SMG CFO Scorecard Playbook

🎯 Entity Setup

🧩 Subcomponents & Activities

• Choose and file the right legal entity structure — whether that’s an LLC, S-Corp, C-Corp, or LP — based on your goals around taxes, ownership, liability, and fundraising.
• Register the business in one or more states, with Delaware often selected for its business-friendly laws and investor preference.
• Obtain an Employer Identification Number (EIN), open business bank accounts, and fully separate personal and business finances to maintain clean records.
• Design a custom chart of accounts that mirrors your actual business model instead of relying on off-the-shelf templates.
• Select your accounting method — cash, accrual, or hybrid — based on your industry, reporting needs, and tax implications.
• Clearly define the equity split between founders, document any vesting terms, and build a clean cap table from day one.
• Draft and execute operating agreements or bylaws that define how decisions are made and what happens if a founder exits.
• Create financial policies that set expectations around expenses, approvals, AP/AR workflows, and spending authority.
• Set up your core finance tech stack — including accounting software (like QuickBooks or NetSuite), payroll systems, bill pay tools, and cloud storage.
• Register for all required tax IDs — including state, local, franchise, sales tax, and payroll — and complete your Beneficial Ownership Information filing if required.
• If you're operating multiple entities, create a parent-subsidiary structure with proper intercompany tracking and financial reporting protocols.

⚠️ Common Issues

• Businesses often select the wrong entity type, leading to tax inefficiencies, legal complications, or friction with future investors.
• Founders commingle personal and business finances, which creates audit headaches and tax exposure down the line.
• The chart of accounts is either generic or poorly structured, making it impossible to analyze margins or track different revenue streams.
• There’s no clean cap table or founder agreement, which leads to confusion and conflict when equity questions arise.
• Financial systems are disconnected — for example, accounting software doesn’t link with bill pay or payroll — leading to messy data and duplicate entry.

✅ What SMG Can Do

• We advise clients on the optimal legal structure by coordinating with their legal and tax advisors to ensure alignment with long-term goals.
• We redesign the chart of accounts to reflect your actual revenue streams, departments, and cost centers, laying the foundation for better reporting.
• We implement accrual-based logic and revenue recognition where it’s needed to ensure GAAP compliance and operational accuracy.
• We set up the finance infrastructure from scratch — including folders, documentation standards, approval workflows, and integrated tech systems.
• We connect your bank accounts, credit cards, accounts payable, and payroll systems to ensure clean data flows across platforms.
• We help clarify ownership structures, establish vesting schedules, and build cap tables that can scale with your business.

🎯 Bookkeeping & Month-End Close

🧩 Subcomponents & Activities

• Transaction Entry: Code transactions accurately to the chart of accounts (COA).
• Account Reconciliation: Reconcile bank, credit cards, loans, payroll clearing.
• AP/AR Recording: Track payables and receivables properly, even on a cash-basis tax method.
• Payroll Entry: Post gross pay, employer taxes, benefits, and allocate between overhead and project costs.
• Fixed Asset Tracking: Capitalize qualifying purchases, track with depreciation schedules and subledgers.
• CapEx vs. Repairs Policy: Apply consistent rules to distinguish capital expenditures from repairs.
• Prepaid & Accrual Entries: Allocate costs over time and accrue liabilities like bonuses and invoices.
• Construction Accruals: Estimate using percent completion, draw logs, and vendor delivery data.
• Close Checklist & Cutoffs: Enforce a timeline, invoice cutoffs, and reversing entries.
• Variance Review: Analyze swings against budget and prior month to explain the "why."
• Documentation Standards: Retain support for key transactions — especially capital expenditures and legal matters.

⚠️ Common Issues

• Books are never formally closed — continuous transactions distort performance tracking.
• Misclassifications (e.g., meals in COGS, CapEx expensed) skew reporting.
• Missed or delayed reconciliations cause errors and drift from reality.
• No accruals or invoice cutoffs; expenses fall in the wrong periods.
• Finance teams must guess accruals without operational input.

✅ What SMG Can Do

• Build and enforce a monthly close checklist to create a reliable financial rhythm.
• Train teams on proper account classification with rules and examples.
• Automate journal entries for prepaids, accruals, depreciation, etc.
• Set and manage cutoff calendars to ensure vendor timing is correct.
• Implement document storage and standards to be always audit-ready.

