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5 things to consider when hiring an external CFO

Posted by Shivali Anand

February 17, 2022    |     3-minute read (495 words)

As your business expands, you may find that you need more professional help to put your strategic vision into action and fulfill your long-term financial objectives. However, you may not require the services of a full-time chief financial officer.

Hiring an external CFO is a cost-effective solution in this scenario. By outsourcing the function, your expanding company gains access to a financial specialist without the high cost of hiring someone in-house.

What is an external CFO?

External CFOs are highly qualified finance experts that work with businesses on a project or hourly basis, for even as little as 10 hours monthly. The job description may include a wide variety of tasks, many of which the in-house team lacks the skills, expertise, or time to handle. An outsourced CFO service can scale their time up or down based on the client's exact requirements.

The benefits of hiring an external CFO

By hiring an outsourced CFO, you get the services of a finance professional who can see the big picture at your business. The external CFO assumes responsibility for time-consuming but critical responsibilities, which helps keep your employees from burning out and allows you to focus on building your company. But the advantages don't stop there.

When it comes to choosing an outsourced CFO service, you can count on the following:

Minimal hassle – An external CFO provides your company with the skills and knowledge it requires without the expense of a full-time C-suite employee. They can swiftly catch up and work on problems with little downtime.

Access to expertise – As your company grows, the complexities of your sector may require increasingly specialized knowledge. Many external CFOs specialize in a particular area, so you can access that expertise and industry ties that you otherwise wouldn’t have been able to.

Adding new responsibilities over time – Your company may expand through mergers and acquisitions, and an IPO, the purchase or sale of a section of a firm's book of business, or adding a team or office from another company, are also possibilities. Such moves and the responsibilities they entail, such as analyzing possible investment returns, reviewing financing and earn-out plans, can be handled by an external CFO. Outsourced CFOs can also take on finance duties arising from enlarged operations.

Future preparation – An external CFO can help your firm move beyond cash management and bookkeeping to planning strategically for the future. They'll assist you in establishing a solid foundation for your company's future as it grows. Financial planning for the business could come to encompass things like deciding on new sites, sales development and diversification, lease versus buy decisions, whom to hire and so on. An external CFO is positioned to help tie things together for your organization.

Hands-on mentoring – Many companies use CFOs as development mentors for their internal workforce. Smaller businesses may lack the internal experience and resources to train a financial and accounting professional. Using a fractional CFO's talents to mentor staff might be a viable alternative.

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