What is an Outsourced CFO?
A traditional CFO (Chief Financial Officer) is responsible for managing the financial activities, risks, and planning for an entire organization. This includes analyzing the company’s financial strengths and weaknesses(check out what is SWOT analysis), following cash flow, ensuring that financial reports are accurate, and suggesting plans for improvement or correction.
Nowadays, countless companies realize they need an experienced CFO but employing one full-time is not financially realistic. This is especially true for start-ups and small or medium-sized businesses. And that is where outsourced CFO comes into play.
An outsourced CFO will fulfill that same strategic role – but instead of joining your company as a corporate officer, they will work with you part-time, on a contract basis. Most outsourced CFO services (sometimes also called fractional CFO or virtual CFO services) are available at hourly or subscription rates.
Outsourced CFO have considerable experience in high-level corporate finance roles. They have often worked as CFOs for various public and private companies at many stages of growth and in multiple industries. Thanks to that, you can find the best-outsourced CFO for your particular business.
When should I outsource my CFO services?
A question often asked by start-ups and other small firms is when to hire a CFO. Every company is different, but generally, the answer is: if you are not thinking about going public in the next one to two years, consider working with an outsourced CFO.
There is no substitute for having knowledgeable and experienced finance professionals to help guide business decisions, especially at start-ups whose founders usually do not have a finance background themselves.
First of all, an outsourced CFO saves you money and time, both being significant factors while starting your own business. Paying for a certain number of hours with a fractional CFO allows you to get the benefits of working with an experienced finance leader at a much lower cost than hiring a full-time CFO. Thanks to that, you can use services that you usually would not be able to afford. What is more, many early-stage companies only need a CFO for a few tasks, such as expertise for specific activities like forecasting, budgeting, or fundraising. At this point, hiring a traditional CFO would be overkill.
Advantages of outsourced CFO services:
- Affordable internal growth – virtual CFO services let your company get high-level expertise and growth strategies at a lower cost.
- Greater flexibility – start-ups move fast, and what you need now could be irrelevant tomorrow. Having an outsourced CFO allows you to adjust to changes in your company.
- Unbiased advice – an outsourced CFO can take a fresh look at your numbers and evaluate them objectively. And since fractional CFOs usually work with several clients in their area of expertise, they can also apply insights to your business derived from a broader range of experience.
To sum up, hiring an the best outsourced CFO is a great option when you do not want to trouble yourself with reporting, compliance, budget forecasts, taxes, and cash flow. You may not have sufficient knowledge for this, or you may not have enough time for running everything at your company. Instead, you can focus on your strengths, knowing that the financial direction of your business is clear and focused.