🎯 Financial Reporting

🧩 Subcomponents & Activities

• Ensure each transaction is coded correctly to the COA: COGS, OpEx, assets, liabilities.
• Reconcile major accounts — bank, credit cards, loans, payroll clearing, intercompany balances — to maintain accuracy.
• Record AP and AR even on cash-basis tax setups so you can track inflows and outflows clearly.
• Break down payroll to include gross pay, taxes, benefits, and correct cost allocations.
• Capitalize large asset purchases and maintain depreciation tracking through subledgers.
• Apply policies consistently to distinguish CapEx vs. regular maintenance and repairs.
• Amortize prepaid expenses properly and accrue anticipated expenses like bonuses and invoices.
• For long-term projects or construction, estimate accruals based on % complete or draw schedules.
• Use a formal close checklist, cutoff calendar, and reversing entries to keep clean month-end transitions.
• Perform monthly variance analysis across actuals, budget, and prior months — find the “why.”
• Retain documentation for major entries — capital purchases, settlements, and high-value activity.

⚠️ Common Issues

• No consistent reporting cadence — teams struggle with scattered data or skipped reports.
• P&Ls are either overly summarized or way too granular for practical use.
• Budgets and KPIs are missing or not included in reporting views.
• Trend analysis is skipped; teams don’t spot shifts in margin, CAC, or labor percent early enough.
• Reporting arrives too late or varies in format — leading to confusion, lack of trust, and slow decisions.

✅ What SMG Can Do

• Redesign P&L and Balance Sheet layouts for clarity, insights, and better strategic use.
• Automate recurring KPI dashboards and integrate them into reports.
• Embed variance commentary into monthly reporting to explain results and flag actions.
• Set up T+5 or T+10 reporting cadences and train teams to hit deadlines reliably.
• Tailor reporting formats to stakeholders: CEO dashboards, board decks, or ops-level breakdowns.

🎯 Budgeting & Forecasting

🧩 Subcomponents & Activities

• Build a detailed annual operating budget from the ground up — one that reflects the company’s real goals, cost structure, and growth drivers.
• Implement a rolling forecast process that refreshes projections monthly or quarterly based on actual results and updated assumptions.
• Use scenario planning to model what happens in upside, downside, or stress-test situations — so you’re never caught off guard.
• Develop a long-term financial plan (typically 3–5 years) that aligns with your strategic roadmap, funding needs, and eventual exit goals.
• Model revenue using clear, logical drivers — whether it’s price × volume, bookings × retention, or locations × sales per unit.
• Tie your cost structure to real operational inputs — for example, headcount drives payroll, marketing spend drives CAC, and volume drives COGS.
• Make department leaders accountable for their portion of the budget and establish a review cadence to track performance against plan.
• Choose planning tools that fit your business — from spreadsheets (Excel, Google Sheets) to more robust FP&A platforms like Jirav, Mosaic, or Float.

⚠️ Common Issues

• Many businesses don’t create a budget at all, or they build a static plan once a year and never look at it again.
• Forecasts aren’t refreshed regularly, so surprises emerge — and leadership is left reacting instead of planning.
• Budgets are disconnected from actual strategy — they don’t reflect how the business really grows or what it’s aiming to achieve.
• Spreadsheet chaos reigns — with multiple versions, unclear logic, and broken formulas making collaboration nearly impossible.
• Stakeholders don’t buy in because they weren’t involved in the process and don’t feel accountable for results.

✅ What SMG Can Do

• We help you build dynamic rolling forecasts that are updated in real-time with actual performance and new assumptions.
• We align the budgeting process to your strategic goals, so every dollar spent supports your broader plan.
• We lead scenario planning workshops that prepare your team to navigate growth, downturns, and unexpected events.
• We implement collaborative planning tools that enable version control, stakeholder input, and scalable analysis.
• We embed your budget vs. actual comparisons directly into monthly reporting — turning your plan into a living tool, not a forgotten spreadsheet.

🎯 KPI & Performance Management

🧩 Subcomponents & Activities

• Choose key performance indicators (KPIs) that actually matter — blending financial metrics like gross margin % with operational ones like labor efficiency or on-time delivery.
• Define each KPI with standardized formulas and clear data sources so every team measures success the same way.
• Combine leading indicators (that predict what’s coming) with lagging indicators (that reflect what just happened) to get a full picture of performance.
• Create weekly or monthly scorecards that summarize core KPIs for individual teams, departments, and the company as a whole.
• Build real-time dashboards using BI tools (like Power BI or Looker) or spreadsheets (like Google Sheets or Excel) to visualize performance at a glance.
• Set performance thresholds for each KPI — for example, green if above 65%, yellow between 50–65%, and red if below 50% — to trigger action.
• Establish a recurring rhythm for reviewing KPIs with owners — whether it's weekly team meetings or monthly leadership reviews.
• Assign each KPI to an individual or team, and tie performance outcomes to incentives, bonus plans, or accountability frameworks.

