What Is a CFO Who Is Outsourced?

When to hire a CFO is a question we get from companies very frequently. Although every business is unique, for many of our startup clients the advice is the same. If you aren’t planning to go public in the next two years, think about hiring an outsourced CFO.

Outsourced CFO Services: What Are They?

First, let’s take a step back and discuss what a CFO performs.

Everything about the finances of your business falls under the purview of your chief financial officer. From a managerial standpoint, the CFO typically supervises the groups in charge of tactical matters like maintaining accurate, timely books and properly satisfying your tax obligations. In terms of strategy, your CFO will monitor the health of the business and assist you in achieving your financial goals:

  • Keep track of your financial data and provide regular reports.
  • Examine and evaluate your KPI
  • Aid in creating your budget
  • Financial forecasts should be made.
  • Identify future growth strategies
  • Review of the board deck and development of financial slides
  • Analyze your financial hygiene regularly and provide the best methods
  • Offer ideas to improve your financial status.

The same strategic function will be performed by an outsourced CFO. But rather than joining your business as a corporate officer, they will collaborate with you on a contract basis. The majority of outsourced CFO services (also known as virtual or fractional CFO services) are offered on an hourly or subscription basis.

Why Should I Hire a CFO in the Outside World?

In businesses where the founders lack a finance background, having skilled and experienced finance specialists on board is essential for helping to steer company choices. So, what are the potential benefits of outsourcing for your startup or small business?

Outsourcing Reduces Costs

A full-time CFO is expensive to hire. The average CFO receives a salary of over $300,000 per year in addition to bonuses, equity, and benefits. That kind of investment in personnel is simply not feasible for many firms. Even if the business can afford the cost, the opportunity cost—the money that won’t be invested in the other areas of your organization—may be too large.

In this situation, outsourcing is used. You can enjoy the advantages of working with an accomplished finance executive by paying for a certain number of hours with a fractional CFO. At a significantly lower cost than hiring a full-time CFO. This may provide startups and small businesses access to resources they otherwise couldn’t afford.

Time Is Saved via Outsourcing

The needs of your business are another consideration. The demand for a CFO is frequently driven by the requirement for expertise in particular areas, such as forecasting, budgeting, or fundraising. All of these tasks might be performed effectively by hiring outsourced CFO services. Hiring a full-time CFO would be excessive for these businesses.

Benefits of Contract CFO Services

Affordable development many small businesses lack the resources to hire a full-time CFO. Your business may access CFO-level expertise and growth plans through virtual CFO services at a fraction of the cost.

More adaptability Startups develop quickly, so what you need now might not be necessary tomorrow. You can modify your engagement as your business changes thanks to outsourced CFO services.

Outsider’s Eye View

An external CFO adds a fresh perspective. They can take a fresh look at your figures and compare them objectively to standards in your market because they aren’t involved in your day-to-day operations. Additionally, since fractional CFOs typically work with multiple customers in their field of specialty, they can use insights from a wider range of experiences to benefit your company.

How to Pick the Best CFO Services Company

Your fractional CFO must match your organization well, just like an in-house hiring would. Here are some things to remember:

  • A relevant background. There may be different indicators to prioritize and different obstacles to prepare for depending on the sorts of companies, marketplaces, and sectors involved. Find a virtual CFO supplier who has worked with businesses like yours. For instance, if your organization offers SaaS, you’ll want your part-time CFO to be knowledgeable about SaaS business models and important KPIs like ARR. If you intend to raise money soon, use an external CFO who has a track record of doing it.
  • Your intentions. The majority of CFO service providers provide a wide range of services; for instance, our team at Pilot can assist with forecasting, KPI analysis, board deck guidance, and more. Consider the issues you’re attempting to resolve and the results you desire to ensure you get the most out of your fractional CFO. Knowing your goals before hiring a fractional CFO can assist you to know what to search for in a candidate in terms of qualifications and expertise.
  • Service team versus consultant. There are many different sizes and shapes of virtual CFOs. You might hire a freelance consultant to work with you one-on-one. Or a CFO services team made up of several CFOs who collaborate to support your goals. A single consultant could be less expensive, but working with a team gives you access to more specialists and faster turnaround times.

It’s not always necessary to hire a costly corporate officer to bring in a finance expert. As your business expands, think about using an outsourced CFO to get the advice you require. All at a cost your business can afford.