A chief financial officer is consulted when a company wants to better understand its financial status. And if you own or run a small business, you already know the value that a CFO could bring to the table. As an integral part of most large companies, they manage and control all of the accounting and financial reporting requirements and strategize to maximize profits. However, not every company is ready to hire a full-time CFO, so they may choose to outsource the role.
By outsourcing the crucial services of a CFO, your company gains access to a skilled outsider's perspective as well as a fresh set of tools. An outsourced CFO can provide valuable insights to help your company grow in strength and financial security without incurring the same expense as hiring a full-time CFO. It is also less costly than recruiting a full-time employee with similar experience. You’ll likely never get the kind of financial input you need to take your company forward if your financial records are retained exclusively for tax compliance, which is all most small businesses tend to have the bandwidth for. To attain that level of expertise, you'll need a finance team with industry knowledge to mine your financial data, analyze the competition and assess market conditions that will help you get out of the muck and into the growth curve.
So, how do you decide which type of outsourced CFO services your company can benefit from? Well, an outsourced CFO's position shifts depending on the organization's current requirements, problems and objectives. This distinguished the CFO from certified public accountants and controllers, whose essential duties typically comprise bookkeeping, tax administration and record-keeping.
Small- to mid-sized businesses are increasingly discovering that contracting out for CFO services, rather than trying to hire an in-house individual to oversee their financial team, allows them to transition into growth mode.
If you are not sure what a CFO service is or whether you need one, you may be burning a lot of cash and not necessarily outsmarting the competition. However, consider the advantages of outsourced CFO services that could turn this all around.
What can a CFO essentially do for your business?
No matter how big or small a company is, a CFO is a valuable asset. The person who holds this position is responsible for reporting and evaluating financial data in order to monitor and manage your company's growth. The CFO’s specific scope of work will depend on your company's needs. To summarize, the CFO is in charge of assisting a company in achieving strategic financial goals as well as overseeing operational accounting.
Every company can benefit from the services of a professional who can regulate and manage a company's finances. It can include institutional job functions like:
- Cash flow management and forecasting.
- Accounting reviews.
- Capital acquisition.
- Maximizing profits.
- Improving growth.
- Oversee projections.
- Developing a scalable model.
- Design strategies aligned with corporate objectives.
An experienced and qualified CFO is always on top of the latest financial regulations and tax laws to operate in full compliance. However, not every business can afford to hire a full-time CFO. Typical reasons include a lack of capital, staffing constraints and time restraints, but an outsourced CFO is a cost-effective and convenient solution.
Why should you hire an outsourced CFO?
There are numerous benefits of hiring an outsourced CFO service. Every company may have its own set of reasons. You have to evaluate your own business’ financial requirements to see if you really need to take this route. From there, make a shortlist and compare the various service providers. The best pick is the one who covers all your needs within your desired budget. Outsourcing lets you access the services you need on a much smaller scale versus a full-time CFO.
Outsourced CFO services are an excellent fit for profits for the reasons listed below:
Hiring an outsourced CFO is a more cost-effective choice for many firms as the cost involved is much less than hiring a traditional CFO, who is likely to be one of your company's highest-paid personnel. It is an excellent alternative if your company is growing, or is a small firm, as the money you save can be used toward expanding your company. An outsourcing firm will provide you with highly competent CFO services, and you only pay for the time that the person is actually working.
But for an in-house CFO, there will be costs in addition to their salary, such as a recruitment fee, benefits, payroll taxes, payment for the thirteenth month, insurance, bonuses, mandatory retirement account contributions, severance payouts, office space and a variety of other costs. And when the main purpose of having a CFO is to protect your funds, it makes little sense to pay more when the same work can be done for a fraction of the cost.
Outsourced CFO services can help you get quick results. Their experience helps them know where to begin and how to provide results than thinking about when to get started. It is easier for you to collaborate with your CFO to guarantee that your business objectives are met at a rapid pace. Also, if you create a clear overview of your company goals and objectives, the CFO can help your company in meeting its financial objectives in a short period of time, so that you can concentrate on other aspects of the business.
Outsourced CFOs can help you save money because the service costs less than hiring a similar position in-house. They are unaffected by your company's success and capable of making strategic decisions at a much faster rate. With their experience and skills, they are less likely to struggle with challenging, cost-cutting decisions. They are familiar with other leaders in the business and can compare your costs to theirs, as well as provide you with well-researched and well-defined objectives to enhance operations.