⚠️ Common Issues

• KPIs are undefined or inconsistently calculated, with different teams reporting different numbers for the same metric.
• Vanity metrics are tracked simply because they look good — not because they drive real decisions or behavior change.
• Teams see performance data, but without defined thresholds, they don’t know whether results are good, bad, or neutral.
• Review cycles are sporadic or nonexistent — dashboards exist, but nobody uses them to manage the business.
• The focus is entirely on lagging indicators, offering no visibility into what’s coming or what needs to change.
• KPIs aren’t connected to roles, compensation, or performance expectations — so they don’t drive action or accountability.

✅ What SMG Can Do

• We facilitate KPI selection workshops with your leadership team to identify the right metrics that drive growth and efficiency.
• We build a company-wide KPI dictionary and create automated scorecards that update in real-time.
• We establish a regular KPI review process and assign ownership so that every metric has a name attached to it.
• We help identify and implement leading indicators to give teams early warning signs — not just rear-view mirror reporting.
• We tie KPIs directly into your planning, budgeting, and incentive structures so performance is measured and rewarded consistently.

🎯 Cash Flow & Working Capital

🧩 Subcomponents & Activities

• Build and maintain a rolling 13-week cash flow forecast that tracks projected inflows and outflows across categories like collections, payroll, rent, and debt payments.
• Monitor liquidity on a daily or weekly basis to ensure you always know your available cash and can respond quickly to potential shortfalls.
• Set up disciplined accounts receivable processes — invoice clients promptly, follow up consistently, and escalate overdue balances before they age out.
• Develop a smart accounts payable strategy that manages vendor payments for optimal timing while maintaining strong relationships.
• Plan for payroll and related taxes in advance, even if the cash outflow occurs after the accrual period — especially for bonuses, commissions, and benefits.
• Track working capital metrics like Days Sales Outstanding (DSO), Days Payable Outstanding (DPO), and inventory turnover to keep operations efficient and cash flowing.
• Produce accurate cash flow reports using either the direct or indirect method to compare actual cash activity against forecasts.
• Optimize cash by sweeping idle balances into interest-bearing or reserve accounts — or reallocating toward high-return investments.
• Monitor debt covenants closely, with alerts and tracking dashboards, to avoid accidental breaches and maintain access to credit facilities.

⚠️ Common Issues

• Many businesses don’t have a formal cash forecast and instead manage by checking the bank account — leaving them exposed to shortfalls.
• Accounts receivable collection is slow or inconsistent, causing cash to get stuck in aging invoices.
• Invoices are paid too early without a defined vendor strategy, which strains liquidity unnecessarily.
• Without proper forecasting, companies are often surprised by large outflows like tax payments, bonuses, or debt service.
• Covenant breaches occur unexpectedly because no one is actively monitoring financial ratios or thresholds tied to loans.

✅ What SMG Can Do

• We build detailed 13-week cash models that are easy to update, customize, and use for decision-making.
• We embed cash flow visibility into your weekly operations reviews so the business stays ahead of liquidity risks.
• We implement structured AR and AP workflows — including invoicing, follow-ups, payment calendars, and approval routing.
• We build covenant dashboards that automatically flag potential issues and help you stay in compliance with your lending agreements.
• We help renegotiate vendor terms, improve inventory management, and unlock working capital that’s trapped in inefficient processes.

🎯 Finance Team & Roles

🧩 Subcomponents & Activities

• Define a clear finance org chart that lays out roles from bookkeeper to controller to CFO — so responsibilities are structured to scale with your business.
• Decide what should be handled in-house versus outsourced — including fractional CFOs, CPAs, or bookkeeping partners — and create the right mix for cost, control, and expertise.
• Align finance headcount to business volume and complexity — ensuring the team has enough bandwidth to keep up with growth, reporting deadlines, and strategic needs.
• Evaluate whether your team has the technical and strategic skills required — not every bookkeeper can act as a controller, and not every controller can own FP&A.
• Assign clear ownership for each financial process and deliverable — no more floating responsibilities or “everyone kind of does it” chaos.
• Identify capability gaps and recruit proactively — whether you need a controller to take over from the founder or an FP&A lead to own forecasting.
• Provide regular training and cross-training to upskill your team and build bench strength — especially in fast-growing companies.
• Document key finance workflows through SOPs and playbooks — so knowledge doesn’t live in someone’s head and every process can scale.
• Ensure system access and workflows match team responsibilities — like having the right people managing approvals, dashboards, or reconciliations.

