If you have an established, successful business chances are you have someone in the critical role of Chief Financial Officer, or CFO. The responsibilities of a CFO typically include:
- Tracking cash flow
- Financial planning
- Analyzing financial strengths and weaknesses
- Ensuring financial reports are accurate and complete
- Providing decision-making support on investments, capital structure, and management of income and expenses
- Budgeting and forecasting
- Cost-benefit analysis
- Narrowing gaps between receivables and payables
- Improving your profit margins
- Business model analysis
That’s an enormous amount of responsibility, and you can see why a company’s CFO is a key player in any company’s success.
Even though the role and responsibilities are critical, many owners of smaller and medium-sized businesses simply can’t afford a full-time CFO. Often, they end up trying to take on these tasks … and many times the results are damaging to their business.
That’s where having an outsourced, virtual, or “fractional” CFO comes in.
Virtual, fractional, or outsourced CFOs step into the CFO role as a consultant, rather than a full-time employee. They can be used on a project basis, a part-time basis, or a short-term full-time basis depending on the needs of the company.
Outsourcing your CFO role allows you to get the expertise you need and provides an effective way to elevate your company to the next level – and you aren’t on the hook for costly salary and benefits package. In effect, you “rent” the financial talent you need.
IS AN OUTSOURCED CFO THE RIGHT FIT?
Not sure if you are ready for an outsourced CFO? Here are six questions to ask yourself.
- Can you justify (and afford!) the salary for a full-time CFO? Glassdoor.com shows that the average base pay for a CFO (non-public company) is $158,000 per year. That is before company benefits, ownership incentives, and bonuses that are typically offered to CFOs. If that’s not in your budget, outsourcing could be a great solution. You’ll get the expertise you need and won’t have to pay benefits or commit to a large salary. You’ll only pay for the time you need, at the time you need it.
- Do you need top-tier talent for financial support every day? If the answer is “no”, why pay for a full-time CFO? When you outsource, you pay only for the work you need.
- Are you in the middle of a search for a full-time CFO? If you are looking for a full-time CFO but haven’t found the right team member yet, outsourcing can be an excellent way to plug the gap. You’ll have the luxury of not settling for your next CFO. And that outsourced CFO may be very helpful in transitioning your new CFO once you find the right fit.
- Do you fear hiring the wrong person? Since the CFO is such an important role in the company, you want to find the right fit for the organization. One of the great things about outsourcing your CFO is the freedom from long-term commitment or employee agreements.
- Is improved profitability of interest to you? An outsourced CFO will help improve the profitability and overall financial health of your business. Having an expert, outsider’s perspective on your business model, pricing, expenses, and financial practices will almost always reveal opportunity for improvement.
- Are you sleeping well at night? If you are tossing and turning with anxiety about the financial oversight in your business, your gut is voting “yes” on outsourcing your CFO services!
MANY BENEFITS; FEW RISKS
From the list at the beginning of the article you may have a better idea of the responsibilities a CFO can handle in your business.
There are other benefits as well! The right outsourced CFO can save you money, as mentioned above. He or she can also save you time. Time that you don’t have to spend to accomplish all these tasks – and time you can gain by having someone help you make focused, data-driven decisions.
You should also consider the “third party” benefit of an outsourced CFO. That person brings an outside perspective that could be extraordinarily helpful. As they don’t have “a horse in the race”, as the saying goes, they are often less influenced by the politics and personalities within an organization and can therefore offer a different point of view when identifying issues and making recommendations. A proactive CFO can provide ROI (return on investment) from the first day with valuable insight, clarity, and advice.
READY FOR TO HIRE YOUR VIRTUAL, FRACTIONAL, OR OUTSOURCED CEO?
Congratulations! You’re taking an important step in the growth of your business.
I’ve put together a guide to help you ask the questions that will help you identify the best fit for your company’s CFO needs. Many of these questions are ones that I am regularly asked when companies are interviewing me to act as their outsourced CFO.