The Benefits of Outsourcing a CFO

Startup owners are brilliant at identifying the need for a product or service. But when talking about their finances, most find themselves in a difficult position. In the beginning, a large number of entrepreneurs rely on themselves or their family/friends for financial assistance. But eventually, the financial statements get exceedingly complex and they need help with their accounts. What can the business owners do when they reach this point?

The answer is simple — hires a full-time chief financial officer (CFO) or outsources their CFO services to a company that specializes in this area.

However, the cost of finding, interviewing and recruiting a full-time, in-house CFO can be unnerving, especially for a small- or medium-sized business owner. According to salary.com, the average salary for a full-time CFO in the U.S. is $385,412 (as of October 28, 2020), depending on such important factors as education, certifications, additional skills and the number of years spent in the profession.

With an outsourced CFO, business owners can leverage the knowledge of a full-time CFO without taking on the cost of having the person on staff. The benefits that an outsourced CFO can bring to small- and medium-sized businesses are essential to growth. But without prior knowledge of a CFO’s role and responsibilities, it can be difficult for business owners to understand how an outsourced CFO can help them grow. Therefore, here are 10 benefits of outsourcing CFO services that can help entrepreneurs grow.

1. Significant Cost Savings: An outsourced CFO provides small- and medium-sized businesses with expert financial advice, beyond what accountants or bookkeepers can provide, at a much lower cost. By outsourcing, businesses also save on infrastructure costs, employment taxes and other overhead costs.

2. Cash Flow Management: A CFO will run an analysis of the expenses and profit statements, and can plan strategies to deal with any financial roadblocks. They also identify areas and implement strategies to free up cash and improve the company’s overall performance.

3. Strategy and Planning: An effective CFO can help businesses create a strategy and business forecasts and plans. They focus on current performance needs, long-term strategic planning and guidance, and provide customized solutions specifically designed to take the companies to the next level.

4. Growth and Exit Strategies: An outsourced CFO can help prepare all required documents, including business plans and forecasts, in order to raise capital for growth, or prepare the organization for sale. This expertise can help the company achieve a substantial premium on a sale or better investment/lending terms.

5. Financial Planning: When a company decides to go public or merge with another firm, the outsourced CFO can develop and execute strategies to deal with rough financial periods and/or sudden growth to ensure a smooth transition. An outsourced CFO can help perform such financial planning functions as setting company goals, conducting market research and analysis, drafting sales and marketing plans, setting up accounting and financial management systems, finding ways to obtain startup funding and so on.

6. Accurate and Timely Financial Information: The outsourced CFO ensures that the business they are looking after is receiving error-free and timely financial information. The financial statements and other important financial documents are reviewed by an expert, so business owners can be sure that the information provided is accurate.

7. Fraud Prevention: According to the Association of Certified Fraud Examiner’s study from 2012, the most common victims of fraud are small businesses that employ fewer than 100 employees, and the median fraud amounts to an astounding $147,000. This is because most small businesses don’t have access to a controller or CFO who could spot abnormal activity in the transactional and billing data. However, an outsourced CFO can keep track of all transactions and reports and ensure increased internal controls.

8. Review Customer Contracts: An outsourced CFO can advise business owners on how to negotiate highly profitable contracts. They can also identify potential risks that could end up costing them money and assess whether the contract terms are in their best interests.

9. Process Improvement: CFOs can improve several business processes, including the month-end reporting timelines, credit and collections processes, client onboarding, reducing lead time to revenue and increasing lead generation. Outsourcing your CFO services can help business owners analyze and update their marketing strategies to maximize the ROI of their expenses. With an outsourced CFO, they also have time on hand that can be better utilized to drive innovation and product development, leaving financial matters to the experts.

10. Specialized Restructuring Advice: If a business is going through a major change, such as redirecting its trajectory or restructuring for growth, the required CFO functions may have to be highly specialized, instead of generic. In such situations, the company can benefit from bringing in an outsourced CFO who can focus on specialized tasks.