Why Companies Benefit from Hiring Outsourced CFO Services
All companies need expert financial consulting advice, however many small businesses just can’t afford to hire a full time CFO
Why are growing businesses choosing to hire consulting Chief Financial Officers (CFO) instead of their own permanent executive? There is a pattern developing whereby many small businesses in San Diego, all in desperate need of business advisory and accounting assistance to balance their books and guide them into revenue, profitability, are contracting part time CFO consultants rather than hiring them on a full-time basis. This smart financial strategy comes at a time when our economy is still growing at a slow pace, which is forcing startup businesses to look for money saving alternatives that can yield a positive ROI while avoiding large overhead salary position costs.
“Small businesses hire me as a consultant because they are looking to maximize and streamline cash flow from operations as best as possible,” says Thomas Huckabee, founder of Thomas Huckabee CPA.
The average full time CFO salary of small to medium sized companies can range from $109,750 to $157,750 according to the Robert Half International Inc’s 2016 Salary Guide.
CFO vs CPA?
Outsourced CFOs have much larger roles at a company than a certified public accountant, who mainly just files taxes and keeps track of the books. The CFO will spend a larger amount of time on broader business matters than a traditional CPA would.
The interim CFO will work with the owners and CEO to manage their finance departments. The company may also benefit from business sources needed for growth along with financial data necessary to enable management to make strategic day to day and long-term decisions. A traditional CFO is usually responsible for overseeing all the financial activities of the entire company, analyzing the strength and weaknesses and suggesting recommendations for improvements.
In today’s business environment, it is imperative that startups and growing companies are discovering the need for an experienced CFO for the first time. Once a company’s revenue and finances start to get more complex they often need someone with more expertise than just an accountant.
“The ultimate goals for a CFO are to improve profits, manage risk, and free up cash flow for the company,” Thomas said.
What are the Duties of an Outsourced CFO?
- Cash Flow Forecasting
- Cost Management
- Business Plans
- Year-round Tax Planning
- KPI Development & Analysis
- Budgeting and Expense Controls
- Exit Strategy
- Tax planning strategies
- Paying your bills and handling payroll
- Installing new financial processes and metrics.
- Accounting system design and implementation
- Monitor All Banking Activity
- Comprehensive Financial Health Checkups
- Advisory to Senior Management & financial/accounting staff
- General Ledger & Pre-Issuance Review of Financial Statements
- Weekly & Ad-hoc Finance Meetings with Senior Management
- What if Scenario & Financial Modeling as needed
Why Hire a Part time or an Outsourced CFO Consultant?
- It is more cost effective and affordable
- Outsourced CFO has often worked with many different types of industries
- When it comes to meeting deadlines, an outsourced one tends to be more efficient compared to a salaried one.
- They can create budget planning and implementing based on your company’s current financial situation
- They can increase and drive internal cash flow by actively managing the working capital and advising strategies to improve product and service line profitabilities.
- Provide operations reporting, which focuses on key performance indicators and operating information.
When do small businesses need to think about hiring a CFO consultant? If you have a business loan or have any investors then it is usually a good indication that this something to think about. You should draft up and make the outside CFO sign a nondisclosure agreement, which will ensure any privacy concerns. It’s good to interview a few people and try not to sign any long term contracts unless you feel it is a good fit. Sometimes the CFO consultant will establish an ongoing relationship which allows them to establish a stronger, long-term collaboration with your company and all internal and external stakeholders.The CFO financial reports can help the businesses really start understand more about cash flow and profitability, so that they can start to make better decisions regarding hiring and allocating marketing budgeting. Really experienced CFOs can have a tremendous cost savings on the business by offering bookkeeping and strategic tax accounting advice.
When you are first starting a company, it’s better allocation of resources to hire salespeople and engineers vs a CFO, but once you have a product market fit and revenue coming that is a different story. An outside financial consultant can give the company an unbiased reality check. You want smart objective high end advice that will ultimately make a substantial impact on your company’s short-term and big picture financial goals.