Outsourcing CFO services can provide entrepreneurs with the opportunity to work with a finance and accounting expert (CFO) with advanced accounting degrees and experience. The CFO can help you overcome several impediments to your business growth and handle various financial operations accurately and efficiently. Thus, you can access high-end knowledge and expertise at just a fraction of the cost of hiring a full-time CFO. Here we’ve detailed how outsourcing CFO services can help entrepreneurs grow their businesses and how they can evaluate whether a company is a right choice.
Advantages of Outsourcing CFO Services
Outsourcing CFO services can have many benefits, from improving financial stability to implementing strategies and bringing credibility to a business. Here are a few more advantages that every entrepreneur can access by outsourcing CFO services.
Save Time and Money
With outsourced CFO services, you can free up your time to drive product development and sales, leaving financial matters to the experts. An outsourced CFO allows entrepreneurs to save their time by managing the processes they were handling internally, including processing payroll, paying bills, budgeting and handling financial paperwork.
Tackle Financial Challenges
Outsourcing CFO services can help you prepare action plans during times of financial crisis or economic uncertainty. Most outsourced CFOs work across many different companies and industries with unique challenges. They have also experience in solving financial problems, such as inability to raise capital, high business overhead, poor cash flow and high client churn. Therefore, they can serve as long-term strategic advisors for your business and help you navigate many financial challenges.
Improve Business Processes
With outsourced CFO services, you can bring the best practices to the functional areas of your business. Outsourced CFOs can improve your current business processes, including the month-end reporting timelines, credit and collections processes, client onboarding, reducing lead time to revenue and increasing lead generation. They can also streamline and automate your administrative and financial operations to improve their efficiency.
Get the Books in Order
By outsourcing CFO services, you can keep your accounting records accurate, in order and up-to-date, thus avoiding tax and banking errors. This can help you in the future when you’ll expand or add a new division into your current accounting system.
Strategic Capital Allocation
An outsourced CFO can ensure that you deploy your limited cash resources effectively and in-line with the company's strategic objectives. By outsourcing CFO services, you can manage your expenditures on workforce and technologies and monitor the factors that affect success.
What Businesses Gain from Outsourcing CFO Services
Without prior knowledge of a CFO’s role and responsibilities, it might be difficult for business owners to understand how outsourcing CFO services can help them grow. Therefore, here we’ve listed some of the top CFO services you can get by outsourcing.
An outsourced CFO can forecast your business’ cash flow, strategize the best ways to use the funds, and make adjustments as things change. By outsourcing CFO services, you can ensure that you have sufficient resources to meet your future business goals and best utilize the opportunities.
Tax Planning and Compliance Adherence
CFOs are trusted advisors who help businesses maintain compliance with the latest rules and regulations. Your outsourced CFO will be in charge of preserving compliance with government policies for your business during every transaction and funding round. They can also guide you during tax planning and building the most cost-efficient tax structure.
Generating Data-Driven Insights
With outsourced CFO services, you can ensure the quality of your financial and operational data drawn from various sources. An outsourced CFO can interpret the business data to generate the data-driven insights that entrepreneurs need for making informed decisions.
Find New Funding Sources
An outsourced CFO can prepare financial reports of your business to pitch to investors or raise funds. They can also convince potential investors, lenders or vendors about the reliability of these reports. By outsourcing your CFO services, you can find the best financing match for your business to fulfill your needs.
Forge New Relationships
If you are expanding into new geographies, products or services, outsourcing CFO services can help you build and maintain new relationships with investors, lenders, vendors and customers. Further, you can also benefit from the outsourced CFOs network, knowledge and experience to grow your business connections.
When a startup decides to go public or merge with another firm, an outsourced CFO can develop and implement strategies to deal with rough financial periods and sudden growth to ensure a smooth transition. Your outsourced CFO can help you perform the following financial planning functions:
- Find methods to obtain funds
- Conduct market research and analysis
- Draft a sales and marketing plan
- Set up an accounting and financial management system
- Create a reliable business budget
A highly skilled CFO can bring experience and insight to help senior management members predict the potential risks and build a risk management plan to mitigate them in advance. An outsourced CFO can assess, manage and organize processes to avoid procurement or operational risks, such as late payments, misplaced inventory or misuse of corporate assets.
Business reports are essential tools that can help entrepreneurs in their everyday decision-making processes. An outsourced CFO can prepare custom reports, profit and loss statements, cash flow statements and balance sheets to help you make the right decision. With accurate and thorough financial reporting, you can keep track of your company’s progress against implemented business strategies.
