When It’s Time to Outsource a CFO

Graph on document with pen
Mindy Barker | Barker Associates

I often get asked about why companies should outsource CFO services. As small- to medium-sized businesses grow, they need additional financial resources, including data and expertise to help them better understand the company’s financial health, plan where they can feasibly go based on that health, and improve performance overall. In the past, many companies reaching this phase would bring on a full-time Chief Financial Officer (CFO). But, as we all know, times change … and so do needs and resources. Now, more businesses are deciding to forgo the large salary expense and still get the expertise by outsourcing those financial services.  

You may need high-level financial strategy, but you may not need, or maybe you can’t afford, a full-time employee. Essentially, the finance function of your company can be outsourced to a third-party service provider who acts in the same capacity as a CFO.  You gain expert financial insights, advice, skills, and resources that will help you grow your business, without the huge paycheck that historically goes with it. 

Why Outsource to a CFO? 
The reasons you may decide the time is right to get someone in your financial corner are plentiful. However, as I touched on above, your company experiencing rapid growth, such as the development of new products or market expansion, is one of the most common reasons. Growth like that needs cash for manufacturing, distributing, and marketing. Does the company have enough? Where will it get the money from over time? These are the questions a CFO can help you answer. 

Other reasons to bring on an outsourced CFO include resolving a financial challenge (cash flow, inefficient processes), scaling systems to handle the complex transactions aligned with rapid growth, and needing an accurate, up-to-date financial forecast for budgeting, restructuring, or funding purposes. These major decisions and company crossroads require a financial expert that many companies do not have on staff. 

How an Outsourced CFO Helps 
An outsourced CFO will take their knowledge and broad experience to analyze the company’s financial picture and provide strategic planning and solutions to move forward with the best financial footing. Equally important, they will help ensure the company has the checks and balances needed to keep stakeholders accountable as the company grows. For example, if the company needs to secure additional funding, prepare for a merger or acquisition, or increase oversight to minimize the risk of fraud.  

While each set of circumstances and needs vary, an outsourced CFO can: 

  • Develop a financial roadmap to navigate the company’s future 
  • Help make the numbers more understandable  
  • Help overcome obstacles to business growth 
  • Implement reporting for financial and accounting functions 
  • Oversee financial controls  
  • Identify weaknesses and capitalize on strengths  
  • Develop KPIs and metrics 
  • Develop forecasting and budgeting models 
  • Provide strategies to move forward  
  • Put accounting and reporting systems into place 
  • Provide regular financial reporting  
  • Manage cash flow  
  • Help acquire funding from investors 

The End Benefits of Outsourcing a CFO 
It’s appropriate that the largest benefit of outsourcing a CFO is cost savings. And while many people believe that the costs are actually higher, according to an article in Forbes, the idea that outsourcing is too expensive is a fallacy. In the article, they compare the salaries of full-time CFOs (companies with approximately $10 million in revenue) to the costs of outsourcing. The full-time CFO earned about $200,000 to $250,000 per year as a base, plus bonuses, benefits, taxes, overhead, and long-term incentives (equity), adding up to $300,000-$400,000 per year or more. However, an outsourced CFO for the same size company averaged $7,500 per month, or $90,000 per year (assuming they were retained every month, all year, which is not always the case). The outsourced CFO was about a quarter of the cost of the full-time CFO (at the higher end). 

In addition to the cost savings, an outsourced CFO provides access to a financial expert with various experiences, and the flexibility to utilize that expertise only as needed. The relationship can start part-time or be project based and, as the company grows, so can the services and time. But in either case, you can get back to the business of your business. 

Barker Associates provides outsourced CFO services to companies of all sizes. We can provide the higher level of financial analysis and strategy your company needs to get to grow. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.  

Related Post

To eat eggs or not – that is the question. Those of us who work to manage our cholesterol have received conflicting information about eating eggs. I grew up loving eggs, but then, as an ad...