What Are Outsourced CFO Services [& Why Your Business Needs One]
Every business’s growth is complicated. With a combination of unique industries, differing business goals, and diverse ways to raise capital, it’s safe to say that nearly every small- to mid-sized business has a different origin story.
But what about your future? Are you poised for growth? The best way to figure that out is with an outsourced CFO service.
Outsourced CFO services are designed to align your strategy with the operations of your business. In this article, we’ll address what an outsourced CFO is, the service they offer, and the unique benefits you can enjoy from working with one.
What Is an Outsourced CFO?
An outsourced CFO, also known as a virtual, fractional, or remote CFO, is an executive that businesses can use as a financial expert on a part-time or project-based basis. Outsourced CFOs often operate at the executive level, acting as a financial advisor for a company’s executive team and outlining high-level plans and roadmaps for the company to abide by to achieve their financial strategy.
Hiring outsourced CFO services is an ideal option in the following scenarios:
- Growing companies who can’t afford a full-time CFO
- Growing companies that don’t yet need a full-time CFO and want to optimize their spend on other resources
- Companies that seek an interim CFO while looking for someone to take the position full-time
- Companies that need an experienced vision for their financial roadmap
What Do CFOs Consider to Be Their Top Priority?
The top priority for many CFOs is to firmly establish a strategic financial vision for the company they work with. To achieve this goal, a CFO must be able to address the following two points:
- Potential blind spots in a leadership team’s strategy
- A method for capital planning and acquisition
If the executive team announces a new business goal, it’s the CFO’s job to address the financial implications and requirements of the decision. They’ll ask questions like:
- Does the company’s current goal reflect trends in the company’s revenue increase?
- Can the company’s current cash flow support the strategic goal in question?
- If current cash flow cannot support the strategy, what has to be done to get it to the correct levels?
Capital Planning & Acquisition
Strategic planning in finance also needs to be future-oriented. As such, CFOs will look at the trajectory of a company and answer the following questions:
- How much money will the company need in the future to continue growing at the current rate?
- Can the company currently survive an economic downturn, and if not, what must be done to prepare?
- What capital acquisition strategies should the company pursue?
What Does a Virtual CFO Do?
Virtual CFOs are primarily meant to oversee and consult for a company’s financial trajectory. That means there will be a lot of overlap between the tasks of a virtual/part-time CFO and a full-time CFO:
- Virtual CFOs often outline a company’s financial plan. One of the primary roles of a CFO is to add some financial realism to a company’s goals. For example, if a company wants to break out into a new market, a virtual CFO can give them a realistic estimate of how much that will cost and what the risks are. Fractional CFOs can also structure a plan from scratch if a company has no existing financial plan.
- Virtual CFOs help in the search for a full-time CFO when applicable. If a virtual CFO is hired to fill the position while a company looks for a new full-time CFO, the virtual CFO can help find a qualified candidate. While doing so, the virtual CFO can identify specific needs the company has and help look for candidates who could address those pain points.
What Type of Financial Services Are Outsourced?
The services a virtual CFO can provide are identical to those provided by a full-time CFO However, in general, you may enjoy any combination of the best outsourced CFO services:
- Cash management
- Strategic analysis
- Profitability analysis
- Merger/acquisition support
- Long-term financial forecasting
- Scenario modeling
- Mentorship for financial teams
- Scalable financial technology solutions
What Are the Benefits of Having an Outsourced CFO?
Instead of exploring every reason why you should hire an outsourced CFO, here are six important benefits you can expect:
1. Improved Financial Literacy
You aim to hire the best when finding candidates for your finance team opening, but those hires can always improve their skills. With outsourced CFO services, inexperienced finance teams can be trained and improve their financial literacy, elevating their skillset to be beyond industry standards. Further, a capable engaged CFO will improve the financial literacy of the entire organization.
2. Realistic Perspective on Business Goals
Sometimes, executive teams get a little over-ambitious with their business and marketing goals. This is true for many businesses, but start-ups need fiscal realism in particular, that allows for hope and dreaming but is also describably achievable. To help, virtual CFOs will take an honest look at company goals, help outline operational priorities to achieve them and determine how much capital they would need to achieve their lofty goals.
3. Better Prepared for Fast-Paced Transitions
Fractional CFOs hit the ground running. They quickly engage with their business to ensure a steady financial plan is developed and actionable steps are established to put it into action.
This is particularly helpful for eCommerce businesses, an industry that is growing at a rapid pace. Having a cemented financial plan early on can help new eCommerce businesses stay ahead.
4. Access to Industry-Specific Knowledge
It’s not enough to be a financial expert—a fractional CFO should also be an expert in your industry. This is particularly important in industries like SaaS; there are certain success metrics a CFO must be aware of in the SaaS industry that are widely different from other industries. Fortunately, a fractional CFO ensures that these metrics are considered in their financial strategy.
5. More Cost-Effective
Most small and mid-sized businesses don’t have the capital or need to justify hiring a full-time CFO. However, every company needs to have a long-term forecast for its financial strategy. Virtual CFOs allow these companies to prepare for the future without breaking the bank. Jeff Epstein, an operating partner at investment firm Bessemer Venture Partners and a former CFO of Oracle Corp., remarked that he always advises founders of early-stage firms to “hire a part-time CFO so they can focus on building and selling their products instead of managing the finances.”
6. Improved Long-Term Scalability
Every business wants to stick around for the long haul—CFOs help make that dream a reality. By creating financial plans and using the right capital acquisition strategies, your business can better scale for growth and be prepared for the future.
How Much Does an Outsourced CFO Cost?
An outsourced CFO’s cost will vary depending on your industry and location. But with that in mind, the average cost for an outsourced CFO could range from $3,000 to $10,000 a month.
How Do I Find and Hire a Virtual CFO?
Finding the perfect CFO for your business can seem daunting, but it can be made easier with a trusted partner like Amplēo.
Amplēo works with dozens of CFOs with expertise spanning across various industries, making it easier to find the right CFO for your company.
To support our outsourced CFO services, Amplēo also offers financial controller and accounting services. These services can help operations run more smoothly as your outsourced CFO begins to develop and apply a new financial strategy.
Finally, if your company’s finances aren’t going in the right direction, Amplēo’s turnaround and receivership services can help.
See What Amplēo Has to Offer
If you are in the process of outlining a financial strategy and believe a fractional CFO would help, please consider what Amplēo could do to assist you. We have an entire team of experts at the ready to help you achieve your financial goals—contact us today!