The Rise of Outsourced CFO Services
The massive move of data and systems to the cloud over the last few years is enabling many small businesses and non-profits to “go lean” while simultaneously driving business growth. These organizations now depend on remote 3rd-parties for activities which used to be performed in-house.
The shift from in-house to outsourced has created all-new service industries. Today, many industry-leading enterprises leverage the power of outsourced Chief Financial Officer (CFO) services.
Small and Medium businesses enterprises (SMEs) now have more choices for high and low-level roles based on merit, not just physical proximity. It is now possible to get great financial insight from professionals with experience in your industry without requiring them to move to within a commute-radius of your locale. It’s a matter of finding the best CFO Service anywhere, not just the best in your zip code.
Which outsourced CFO services can benefit your company?
It depends on your goals. Unlike controllers and CPAs who typically have a more straightforward job description of record-keeping, bookkeeping, and tax management, an outsourced CFO’s role changes based on the current needs, challenges, or goals of an organization.
Most Common Outsourced CFO Services
Preferred CFO has an elite team of some of the most experienced outsourced CFOs in the industry. These experts have decades of experience providing CFO services to hundreds of clients in dozens and industries.
Below is a list of some of the most common outsourced CFO services:
1- Financial Strategy:
The greatest benefit a CFO will bring to your organization is a higher level of financial strategy. An outsourced CFO is an expert in long-term planning and figuring out what, exactly, is needed to take your company from where it is now to where you’d like to be.
2-Short- and Long-Term Forecasting:
A financial forecast is one of the most important tools an organization can have. It is the detailed financial and operational roadmap giving a step-by-step guide to take you from where you are now to achieve your goals. A financial forecast requires analysis, strategy, and practicality.
3-Financial Systems Strategy & Design:
If your financial management software and internal systems are incapable of keeping up with your growth, are incompatible with your other operational and/or sales systems and processes, or lack features essential to your business, it may be time to reevaluate, Outsourced CFOs can help.
The budget helps guide the year’s financial decisions while keeping the organization on track to reach its goals. A strategic CFO will often use a forecast as a rolling budget to help ensure your financial performance is in line with your company goals and roadmap.
5-Facilitating & Interpreting Financial Reporting:
Let a CFO analyze your reports and give you the most important takeaways in a way that best supports your business needs. This gives you an opportunity to ask questions, re-strategize when needed, stay aware of the goings-on, and to have the information you need to make your essential business decisions. If you don’t currently have a reliable system for timely, accurate financial reporting, your outsourced CFO will also help put a reporting system in place.
Raising capital is typically very stressful for an organization, but an outsourced CFO can offer services to make the process go more smoothly. An outsourced CFO can also:
- Ensure your current accounting and financials are conducive to positive conversations with potential investors or lenders
- Provide financial statements, reports, and documents for due diligence
- Assist in structuring capital including determining how much financing you need and what mix of debt and equity financing is best for your goals
- Bring confidence, reputation, and professionalism to your organization by having an experienced CFO representing you and your business.
- Term sheet review and negotiation
How much financing do you need, and what combination of debt and equity will help you uphold company value while achieving the growth you desire? An outsourced CFO provides services to help you determine what capital structure is ideal for your organization.
8-Cash Flow Analysis & Restructuring:
Cash flow is one of the most common (and influential) challenges businesses face. Outsourced CFOs take a deep dive into your financials to figure out how to maximize your bottom line. This may include:
- Renegotiating vendor contracts
- Restructuring client contracts
- Ensuring pricing is aligned with company & industry trends
- Analyzing commission structures
- Supply chain management
- Attributing costs to revenues
9-Making Cost Cuts:
Outsourced CFOs can usually make more (and better) strategic cost cuts than an in-house team, which makes it one of the popular outsourced CFO services. The reason an outsourced CFO can be more effective is because:
- They will have expansive experience with a variety of companies in your industry so they have a deep understanding of benchmarks to which they can compare your costs.
- They are more objective. Where managers or teams may have more of an interest in particular projects or initiatives that may influence their cost-cutting strategy, outsourced CFOs have no such biases and make decisions based on data and experience.
- Cost cuts will be more objective. Cost-cutting isn’t a simple “big numbers are bad, small numbers are good” game. To achieve cost cutting that is sustainable and that drives company goals as opposed to undermining them, thoughtful consideration, data analysis, and objectivity needs to take place.