Should I hire an outsourced CFO service?

fractional-CFO-services

Well, it’s faster than becoming a CFO yourself.

Once upon a time, small business owners had to handle everything themselves. But in our modern age of information, specialized help from experts is just a click away.

Hiring a CFO service is an option that’s gaining popularity. But what does a CFO-for-hire do, and is that really what your business needs?


The basics

  • CFO is a high-level advisory role that can mean different things
  • You could be looking for bookkeeping, advisory, or full CFO services
  • Accounting firms can cover many financial needs for a small business

What’s a CFO service?

You have many options for getting additional help with your financial decision-making needs, and an outsourced CFO service – also known as a fractional CFO – is a popular choice. You can bring on an experienced CFO on a temporary or part-time basis to address specific financial needs.

First things first, let’s cover what CFO actually does.

What is a CFO?

To put it simply: a Chief Financial Officer, or CFO, is a big-picture financial strategist. When they’re a full-time hire at a specific company, they’re a top-level executive in the C suite, like the CEO or COO. And it’s their job to oversee that company’s money moves.

The CFO name is not a degree or certification, it’s the job title itself. But you can bet that most CFOs will have impressive degrees, practical experience, and other credentials.

The role is flexible by nature, as a CFO needs to be ready to solve any number of money-related problems that might crop up. In general, though, a CFO will be in charge of securing capital, making sure any big ventures are properly funded, supervising the accounting team, handling investments, and planning how to keep the company financially healthy in the long term.

Then what’s a CFO service?

The outsourced or fractional CFO service is a relatively modern phenomenon, but it’s the right size solution for many growing businesses. It’s more or less exactly what it sounds like: you hire someone to do CFO work for your company, without actually making them an employee.

A fractional CFO can be hired on a temporary basis to solve specific problems, or they can be a recurring part-time member of the leadership team.

Why you might need a CFO service

  • You need some guidance on financial decisions. A CFO-for-hire will be able to analyze your financial position and offer advice on how your business should move forward.
  • You need to raise some money. If you’re trying to secure additional funding for your business, either from investors or in the form of bank loans, we highly recommend using a CFO for this.
  • You are trying to sell your business, sometimes. If you have a good mergers and acquisitions firm you are working with, then a good CPA advisor (hint: us!) can work directly with them. If you aren’t using an M&A firm, then a CFO and your CPA might be a good move.
  • Your business has tons of data that you want someone to look at. Your business activity generates financial information, and a CFO can look at those numbers and turn them into insights and advice.
  • Cash flow is an issue. If you’re bleeding money and you can’t quite identify the cause, a CFO can help sniff out the problem.
  • Your accounting staff is asking complicated questions. If you can’t answer them, and your CPA can’t either, a CFO might be able to offer a valuable perspective.

Advantages of outsourcing rather than hiring a permanent CFO

A full-time CFO is a powerful money management solution, but there are plenty of reasons to outsource instead. Most obvious is cost: you get the benefits of a CFO, without shelling out the kind of salary required for a C-suite position. You’re able to bring on more experienced help than you might normally have the budget for.

There are also advantages to their position as an outsider to your business. Since they’re a hired gun with less of a personal stake in things, you can trust them to be objective and do what it takes for your business to succeed. And when they’re hired to fulfil a specific need, you can count on their focus.

Other options

A CFO isn’t the only type of help available when it comes to financial problem solving, and depending on your situation, could even be overkill.

Bookkeeping

The most basic level of money management help you can hire is a bookkeeper. They’ll help you clean up your books, generate financial reports, and otherwise make sure that all the numbers are lining up. If your business activity has picked up and you suddenly can’t keep up with the volume of transactions, you may want to call a bookkeeper.

Businesses of a certain size might eventually consider hiring a full-time bookkeeper, but for many small businesses, that won’t be necessary. Hiring a bookkeeping service is the more cost-effective option a lot of the time. Depending on your needs, you can opt to work with a bookkeeper on a monthly, quarterly, or annual basis.

Tax prep

Once your books are nice and tidy, the next financial responsibility that many business owners choose to outsource is tax preparation. Individual tax returns are complicated enough, but business tax returns often require specialized knowledge if you want them done accurately and efficiently. New tax regulations pop out nearly every year, and it’s helpful to work with an expert who keeps up with them.

Outsourcing your tax prep can help avoid mistakes, minimize your tax bill, and plan more effectively in the long term, without the time and hassle that you would normally have to endure for preparing your business taxes. It costs money, but you get some savings back, and it’s definitely a lot cheaper than an audit would be.

Advisory

For many small business owners, bookkeeping and tax preparation is all they need to keep things under control. But for those who need more specialized help, many accounting firms also offer an advisory service, often with the CPA running the place.

You can meet with an expert who can provide guidance on how to structure your business, how to set up a trust, and other methods of setting yourself up for the long run.

When do you need a CFO service, and not these other options?

Although a bookkeeper or an accounting firm can handle many of the money-related jobs you might have around your business, sometimes you really do need a CFO’s touch. For instance, if you are:

  • Handling investors
  • Working with banks
  • Pursuing joint venture deals
  • Expanding your business into new territories, states, etc.
  • Changing ownership structure of your business due to growth

These are all great reasons to get a fractional CFO involved.

Bottom line

You may not need a CFO for your small business, but a CFO service could be just right. A CFO service can help with financial decision-making and process building with a level of experience beyond what many small businesses normally have access to. And if you don’t quite need a CFO service, there are other levels of financial expertise you may benefit from, whether it’s a bookkeeper or a CPA.

We’re not a CFO service at DiMercurio Advisors, but we do all that other stuff! Schedule a call with us and find out what we can bring to your business.

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