Strategize Short- and Long-Term Goals
An outsourced CFO can analyze your business parameters, such as revenue growth rate, debt to equity rate and lifetime value of a customer, to set your goals. They can also map out a plan to help you achieve and measure your short- and long-term goals, such as international expansion and acquisition.
Strengthen the Skill Set of Internal Team
With outsourced CFO services, you can enhance the skill set of your internal accounting and finance teams. This helps your team manage a wide range of special projects, including pricing analysis, ROI evaluation and entity restructuring.
Provide Business Analytics
The more data-driven your startup is, the more likely it is that you will foresee opportunities and anticipate errors in advance. An outsourced CFO can review your business data to determine its operational efficiency and help you improve team productivity. With in-depth financial analysis, you can plan and implement the next steps for your company effectively.
Fulfill Audit Requirements
Outsourcing CFO services can provide a business with benefits when an investor requires an audit from a third party. Since the CFO is not working full time at your company and doesn’t have an emotional connection with your staff members, investors have more confidence that the reports are unbiased.
Build a Scalable Infrastructure
A CFO can set up an infrastructure and even implement different processes to prevent future issues and support the business as it grows. Outsourcing CFO services can help you create a scalable financial system from payment processing and payroll to cost analysis projections to meet changing business’ demands.
Develop a Sales Strategy
Outsourcing CFO services can help you formulate pricing policies based on the competitive conditions and market environment. An effective sales compensation strategy can motivate the sales team to hit targets aligned with the company's interests. Your outsourced CFO can regularly review your sales compensation policy and ensure its effectiveness concerning sales quotas, commission rates and performance incentives.
Improve Cash Flow
Your outsourced CFO can help you determine where you can cut costs. The CFO can also streamline processes and develop strategies to improve your cash flow. They can prepare complete cash flow statements that include long-term assets, net income, liabilities and stockholder equity for your reference.
An outsourced CFO can analyze your balance sheets to guide you on budgeting, investments, hiring plans and overall financial management. They can also analyze your business data to make the following financial projections.
- Your company performance over the next months and years
- Sales or income across all key verticals
- How your expenses will grow
- Number of salespeople required to meet revenue targets
An outsourced CFO can advise business owners on how to negotiate for more profitable contracts. They can also identify potential risks and assess whether the contract terms are in your best interests.
Prepare for Mergers and Acquisitions
An outsourced CFO can help you prepare a business plan for mergers or acquisitions. A CFO can advise your company on whether to proceed with a deal or not. They can also help you make necessary changes in corporate structure and take other actions to make the transition smoother.
How to Evaluate and Choose the Right Company
Before you outsource your CFO services, you must determine your goals that you want your outsourced CFO to meet. Following are the things that every entrepreneur should consider to find the best outsourcing company for their business:
What You Want to Accomplish
You must define the end goal of hiring an outsourced CFO before finding an outsourcing company. Mapping out your expectations from the outsourced CFO will help you make a better decision on who to hire. Prepare a list of the tasks and responsibilities you want your CFO to perform, and set parameters to measure the success of their efforts.
You should check references, speak to the CFO’s existing clients and get testimonials from its other partners before signing any contracts. You must ensure that the outsourced CFO and their team members have all appropriate certifications and licenses and are up to date on all laws and compliance issues. You must also confirm that there will be a fixed point of contact (POC) for all your queries.
Entrepreneurs outsourcing their CFO services should consider the company with relevant experience in their industry that has handled businesses similar to theirs. An outsourced CFO with relevant expertise and experience will be accustomed to how things work in your industry, including workflows, laws, regulations and requirements.
Companies should consider clients’ expectations and needs before outsourcing their CFO services. The outsourced CFO should be highly professional and trustworthy. Before you sign the contract, make sure you have a clear picture of the timeline of events and the specific deliverables to expect from your outsourced CFO.
An outsourced CFO who is part of a financial services providing company may offer better service continuity that is less dependent on individuals. They will also have a team of experts who can work on your issues. Ask potential companies about their practices of handling the unique financial complexities of a business. Also, refer to the customer reviews or case studies available online to check their work history.
Some CFOs charge a flat fee per project, while others charge on an hourly basis. Ensure that you discuss all terms and conditions while outsourcing a CFO to avoid any hidden costs at the end. Also, ensure that your outsourced CFO has the time and attention to dedicate to your company.