommerce setting?

Duties Of An Ecommerce CFO

Is your ecommerce firm on track to meet its goals? It would basically be the CFO’s job to find out. Of course, the CFO will first need to know what those objectives are. Hence, this particular finance professional will need to be in regular touch with the company owner.

Together, the business owner and the CFO will develop a strategy intended to help the business further its mission. However, there will not just be one major, overriding mission here, as each department of the company will need to be set its own targets.

This helps to explain why the CFO will also communicate with the ecommerce company’s marketing staff. After all, everyone within the business should ultimately work towards helping it to fulfil its overall mission.

Nonetheless, the company could struggle to make fruitful progress in this direction without keeping in the know about what is happening in the wider market.

For this reason, the CFO needs to stay informed about topical developments in that market — such as trends that are not only taking hold in it, but also threatening to upend certain players in it.

You don’t want those companies to include yours. However, you can’t always expect to be able to ride the wave of disruptive forces in the market if, well before they have a chance to strike your company, you fail to familiarise yourself with exactly what form those forces are taking.

They could even include competitors of your company. Thankfully, an ecommerce CFO can keep tabs on these by undertaking an ongoing process known as competitive analysis.

That way, you will be able to more easily judge how to sensibly price your products or services. While pricing these too high could risk driving more of your customers or clients into the arms of your competitors, underpricing is bound to hamper your attempts at making a profit.

Another plus point of a CFO tracking your company’s ecommerce rivals is that you might be able to pick up a fair few tips and tricks from them, given that you will all be targeting the same customers.

In essence, a CFO would assist your ecommerce firm in optimising its income as well as reining in excessive spending. In this sense, then, the CFO can help to keep the company financially healthy.

What Is A Fractional CFO?

As we have established, a CFO can tick many boxes for your ecommerce business. Ironically, though, you might not quite be able to financially stomach a full-time CFO for it — at least not while your business remains relatively small.

You would thus be left in something of a catch-22 situation — unless you can find a way to source a CFO at a lower price without compromising on the standard of the guidance they would be able to deliver.  

Fortunately, this is actually a very real possibility — as you could opt to hire a financial professional known as a fractional CFO. The ‘fractional’ part of the equation refers to the fact that the CFO can provide their services just as and when they are needed.

For your ecommerce business, then, a fractional CFO could work part-time rather than full-time hours, or even just be hired for one specific project.

Either way, your business would get the benefit of tapping into a CFO’s specialist expertise without having to pay a full-time salary for it. You could choose a fractional CFO who would actually be employed by a separate, third-party company rather than your own.

Our own, London-based business, Practical CFO, offers CFO services whereby clients can enjoy the flexibility of only utilising and paying for a CFO as and when they are genuinely needed.

A CFO that you directly employ either full-time or part-time can be referred to as an in-house, rather than fractional, CFO. However, you would still be able to trust a fractional CFO with the same types of responsibilities — such as tracking expenses, optimising cash flow, and all-round budgeting.

A fractional CFO can also — again, in common with a more conventional, in-house one — secure loans, liaise with investors, and assist the company owner in raising capital. The CFO could even advise you on how to effectively leverage accounting software and other technological solutions for the workplace.

Fractional CFO For Ecommerce

Let’s assume that you have just decided to hire a fractional CFO for your ecommerce brand. How can you expect your relationship with that CFO to develop from hereon in?

You can anticipate this CFO starting with an assessment of how far your company has come. Factors taken into account here will include how much your business has grown on a year-over-year basis, as as well as what you have spent on and earned from your advertising endeavours.

Once the CFO has gathered various figures about where your ecommerce firm currently stands, they will proceed to analyse this data in the context of what point the business should have reached by that time.

The CFO will be a strong position to carry out this analysis due to the depth of industry-relevant knowledge they will have garnered before you hired them.

For example, the CFO will be able to spot any patterns in the data that bode ill for your company’s present trajectory. Remember that this CFO will know what has and hasn’t worked for other businesses in the past, so they will also know what warning signs to watch out for.

You can also expect the CFO to keep in mind your specific goals. It would be wise for you to define these either before initially contacting the CFO or instead in consultation with them.

There should be a specific timeframe attached to each of these goals. You could aim to set certain goals for you to meet by the end of the next quarter, others by the start of the new year, and a select number within the next few years.

Whatever goals you do outline, the CFO can make sure they would be realistically achievable for your business. The CFO can also help you in identifying lead measures for your operations team to implement so that your business can stay on the right track.

Once you have got well underway with pursuing these measures, you can leave the CFO to engage in ongoing monitoring of your ecommerce firm’s performance. If they do pick up on something going wrong, you can be alerted to the issue and quickly rectify the matter before you risk going too far off course.

Benefits Of Having A CFO For Ecommerce Business

The world of ecommerce can change quickly, as evidenced during the pandemic. It can therefore prove crucial that ecommerce businesses are able to move quickly as and when necessary — as, otherwise, a given business could fail to keep pace as required with the rest of the market.

Having a CFO at close hand can make it appreciably easier for you to manage large-scale changes to your business, such as restructuring necessitated by acquisitions or mergers. When you partner with Practical CFO for your ecommerce CFO needs, you can have faith in the practical and clear methodology we will utilise for you. You can email your initial enquiry to us via insights@pcfo.co.uk – or why not call us on 0800 048 9413?

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