In today’s economy, it is very common to see businesses outsource many operations such as accounting, marketing, payroll, IT, and more. What many business owners fail to realize is that they can also outsource the functions of their financials. This is referred to as CFO outsourcing, which gives companies the expertise they need without having to make a full-time commitment.
Overview
Outsourced CFOs are financial experts that are hired or contracted from outside of the organization. They can provide services in areas such as finance, accounting, and other daily operations within the business. Outsourced CFOs can be hired full-time, but they are typically hired on an interim/part-time basis, or for the duration of a specific business project.
Why Outsource a CFO?
Outsourcing CFO services can prove to be effective for all businesses from just startups to large private equity firms, and everything in between. There are several situations a company may find itself in where outsourcing a CFO is the best solution. To see if an outsourced CFO may be able to benefit your business, we’re listing some of their use cases below:
- Start-Ups
- There are several things a start-up company needs to address when their sales start to blast off. Keeping up with demand, finding space for expansion, and finding employees are all top priorities for a new business owner. At such an early and explosive stage, many start-ups do not have time to focus on other things of grave importance such as budgeting, forecasting, and analyzing the financial state of the business. An outsourced CFO can come in and help any new business owner address those situations.
- Small Business Owners
- An advantage of small business owners is their ability to fully understand the needs of their customers. While this is great because it can lead to better customer service, it may also cause the business owner to be less focused on the financial state of the business allowing them to better satisfy customers. Outsourced CFOs can help small business owners make decisions based on financial data and previously experienced results, rather than just instinct.
- Expanding Businesses
- Suppose a business owner manages to raise capital and needs to provide updates to the investors. These updates include customer acquisition costs, profit margins, and other key performance indicators that need to be revealed. Outsourced CFOs can compile all of that information to ensure the expansion of the business runs smoothly.
- Replacements
- Turnover is something that every type of company experiences at some point throughout the business’ lifecycle. If a key financial player decides to leave the team, finding someone in-house that can take on their responsibilities can be a daunting task. If an Outsourced CFO were hired in this situation, they can ensure the correct financial statements are being prepared.
- Tapping Business Potential
- In any sort of economic environment, businesses at some point will undoubtedly find themselves struggling to tap their full potential, and at some points, may even struggle to keep the business afloat. Outsourcing a CFO to act as a third party is proven to be an effective strategy. Not only will this help the business owner identify areas that are deficient, but will also point out areas where action is required for growth.
Outsourced CFO Service Offerings
- Monthly Engagement based on Business Needs
- Going over business processes
- Reviewing financial health
- Maintaining and optimizing the businesses budget
- Negotiation and review of contracts
- Provide consultations on how to improve sales efficiency, employee retention, and employee benchmarking
- Forecasting and Budgeting
- Experts who will analyze the business and construct a forecast based on:
- Income
- Employee expenses
- Operating Costs
- Experts who will analyze the business and construct a forecast based on:
- Strategies on How to Increase Business Funds
- Market Analysis
- Construction of an overall fundraising approach
- Hold Mock-Lead Sessions
- Tax & Bookkeeping Experts
- Tax Preparation on all levels
- Tax Preparers dedicated to your business
- Streamlined process to ensure maximum efficiency
Cash Flow
In many cases, a business owner will be able to tell something is wrong by looking at the cash flow of the company. There are countless amounts of times that the financials of the business will say that the business is making money, but as the business owner, you know this not to be true because sometimes the business does not have enough money to pay expenses. This could be a trigger for the business owner to outsource a CFO to do an in-depth analysis of how things are currently operating, and identify areas that need to operate differently.
Board Members & Shareholders
It is very common for Venture Capital backed companies to be required to report financials and other forms of financial information to a team of board members. Likewise, publicly traded companies commonly hold shares calls to report on every financial aspect of the business to the shareholders of the company. Going into these meetings lacking information or providing incorrect information is bad for everyone involved in the business because it can potentially mislead board members or even worse mislead shareholders. A lot is expected out of a CEO for any business, whether VC-backed, publicly traded, or a small business. Having someone by their side to interpret financial data or provide further data they did not have previously is very valuable.
Financial Committee
Having a financial committee within a business indicates that there is not a single individual responsible for compiling the necessary financial information. Just like outsourcing other work, outsourcing a CFO could be a big relief for CEOs with other things to focus on. CFOs have all the tools needed for financial forecasting, pointing out opportunities for growth, and more. This is because of their commitment to financial proficiency and the best practices of finance.
How is This Valuable
There are many scenarios where a business offers multiple different services and products. As a business owner, it can be extremely difficult to obtain the financial information that is needed to correctly allocate business funds. An outsourced CFO can provide the appropriate metrics to determine what areas of the business are struggling, and gameplan how that area in the business can be improved.
It makes perfect sense for business owners to arm themselves with all of the necessary financial information to make their business profitable. There’s a difference between obtaining financial information and interpreting financial information. Outsourcing a CFO to act as the interpreter of your business’s financial information can open new doorways you may not have had access to before.
The decisions that business owners must make every day are not optimal unless they are armed with all of the accurate financial information needed. When decisions are made in a business that is based on incorrect financial information, it can cause a ripple throughout the entire company, affecting costs, margins, cash flows, inventory, and much more. CFOs are known for organizing this information and analyzing all of it to make sure the business owner is not receiving insufficient or inaccurate information from their financial department.
Wrap Up
Regardless of the industry, the product sold, or the service provided there is a financial side to every single business. By outsourcing the work associated with this portion of the business’ workload, strategic and financial reports will be completed by the most qualified experts in their field. This ultimately leads to a more successful business since the owner’s hands become untied from having to deal with the things that the outsourced CFO will take care of, and allows them to focus on what makes their business so special in the first place.