If you’re a business owner, you may already have some exposure to companies that provide services through an outsourced model—perhaps you’ve sought out contractual or fractional work to save on hiring costs. You may also have a good idea of the role that a CFO or other high-ranking financial executive plays in a company.
Before we dive specifically into the functions that an outsourced CFO executes, and if contracting one would be a good fit for your business, let’s first review what a typical CFO does and how the best CFO consulting firms can help your business. The Chief Financial Officer holds the top financial position within an organization and is generally tasked with managing the big-picture items, such as financial planning, analysis, and cash flow. Deloitte breaks down four primary roles that a CFO plays:
As stewards, CFOs protect the assets of the company, verify compliance with GAAP and other regulatory bodies, and close the books accurately. They are preoccupied with assessing and mitigating risks to the company.
As operators, CFOs execute tasks that keep the financial branch of the company running effectively and efficiently. They provide a variety of services, such as financial planning, analysis, reporting, budgeting, management, training, and decision-making.
As strategists, CFOs are crucial to carving out the future path that a company will take as it grows. They use financial data to make decisions that will align the company with organizational goals. They similarly aid in mergers and acquisitions, as well as analyzing and deciding on long-term investments of the company.
As catalysts, CFOs can enact timely change within the financial functions of the company. Particularly relevant in the current economic situation, CFOs help businesses adapt to changing circumstances in order to succeed. They take measures such as cost reduction, process improvement, and system upgrades to help the business maintain a dynamic position.
Essentially, the CFO oversees the financial initiatives and well-being of a company, as well as the team responsible for executing the day-to-day accounting and financial tasks. This is different from using a CPA firm to file taxes or execute an audit, as this is compliance-focused. A CFO helps companies become reliance-focused, meaning that financial data is used to make business decisions. Reliance-based accounting additionally provides insight into every department of your business, allowing you to position yourself for growth.
An outsourced CFO will fulfill the same strategic roles as described above, but will work with your company on a fractional or contractual basis as opposed to joining your team full-time. The main benefit of utilizing an outsourced CFO is saving on costs associated with full-time hires; often, small and medium-sized businesses do not have the need, nor the financial resources, to employ a full-time CFO. Contracting an interim or outsourced CFO can provide access to the same big-picture consulting for a fraction of the cost of hiring a full-time one.
For larger companies, bringing in an outsourced CFO can be a strategic move to supplement the existing accounting team in times of additional need. For example, if a company is undergoing an M&A, implementing a new system (such as an upgrading to an ERP), experiencing a significant amount of growth, or is needing to resolve a challenge, an outsourced CFO can offer additional support and a fresh perspective. The best CFO consulting firms offer a wide variety of CFOs that have specific experience with the challenges your company is facing or the objectives you want to achieve.
Just as you would with an in-house, full-time hire, it’s essential for an outsourced CFO to be a good cultural and experiential fit for your company. If you decide to hire a fractional CFO, they should be aligned with your company’s objectives and have experience both with the processes you’re focused on and within your industry. Most importantly, they should be able to provide you with financial visibility and in-depth insight that gives you the confidence to make the best decisions for your organization, such as how to profitably price your services, which areas to invest in, and what growth initiatives to implement. Leveraging an outsourced CFO can help you receive the guidance you need at a price your business can afford.