December 24, 2020

Should My Business Outsource CFO Services?

A chief financial officer (CFO) plays an essential role in giant corporations. The CFO leads the finance and accounting teams and works to create financial reports that reflect the organization’s past, present, and future financial health as accurately as possible. The company’s top management and its stakeholders rely on the information they produce to make critical decisions. 

Looking at your startup, you may not yet be at the level of hiring professionals to make these decisions for you. If you’re still handling most of your enterprise’s operations yourself, you may not feel the need to have a CFO. However, in some businesses, you will need a CFO regardless of your outfit’s size.

As a business owner, you shouldn’t have to worry about the expense of hiring a CFO. One realistic option is to outsource. 

What is a CFO?

A CFO is a top-level executive in a corporation, reporting only to the chief executive officer (CEO). They play a crucial role in determining a business’s strategic direction, not just by providing executives with financial statements and projections. A CFO is involved in seeking revenue-generating avenues through which your business can grow financially. They also serve to monitor and limit expenditures, however possible. 

An organization’s CFO makes investment decisions to help their business realize the best returns. 

In addition to the above, your CFO may oversee day-to-day accounting, ensuring recordkeeping is an accurate reflection of daily operations. As a result, they can ensure that the periodic reports issued to top management are always favorable. 

CFO Services

  • Track cash flow: Your CFO should keep accurate records of your business’s finances, tracking expenditures and income, including revenue from sales, money borrowed as loans, and returns on investments made by your company. 
  • Financial planning: A CFO is central to the economic strategy of a company. They play a vital role in determining where the organization wants to be in the short and long-term and devising strategies to achieve those goals. Your CFO will be in charge of developing periodic budgets and seeing that they are adhered to as closely as possible.
  • Create Financial Reports: You may not require your CFO to sit down and complete your organization’s balance sheets, but you can expect them to institute a system to get them done. They should vet the accuracy of financial reports produced by the accounting team.
  • Oversee Tax Issues: Ensuring your company is tax-compliant on local, state, and federal levels is in the purview of the CFO. These higher entities need to see that the company complies with financial fraud prevention legislation. 

Pros of Outsourcing CFO

You don’t have to hire an on-staff CFO to enjoy the services they offer. You can simply outsource a CFO as the need arises. Here are some reasons you should go in this direction:

  • No Need to Hire Additional Staff: Hiring additional staff means more remittances regarding a payroll tax. You also have to ensure that you keep up with all the required statutory deductions on their behalf. 
  • Gain Access to More Expertise: An outsourced CFO will grant you their expertise from working with other companies and explain how other organizations handle their cashflows, financial reporting, and financial planning. With this knowledge, you can make improvements to your current practices.
  • Have an Outsider’s Opinion: An in-house CFO may be so accustomed to doing things a certain way that they may not be willing to change or even be aware of a more efficient way of doing things. Bringing in an outsider opens your business to new perspectives that can improve it. 

Cons of Outsourcing CFO Services

  • Unfamiliarity with Your Business’s Structure: Since they will not be familiar with how you do things, it will take time for the new CFO to effectively learn your structure and fulfill their role within your company.
  • Less Flexibility and Control Over the Position: With an outsider, you will have less control over how they conduct their business. However, this is only a potential issue if you don’t trust the CFO in question. 

If you’re outsourcing CFO services from an experienced, reputable firm, you can be confident that they will quickly come to grips with your structure and how you conduct your business. 

Tips on Working with Outsourced CFOs

  • Be Open to New Ideas- Outsourced CFOs will come with new, more efficient ways of handling finances based on their experience with other businesses in your industry. It’s best to grant them the freedom to implement their ideas.
  • Explain Your Expectations Clearly- Outline your expectations clearly, both verbally and in the contract with your outsourced CFO.
  • Discuss How the CFO can Best Help You- Come up with focus points when working with an outsourced CFO so they can focus their expertise on your business needs.
  • Be Transparent About Your Financial Situation- Lay all your cards on the table so that your CFO will know how best to assist your business.
  • Give Them Access to Financial Documents- Your CFO will be at their most efficient when you give them access to any of your financial records they require. 

Investing in Your Financial Health

Bringing an outsourced CFO on board should not merely be viewed as an added expenditure. Outsourcing a CFO is, in fact, a wise investment in the financial health of your business. They will help get your financial reporting up to scratch, aligned with acceptable standards, and they will help you spot areas for potential growth. 

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