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Is hiring an outsourced CFO the right move for your company?

Posted by Shivali Anand

August 3, 2021    |     4-minute read (621 words)

As a small business owner, you may find yourself at a crossroads. There is a need for expansion, but you don't know how to get there without a full-time chief financial officer. Outsourcing your CFO is a very contemporary – and highly successful – alternative solution.

As a relatively new idea, virtual CFOs provide small and medium-sized organizations with several perks that are critical to their success. Here's how to find the right one for your organization.

When you need a CFO, you can get one

A typical chief financial officer is responsible for a company's whole finance department. While some small businesses consider the CFO to be only responsible for tax compliance, the fact is that the CFO leverages the firm's data to assist the company going forward. They're taking a whole different approach to your data than an accountant would.

A CFO examines the company's metrics to see what operational story they're conveying and how the data might assist promote growth and efficiency. In a conventional corporate structure, that knowledge comes at a very high cost since the average CFO in America earns roughly $151,075 – thus, that role is usually restricted to a much larger firm. A company requires that direction, especially if it is seeking investors, and it requires a method to use the data to create operational changes. They want the services of a CFO who is regularly delving into these figures and applying the data, but they cannot afford it. As a result, the virtual CFO comes in at a fraction of the price.

Outsourcing fosters trust

In many cases, the fact that the CFO is outsourced is a significant benefit to the company. Assume an investor requests an audit of a startup; it is generally preferable that the audit be performed by a third party, a function that the virtual CFO may serve. Because virtual CFOs do not operate in the firm daily, they know there is no bias in the data.

The distant position is also advantageous since an outsourced CFO lacks an emotional connection with staff individuals or specific departments. If the data show that an employee is reducing a company's earnings, the outsourced CFO will be quite honest that the individual must go. In contrast, an employee may have an emotional motivation to keep the employee on board.

Here's how to work with a virtual CFO

Most small firms are ready for a virtual CFO if their revenue is about $750,000. At that level or above, the company needs someone in this position to evaluate the figures and then use that information to make changes and improvements.

When hiring an outsourced CFO for your company, you want to be sure the match is perfect. Typically, CFOs work with the firm's founder, and the company is their baby, so it's highly personal. As the CFO will see and know everything, you must ensure that the person is a good fit for your business firm as the CFO will be involved in everything, and for smooth functioning, trust will be essential.

Furthermore, the CFOs should be able to detail what they will accomplish for you. Will the CFO report in person once a month, or will they meet through Zoom once a week? Furthermore, the CFO should be able to generate custom reports in addition to profit and loss statements. The reports should include industry-specific KPIs and benchmarks and be supplied in a convenient format for the business owner.

Before signing any contracts, as with any other business connection, you should verify references, chat with the CFO's previous clients, and obtain testimonials from its other partners. And, above all, ensure that you and the CFO are on the same page about your company's goals.

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