How Can Your Business Use an Outsourced CFO?

Posted by Shivali Anand

Most businesses launch with a small team of employees— for some, the staff may comprise just the owners or founders— as they are just starting out and must be very careful about costs. New businesses typically avoid recruiting additional employees and try to do all the required tasks that running a business entails by themselves, which almost inevitably leads to an unmanageable workload. But outsourced financial services are available to assist businesses to accomplish more with the limited resources they do have and help businesses return their focus to their core activities by freeing up their time.

In today’s global economy, companies commonly outsource many functions, such as payroll, accounting, marketing and IT. However, some business owners are not yet aware they can also outsource their company's finance functions. Outsourced chief financial officer services confer small companies with access to seasoned financial experts with a broad scale of experience and a commitment to keeping up with best practices. The CFO outsourcing service gives company owners the ability to access a skilled finance professional on demand, rather than hiring a full-time, in-house person to fill the role. 

By profession, an outsourced CFO is a finance expert who offers high-level, strategic services on a part-time basis or on a project basis, for example working on systems design and analysis as well as operational optimization. An outsourced CFO also assists with challenges such as raising capital, correcting cash-flow issues, implementing more proficient systems, resolving tight margins and preparing the company for expansion. A primary reason that many business choose to use outsourced CFO services is the significant experience in high-level corporate financial roles they can bring to the role, as most have served in the position at both private and public firms, and at different stages of development and in multiple sectors.

Duties and responsibilities of a CFO

A CFO is first and foremost responsible for a company’s financial services, including managing its assets, creating external and internal financial reports and monitoring cash management. Frequently, the CFO is also charged with managing growth and incorporating strategy and business partnerships accordingly. But the core obligations of a CFO center around planning, implementing, administering and managing all the financial activities of a firm; for example, the CFO is charged with business planning, budgeting, forecasting and agreements. The role also extends to managing investor relations and monitoring partnership compliance. Dealing with employees, both senior and junior, as part of an executive management team is an inherent aspect of the role as well. 

What functions should you expect from a CFO?

  • Guiding, leading and managing the finance and accounting teams.
  • Providing strategic guidance to the CEO, president and executive team members.
  • Managing the processes for budgets and financial forecasting, and supervising the preparation of all financial reporting.
  • Advising on long-term financial and business planning.
  • Establishing relationships with senior management, stakeholders and external partners.
  • Reviewing all formal HR, finance and IT-related systems

The unique role of the CFO

A CFO has an all-inclusive overview of an organization’s financial administration and performance as well as a significant amount of responsibility for the overall business plan and performance. As leaders, they are responsible for growing the business’ revenue streams. They are uniquely tasked with coming up with innovative funding and capital-increasing strategies as well as preparing risk-control plans to encourage expansion, modernization or progress. CFOs must be technologically capable and ready to incorporate a tech strategy into the business. The role entails working closely with the CEO to influence business plans and in many cases, the CFO is among the corporate board members.

How do you become a CFO?

The CFO post is occupied by a highly experienced professional with a proven track record. They typically hold advanced educational credentials, such as that of a chartered financial analyst or CFA, as well as a master’s degree in finance. Many CFOs have extensive backgrounds in fields such as investment banking, accounting or corporate finance. Most CFOs have expertise covering disciplines such as financial analysis and planning, treasury and controllership. In the public’s perception, the CFO is often considered to be the most highly paid and prestigious designation within a company. 

To become a CFO, an individual usually sharpens their skills via on-the-job training before climbing the ranks to the senior position within the company, or they may be employed with a finance and accounting company before jumping into the CFO profession. A well-versed CFO not only knows the company’s numbers from top to bottom, but also understands its products, operations, services, vendors, customers, employees and shareholders.

Generally speaking, the roadmap to the C-suite for CFOs comprises fives steps:

  1. Obtaining extensive financial experience.

CFOs need a strong grasp of the fundamentals of finance, budgeting, risk management, analysis, compliance and accounting principles. It is their responsibility to make sure that the CEO and board's decisions are financially safe and meet regulatory compliance and standards. Possessing substantial financial experience ensures you to be more suitable to make these judgments. 

  1. Developing operational and business expertise.

Obtaining broad knowledge of their business is crucial for those on the CFO professional track. CFOs regularly meet and collaborate with managers and the board of directors, as well as the CEO. This requires a comprehensive understanding of the corresponding industry as well as the operational facets of the individual business.

