Is An Outsourced CFO the Right Choice for Your Business?

By Yair Segev

Your small business is at a crossroads. You’re ready to scale, but you aren’t sure what your numbers are telling you about the right route that will lead to growth, and you aren’t in a position to hire a full-time chief financial officer to forge the path. One very modern – and very effective – solution is to bring on an outsourced CFO.

The concept of a virtual CFO is a somewhat new phenomenon, but the benefits that these experts can bring to small- and medium-sized businesses are essential to growth. Escalon sat down with Denai Wolfe, a virtual CFO who operates The Chic CFO, to get the scoop on what an outsourced CFO can do for a company, and how to find the right one for you.

A CFO On-Hand When You Need Them

In essence, a typical chief financial officer runs the entire finance department of a company. “Whereas some small businesses may think of the CFO as filling a tax compliance role, the reality is that a CFO uses the business’ numbers in a way that helps move the needle for the company. They’re looking at your information from a totally different perspective than how an accountant would look at it,” Wolfe says.

A CFO reviews the company’s numbers and aims to determine what operational story those numbers are telling, and how that data can help drive growth and efficiency. “In a typical business structure, that expertise comes at a very high price tag, since the average CFO in America is making a minimum of $151,075 — so that’s restricted to a much bigger company,” Wolfe says. “A startup needs that guidance, particularly if they’re getting investors, and they need a way to utilize the data to make operational improvements. They crave the services of a CFO, who’s diving into these numbers on a regular basis and actually using the data but they can’t afford it. So the virtual CFO comes in at a fraction of the cost.”

Outsourced Nature Builds Trust

In many situations, the fact that the CFO is outsourced is a big benefit to the business. For instance, suppose an investor requires an audit of a startup – it’s often preferred that the audit comes from a third party – a role that the virtual CFO can fill. “Since I’m not working at the business on a day-to-day basis, they know there’s no bias coming in with these numbers,” Wolfe says.

The remote situation is also helpful because an outsourced CFO doesn’t have an emotional connection with staff members or particular departments. If the numbers say that an employee is dragging down a company’s profits, the outsourced CFO will be very honest that the person has to go, whereas an employee might feel an emotional reason to keep the staffer on board. “My clients know that the only number I really care about is the profit, and I’m working to get them there,” Wolfe said.

Here’s How to Partner With A Virtual CFO

Most small businesses are ready for a virtual CFO if they’re at about $750,000, Wolfe says. “ At that level or higher, the business really needs someone in this role to analyze the numbers and then to take that data to make improvements and suggestions.”

When you start looking for an outsourced CFO for your business, you want to make sure the fit feels right. “Usually as the CFO, I’m dealing with the business’ founder, and the company is their baby, and it’s very personal. As the CFO I’m going to see and know everything, so you want to make sure the personality is the right fit. The CFO will be immersed in everything, so the trust factor is huge.”

In addition, the CFO should be able to outline everything they’ll do for you. Will you report face-to-face every month, or will you get together over Zoom on a weekly basis? In addition, the CFO should be prepared to create custom reports, not just profit and loss statements. The reports should show industry-specific KPIs and benchmarks and should be delivered in a way that works for the business owner.

As with any other working relationship, you should check references, speak to the CFO’s existing clients and get testimonials from its other partners before signing any contracts.

And no matter what, make sure you and the CFO are on the same page about your goals. “I start every relationship with my client asking where we are and where we want to be, and it’s my job to look at the numbers week after week to make sure we’re on the right track to meet those goals,” Wolfe adds.