Helps raise funds
Raising capital is one of the most common reasons for hiring an outsourced CFO. It is a difficult and time-consuming process, but a CFO who is outsourced has prior experience in the field. They have connections with financial backers and may be able to introduce you to funding possibilities that you would not have discovered on your own. From researching and analyzing your financial situation, creating business strategies, to assisting with negotiations, an outsourced CFO will ensure that you are prepared for raising funds and help you to do so.
Provides objective insights
Providing your company with clear, objective financials is the core job function of an outsourced CFO. They are completely unbiased toward the decisions they make and honest about company finances, which is valuable to you and your company. They will have no qualms about reporting on issues that need to be addressed and not hesitate to offer solutions. An in-house CFO's perspective may be hampered by personal ties without the freedom to express an unfavorable viewpoint. The relationships that exist among workers in an office might make it difficult to examine problems objectively and lead to avoidance of addressing them.
Outsourced CFOs have years of financial experience that create unique financial expertise to help you meet your company goals and deliver the best results. When you hire an outsourced CFO, you can expect high-quality services as many of these professionals have worked across several industries and different sectors, such as corporate, public and nonprofit. Outsourcing firms will provide you with the ideal CFO based on your company's requirements and objectives so that you don’t have to compromise on quality. Outsourcing ensures that even large projects receive the attention they need, while the more routine tasks don’t get neglected.
Offers interim CFO services
Outsourcing interim CFO services might help you keep your firm running while you look for a new CFO. It is the best alternative if your company has restructured or hasn't employed an in-house CFO. Outsourced CFO is a low-cost option that will ensure that the business flow is not disrupted, and operations are uninterrupted until you appoint a new CFO for your company.
Most common outsourced CFO services
Outsourced CFO firms provide businesses with on-demand, part-time or short-term CFO services. They are tasked with elevating a business's financial strategy by introducing advanced projections, tackling a financial crisis such as cash flow concerns, helping a firm through an audit, raising capital and guiding companies through an IPO.
Below is a list of outsourced CFO services that businesses can leverage:
- Overall financial strategy
The most significant advantage a CFO will provide to your company is a more sophisticated financial strategy. While most other finance professionals in your company are concerned with keeping past and current financial records, a CFO is concerned with your company's specific short- and long-term plans. An outsourced CFO is skilled at long-term planning and determining exactly what is required to scale your business.
If financial workload is disrupting your day-to-day work schedule, you could boost your work potential by hiring an outsourced CFO. The CFO will ease your workload and assist you in finding new ways to do more. Outsourced CFOs can offer more than standard outsourced accounting, bookkeeping and finance. They give value-added financial analyses based on industry experience and knowledge. Other services include strategic planning, succession planning, financial modeling, financial forecasting, raising capital and restructuring, financial plans, financial strategy and financial reporting, implementing financial systems, retirement plans and risk management.
An outsourced CFO will also have access to a wide range of external resources, which means you can gain access to a level of experience, expertise and understanding that an in-house CFO might not be able to deliver on their own.
For most businesses, raising capital is stressful and time-consuming. An outsourced CFO can help ease the process through their network of financiers. They will ensure your present accounting and financials are conducive to favorable dialogues with possible investors or lenders, provide financial reports, statements and documents for due diligence, and assist in capital structure — how much financing you need and what combination of debt and equity is best for your business.
- Short- and long-term forecasting
One of the most significant tools a company may have is a financial projection. It's a precise financial and operational plan that shows how to get from where you are now to where you want to be. A financial forecast needs research, planning, execution and a strategic awareness of your company's existing and future competencies, command over financial systems and trends, and in-depth knowledge of your industry's competitive landscape.
A budget, unlike a forecast, sets out your future financials in detail. A forecast is often a five- or 10-year prediction of costs and activities. Despite the fact that this is a shorter time period than the strategic forecast, a budget is critical to an organization's daily operations. It directs the company’s financial decisions for the year while ensuring the company meets its objectives. To make sure that your financial performance aligns with your company's goals, CFOs use the forecast as a rolling budget.
One of the most prevalent difficulties that businesses encounter is cash flow. Solving cash flow problems entails more than increasing revenue; it necessitates an awareness of where and how much you are spending, as well as determining which expenses are necessary for your company's growth and which can be cut or altered. An outsourced CFO helps you to increase your company’s bottom line through restructuring client contracts, analyzing commission structures, renegotiating vendor contracts, ensuring pricing is aligned with company and market trends, supply chain management and attributing costs to revenues.
- Enabling mergers and acquisitions
If you are planning a merger, acquisition or partial public company or asset sale, CFO outsourcing services can help. These services usually include forecasting, initial analysis and reporting, financial function stabilization, relevant paperwork preparation and advising key staff during the sales process.