The insight and guidance of an experienced mentor can be helpful at this step, along with job shadowing and cross-training. Assuming a leadership position at an industry association or nonprofit can also offer valuable practice for prospective CFOs, offering exposure to a range of business processes and challenges.

  1. Strengthening the customer-service mindset

CFOs must maintain connections with people at all levels of the business, both in-house and outside. On the career path to becoming a CFO, therefore, prospects must enhance their presentation and communication skills and make themselves team builders. Upon reaching the position, a CFO is accountable to board members regarding the company's financial status and will also be required to speak with investors and stakeholders. The CFO role essentially serves as a bridge between company executives and the board. 

  1. Expanding tech knowledge

Aside from more number-crunching in the cloud, the CFO’s responsibilities increasingly depend on software, cybersecurity, data analytics, and other fintech developments. That means part of the CFO’s career path is understanding the advantages and uncertainties associated with such technology. Though they may not be specialists in the tech domain, aspiring CFOs must get familiar with data interpretation  and reviews.

  1. Obtaining CPA and/or MBA qualification

Though CFOs come from diverse backgrounds, several certifications and high-level degrees form the typical path to reaching the position. A certified public account is usually well-suited for the CFO position, given the breadth of their training, including compliance and forensic accounting. An MBA degree, which increased a candidate’s operations and business knowledge, is often beneficial in combination with CPA licensure. 

Modern CFOs bring fresh perspective to the role

Traditionally, CFOs had three main responsibilities: keeping the books, ensuring statutory compliance and financial reporting. However, today’s CFO’s role is fundamentally distinct from that of the past in that they now drive the course and progress of the companies for which they work.  

A modern CFO strives to add new expertise to the traditionally more confining position, using sophisticated financial analyses to assist with and stimulate decision-making, as well as engaging in the business’ growth strategy. A CFO needs to be a noticeable leader in the business, an influencer, and an outstanding communicator to lead the company’s planning and administrative responsibilities.

What does a good CFO look like?

Apart from the essential professional training and qualifications, a CFO should have leadership, communication and influencing skills. A wealth of experience across different finance disciplines and industries is integral, as a good CFO is expected to engage in building the strategic plans to move a business ahead. They typically gain a reputation for efficient leadership not only within their department but across the entire company. 

As CFO, the individual must understand how their company functions, including its business and operations design, to not only deliver numbers but also to interpret and clarify the reasons behind the figures. 

Beyond being nearly universally well-educated, good CFOs share these traits:

  • Strategic thinking. 
  • Concentrated on operations.
  • Comprehensive knowledge of the business and industry.
  • Acumen into what shapes the company’s numbers.
  • Instinctive leadership skills and the ability to motivate others.
  • Mastery of effective communication.
  • Capable of identifying, explaining possibilities.
  • Approach opportunity with attention mitigating uncertainties.
  • Strong integrity and morals.

How CFO outsourcing services help small businesses and startups

Undoubtedly, CFOs perform a significant role in their company’s progress. The position is continually unfolding into one that represents an even bigger purpose for companies than in previous decades. Since small businesses and startups often have a capital crunch, they increasingly turn to outsourcing CFO services to leverage financial expertise from a seasoned professional. While most small businesses don’t have a CFO, many could nevertheless benefit enormously from an outsourcing service that offers such expertise at a reasonable price. 

Outsourced CFOs offer significant experience in high-level corporate financial positions. They’ve often worked as CFOs for a variety of companies at numerous stages of growth and in varied industries. Hiring an outsourced CFO is not only less costly than recruiting a full-time, onsite CFO, but also the employer also doesn’t need to provide benefits, can set the number of hours required, and the value or hourly rate is often negotiable. In addition to freeing up a small business owner’s time, the outsourced CFO can serve as a trial run of how a full-time engaged CFO might contribute to the organization.

When engaging an outsourced CFO as a startup or a small business founder, be sure to have a confidentiality clause in place. Also, it’s best to find someone with ample experience in the intended field. And note that although the term outsourced could mean a business or person in your proximity, the view taken in this post is that the position can also mean virtual CFO services.

Just like an on-staff CFO, the outsourced CFO can maintain bookkeeping and controlling to offer reliable data and evaluate results, presenting insights to direct the company toward its objectives. The outcome is that you, the business owner, know exactly when, where and how to allocate your team’s resources and notify stakeholders.

A CFO, whether onsite or outsourced, can be a much-needed sounding board, mentor or leader. Look for an experienced professional whom you like and trust, not merely someone to fill a position. In the end, you will have a valuable team member who knows your company and can assist you to reach clearly defined goals.

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