A CFO is well-versed in budgeting, forecasting, financial reporting and monitoring expenditures and costs. Startups can leverage their experience and insights to help them scale effectively. Outsourced CFOs can solve financial problems that require expertise in financial modeling, accounting and business strategy, but without joining your startup as a corporate officer.
An outsourced CFO works on a contract basis to help startup CEOs identify and measure the goals of their organization. Outsourced CFOs can handle various financial operations of multiple companies on a part-time basis to grow their businesses. Services may include operational optimizations within your company, raising capital, resolving cash flow issues and implementing more efficient processes and systems.
This article details how outsourcing CFO services can help grow an entrepreneur’s business, the advantages of hiring an outsourced CFO for small- and medium-sized businesses, the key functions an outsourced CFO can offer and an estimate of how much their services may cost.
How Outsourcing CFO Services Can Help Entrepreneurs
An outsourced CFO can perform the following tasks efficiently and accurately:
- Pinpoint problem areas in your strategy and help alter your course if needed.
- Offer strategic insights into product performance and customer demographics.
- Define key performance indicators to track business goals.
- Identify the products and services that can earn the most money.
- Illustrate successful marketing and distribution channels and strategies.
- Keep you up to date with industry trends and compliant with regulatory changes.
- Guide pricing decisions that improve sales and profits.
- Predict risks and plan mitigating actions.
- Help implement new technologies to improve employees’ performance.
- Identify opportunities to invest, raise funds and minimize expenses.
- Prepare accurate financial statements and reports to help you make informed decisions.
- Analyze income and expenses to improve cash flow.
- Build and maintain new relationships with investors, lenders, vendors and customers.
- Prepare action plans for times of financial crisis to speed up response time.
- Avoid tax and banking errors by maintaining accurate accounting records.
- Strategize short- and long-term goals..
- Strengthen the skills of internal accounting and finance team members.
- Assist in planning and implementing next steps for the company.
- Plan the business’ future based on financial projections and adjust accordingly over time.
- Forecast business cash flow and strategize the best ways to use funds.
Advantages of Hiring an Outsourced CFO
Founders can enjoy strong financial health by utilizing outsourced CFO services and expertise for their startups while saving money versus paying a traditional, on-staff CFO. The benefits that an outsourced CFO can bring to small- and medium-sized businesses are essential for growth, such as:
Saving time and money
The cost of finding, interviewing and recruiting a full-time, in-house CFO is high, especially for a small- or medium-sized business owner. With an outsourced CFO, you can leverage the knowledge of a full-time CFO at a reduced cost. As your business grows, you can scale up the partial CFO’s involvement with the business as needed. An outsourced CFO also allows entrepreneurs to save time by providing the financial oversight of processes they were previously handling internally.
Tackling financial challenges
An outsourced CFO can help set things straight when a business is struggling financially. They can help resolve challenges such as raising capital, reducing business overhead expenses, correcting cash flow, minimizing client churn and debt management. Outsourced CFOs are accustomed to and highly skilled at assisting entrepreneurs to improve the financial well-being of their company.
An outsourced CFO will prepare the necessary financial reports and projections to pitch your business to investors. They can also identify the best financing match for your business to fulfill your specific needs. Outsourced CFOs work with lenders, vendors and investors to provide the correct financial information. Due to their experience and expertise, outsourced CFOs know what attracts investors and ensure that your financial reports are presented accordingly.
Improving process efficiency
An outsourced CFO typically streamlines and automates administrative and financial operations to improve efficiency. They also bring best practices to the various business functional areas and incorporate internal checks for current processes. The partial CFO will also analyze and update marketing strategies to maximize the ROI of your marketing expenses.
Functions Offered by an Outsourced CFO
Startups grow faster with the guidance of an expert who understands their financial goals and helps map out a plan to achieve them. An outsourced CFO often plays a critical role in establishing core financial processes and creating a path for growth. Here are some of the top functions of an outsourced CFO for smaller and startup businesses.
An outsourced CFO keeps various accounting and reporting systems in place to ensure business owners make the right decisions, such as
- Providing a 360-degree view of accounting data that lets the CFO view real-time procurement, invoicing and cash flow simultaneously.
- Systems for financial oversight and audit tracking, and ensuring accounting data is accurate.
- Enterprise-resource planning reports to ensure compliance and remediate issues.
Financial planning and forecasts
CFOs create financial forecasts by capturing your business’ cash flow data and analyzing customer payment patterns. Outsourcing CFO services ensures you have sufficient resources to meet business goals and capitalize on opportunities. When a startup decides to go public or merge with or acquire another firm, the CFO will implement strategies to deal with rough financial periods and sudden growth to position for a smooth transition.
An outsourced CFO helps prepare cash flow statements that include long-term assets, net income, liabilities and stockholder equity. And through regular assessment of these statements, the partial CFO develops strategies to improve cash flow. The CFO may also attend business meetings with investors and lenders to raise capital.
Bringing an outsourced CFO onboard provides a quickly evolving business with continued resources as its needs change with growth. The CFO can support the scaling of your business by:
- Performing financial forecasts and risk assessments.
- Ensuring your infrastructure is ready.
- Helping obtain financing or raising funds.
- Building the most cost-efficient tax structure.
- Applying for multistate registrations, if applicable.
Make data-driven decisions
A CFO can oversee data from accounting systems, consumer behaviour and much more to track how the company is doing and identify actionable insights. This means you can leverage the expertise of an outsourced CFO for your day-to-day business decisions.
An outsourced CFO can anticipate risk factors, set up an infrastructure and build a risk management plan to prevent future issues. They can also identify risks that could end up costing the company money. The outsourced CFO prepares action plans during times of financial crisis, such as overwhelming debt or shifts in the economy, helping business owners to respond faster.
Provide financial reporting and analytics
Startups need a CFO’s guidance to analyze their financial data with accuracy and speed to make operational improvements. In addition, they can help startups establish a budget by providing monthly management reporting, KPI reporting, tax reporting and investor reporting. Services typically also include financial analyses and reporting that identify your company’s KPIs.
Formulate and execute strategy
An outsourced CFO can analyze your financial records to create a viable strategy to help achieve and measure your business goals. They can also assist you in long-term planning, scenario analysis, international expansion, acquisition decisions and many other higher-level decisions that leverage their expertise.
Allocating company funds based on how the business works, showcasing its value proposition to clients, identifying cost drivers and analyzing the competitive landscape are all areas in which the outsourced CFO’s experience can help your company grow. They can also help you spend wisely to achieve sustainable growth.
Cost for an Outsourced CFO
Outsourcing CFO services can be a financially viable option for startups looking for expert guidance in a cost-efficient arrangement. Their charges will vary based on factors such as their education, certifications, additional skills and number of years spent in the profession.
With an outsourced CFO, high-end expertise is attainable at a fraction of the cost of an in-house CFO. They typically work remotely and charge either on a per-project or an hourly basis. While most CFO service providers will create a custom quote based on your specific needs, the estimate ranges from $1,200 - $2,000 per month or around $16,547 - $27,578 on an annual basis.