⚠️ Common Issues

• Many businesses don’t have a clear finance org chart — everyone’s involved, but no one is fully accountable.
• Teams are often underqualified for their roles, with bookkeepers expected to handle controller-level work or strategy falling through the cracks.
• As the business scales, finance tasks pile up — causing bottlenecks in AP, reporting, payroll, or close cycles.
• Over-reliance on outsourced vendors creates accountability gaps — and founders can’t get clear answers when they need them.
• Core financial processes aren’t documented — which leads to inconsistent results and poor knowledge transfer.
• Finance and operations teams are disconnected — resulting in reporting that doesn’t reflect what’s actually happening in the business.

✅ What SMG Can Do

• We design a right-sized finance org chart tailored to your current stage and future growth — outlining when to hire, outsource, or restructure.
• We identify skill mismatches and recommend the right hires or partners to fill technical and strategic gaps.
• We provide interim finance support — including fractional controllers or analysts — to help your team catch up or stabilize.
• We build SOPs for core processes like month-end close, AP, payroll, and budgeting — bringing structure and repeatability to the team.
• We establish recurring check-ins between finance and operations leaders to ensure alignment, accuracy, and shared accountability.

🎯 Strategic Finance & Analysis

🧩 Subcomponents & Activities

• Analyze unit economics by customer, product, or project to understand where profit is created — and where it’s leaking.
• Develop a pricing strategy that models the impact of price changes on volume, revenue, margins, and customer retention.
• Build what-if scenarios that simulate the outcomes of hiring decisions, price shifts, geographic expansion, or operational changes.
• Structure owner compensation thoughtfully — modeling trade-offs between salary, distributions, and taxes to optimize both pay and compliance.
• Forecast staffing needs based on operational volume, revenue targets, or throughput — so you hire proactively, not reactively.
• Identify fixed versus variable cost drivers and run cost optimization analyses to preserve margins without cutting critical capability.
• Make capital allocation decisions based on return on investment — deciding where to invest, when, and what payoff to expect.
• Evaluate strategic initiatives — like opening a new location, launching a product, or entering a new market — with data-driven projections.
• Refine your business model to uncover scalability limits, cost breakpoints, and margin inflection points.
• Integrate strategic modeling into the financial planning cycle so long-term decisions flow into budgets, forecasts, and hiring plans.

⚠️ Common Issues

• Leadership often makes critical decisions based on instinct instead of data — skipping modeling entirely.
• Pricing is set arbitrarily without understanding the financial impact on margins, retention, or growth.
• Businesses lack tools to run trade-off scenarios, so they miss the full impact of choices like hiring, expansion, or investment.
• Owner compensation is unclear or ad hoc, resulting in surprise tax bills or inefficient pay structures.
• Without a view into unit economics, companies treat all revenue as equal — and fail to prioritize the most profitable segments.

✅ What SMG Can Do

• We build driver-based margin models that clarify customer, product, and project profitability.
• We run pricing sensitivity scenarios that show exactly how pricing changes affect volume, margin, and revenue.
• We embed ROI and payback period frameworks into every major decision so capital is allocated with confidence.
• We create compensation and tax planning models that align owner pay with tax efficiency and long-term strategy.
• We integrate strategic finance directly into your planning cycle — ensuring your decisions are backed by data, not just instinct.

