The CFO is one of the most important roles in any business. For many companies, hiring an in-house CFO can be too expensive. Fortunately, there are several solutions to this problem. One viable option is outsourcing to a 3rd party professional. Here are some things you should know before making this decision.
Who is a virtual CFO?
A virtual CFO is an external professional who provides finance management services to companies. They are usually hired on a contractual basis. The virtual CFO can help with all aspects of finance management, including cash flow management and forecasting, budgeting, accounting reviews, interpreting the financial statements, designing strategies aligned with your business objectives, and providing valuable input to the business owner about financial decisions.
Outsourcing your accounting department is a viable option for many small and medium sized businesses. The most popular reason why Businesses might outsource is because it can be too expensive to hire an in-house staff member. Hiring an in-house CFO means you have one more staff member to pay on top of any staff members they would supervise. Plus, there are additional expenses like office space, computers, furniture, etc., that come with hiring an in-house CFO.
With outsourcing your CFO to a third party, there are none of those additional costs or responsibilities for you to worry about. Your CFO will also have the benefit of being more experienced than someone just starting out as an accountant because they are not learning on the job but rather coming from a Company or Accounting Firm where they have acquired all the necessary skills and experience.
Another benefit of outsourcing your accounting department is that you can choose between either full service or limited service options. Full service outsourced accounting departments will provide you with the entire suite of service offerings by the 3rd party Accounting Firm such as bookkeeping services, tax preparation, payroll and other advisory needs; while limited service outsourced accounting departments may only provide specific services you choose for your company. This allows each company to decide what they need the most based on their specific needs and budget.
What are the Benefits of an Outsourced CFO?
An outsourced CFO can be a great solution for your business. Outsourcing to a third party can offer many benefits such as:
1. Dedicated expertise which frees up time for you to focus on the business: One of the main benefits is that you will have a dedicated CFO who will partner with you to help achieve your goals. This means that you won’t have to worry about figuring out the day-to-day financial operations of your Company and planning strategies to continuously maintain a healthy business. With an outsourced CFO, you will constantly be aware of what’s going on financially because the CFO has the responsibility of managing all of your finances and communicating the necessary information to you. This gives you more time to focus on your business as well as other personal goals which are important to you.
2. Reduced knowledge gap risk due to staff turnover: With an in-house staff, this creates a significant knowledge gap risk if the employee leaves the Company and he/she is critical to the success of your company based on the extent of knowledge about the Company’s internal operations. You will need to find another person who can take their job and hit the ground running. Additionally, there is the risk of not being a good fit for the Company, which is an inherent risk an employer has to bear with the addition of any new hire. With an outsourced arrangement, these risks are significantly reduced as you are assured of working with highly qualified person who’s primary responsibility is in sync with your goals.
3. Cost Effective: Finally, one benefit of outsourcing this role is that it’s cost effective – which makes sense considering the other benefits mentioned thus far! With this solution, you don’t need to hire someone full-time at a high salary, including health and retirement benefits; Instead, you pay monthly for the services rendered and that’s it!
4. Business advisor: Providing an unbiased assessment of the financial health of your business by interpreting the financial statement and KPIs is valuable information the business owner should have all the time. These insights will provide the business owner with meaningful and timely information, which will aid the business owner in making more informed decisions.
How to find the right CFO for your Company
When you hire an outsourced CFO, there are some things to keep in mind. You want to make sure you find the right person with the necessary experience and qualifications to support you. Effectively, he/she will be partnering with you on your entreprenueral journey and it’s important for all expectations to be very clear and adequately described in your agreement.
Exposure to your industry as well as other industries which directly or indirectly impact your Business is also important.
Also, find out what type of clients he/she has typically worked with and how long they’ve been doing this type of work. Make sure you’re comfortable with the level of experience their firm has.
According to the US Bureau of Labor Statistics, about 20% of US small businesses fail within the first year and the failure rate dramatically increases to 50% by the end of the 5th year. One of the primary reasons for failure is lack of required knowledge to properly navigate the business world, especially for business owners that are not financially savvy.
Having an experienced CPA as your strategic partner to help you navigate the business world comes with a lot of value added benefits, including setting your business up for success.
We provide CFO support services and would like to support your business goals by being your trusted advisor. We would like to give you a free 45-minute consultation to discuss how you can explore opportunities to grow your business and increase your profits.