🎯 Capital Strategy & Treasury

🧩 Subcomponents & Activities

• Create a capital structure plan that defines the ideal mix of debt and equity based on your company’s risk profile, stage, and growth plans.
• Manage debt financing through tools like lines of credit, term loans, equipment loans, or real estate financing — with a proactive borrowing strategy.
• Prepare for equity financing rounds by modeling dilution, setting valuations, and aligning the use of funds with long-term strategy.
• Keep a clean, up-to-date cap table that tracks founder ownership, investor stakes, option pools, and vesting schedules — no surprises allowed.
• Build clear sources and uses models that show exactly how new capital will be deployed and what return it’s expected to drive.
• Design a fundraising strategy that includes pitch decks, financial models, data rooms, and a timing plan to raise on your terms, not in desperation.
• Communicate regularly with investors via update emails, board decks, or quarterly reporting — keeping them informed and engaged.
• Build strong banking relationships and actively manage covenants to avoid breaches and negotiate favorable terms.
• Monitor financial covenants with dashboards and alerts — tracking metrics like minimum liquidity, debt coverage, and reporting deadlines.
• Plan for investor and founder returns through distribution models, dividend policies, exit planning, or recapitalization strategies.

⚠️ Common Issues

• Most companies don’t think about capital strategy until they’re out of cash — which leads to rushed decisions and poor terms.
• Cap tables are often outdated or messy, making it hard to assess ownership, dilution, or vesting schedules.
• Debt strategies are reactive — either under-leveraged and missing growth opportunities, or over-leveraged and stressed on cash.
• Fundraising happens too late or too fast, resulting in high dilution and lower valuations.
• Financial covenants are tracked manually or not at all — leading to missed breaches and strained banking relationships.
• Investor communication is sporadic or nonexistent, which erodes trust and creates unnecessary tension.

✅ What SMG Can Do

• We model the optimal debt-to-equity mix for your business and future plans — factoring in risk, cost of capital, and flexibility.
• We help clean up and maintain a clear cap table with full transparency on ownership, vesting, and options.
• We build investor-ready fundraising decks, models, and data rooms — and help you prep for Q&A and due diligence.
• We forecast cash flow, model covenant stress tests, and help you stay ahead of any liquidity crunch or lender requirements.
• We create a cadence of investor communication that builds confidence — through regular updates, clean reports, and proactive insights.

🎯 Compliance & Risk

🧩 Subcomponents & Activities

• Ensure financials are prepared in alignment with GAAP or IFRS standards, depending on your industry, scale, and investor expectations.
• File all federal, state, and local taxes accurately and on time — including income, sales/use, payroll, and franchise tax returns.
• Stay compliant with payroll regulations by properly classifying employees vs. contractors and remitting taxes and benefits on schedule.
• Analyze your sales tax exposure across states and determine where economic nexus applies — especially important for SaaS, e-comm, and multi-state operators.
• Maintain all required regulatory filings, including state entity reports, annual renewals, and Beneficial Ownership Information (BOI) disclosures.
• Implement strong internal controls, including approval workflows and segregation of duties, to prevent fraud, error, and compliance gaps.
• Set up structured documentation practices — including folder systems, naming conventions, and retention policies — so every transaction is traceable.
• Be audit-ready at all times by maintaining an organized data room with reconciliations, support docs, and policy documentation.
• Carry appropriate insurance coverage — including Directors & Officers (D&O), general liability, cyber liability, and other relevant policies — and review them regularly.
• Keep proper board governance by documenting major decisions with board minutes, resolutions, and approval logs.
• Actively monitor business risks and create contingency plans to address financial, legal, and operational exposures before they become crises.

⚠️ Common Issues

• Tax filings are missed or delayed, resulting in penalties, interest charges, and IRS or state notices.
• There’s no audit trail — businesses struggle to support their financial entries when challenged by auditors or buyers.
• Sales tax liabilities emerge unexpectedly due to untracked multi-state activity or mismanaged economic nexus.
• One person handles both transaction entry and approvals — violating basic internal control principles.
• Key insurance policies like cyber, D&O, or E&O are missing, outdated, or underfunded — leaving the business exposed.
• Founders are stuck managing compliance tasks themselves, which is inefficient and risky as the business grows.
• When it's time for an audit or investor due diligence, financial records aren’t organized or accessible.

✅ What SMG Can Do

• We coordinate with your CPA to ensure all required tax filings are accurate, timely, and optimized for your business structure.
• We implement standardized folder structures, naming conventions, and document retention policies to create a clean audit trail.
• We build compliance calendars and checklists to track filing deadlines, renewals, and regulatory requirements across states.
• We recommend and enforce internal controls that reduce risk — including approval workflows and segregation of duties.
• We conduct sales tax nexus analyses and help configure software tools (like Avalara or TaxJar) to automate compliance.
• We partner with your broker or counsel to review insurance coverage annually and close any exposure gaps.
• We organize and maintain a digital data room so your business is always ready for an audit, financing, or sale — with no fire drills.