The roles and responsibilities of a Chief Financial Officer or CFO in a startup business are irreplaceable. Several CFO services out in the world can help a start-up business manage its financial positioning professionally and constructively. The demand for a CFO outsourced service provider has also spiked up recently.
There are also various types of CFO services. So that companies can dissect and outsource services only a certain portion of the entire CFO functions. CFO services specialize in advanced financial knowledge they bring to the table while taking on the project.
You can hire temporary CFO services, get them on a contract or even go for a virtual CFO service solution. It is also important to mention that not all functions of a CFO can be outsourced. When you outsource CFO services, a financial expert will be appointed to assist you with financial business strategies based on the service contract.
Usually, a CFO outsourced service provider has acquired a diverse experience from working in several high-level financial roles in private and public companies of all sizes and nature. This includes planning, financial projection, scenario modeling, and unit economics.
What Type Of CFO Services Can Be Outsourced?
In the early stages of the company’s formation, CFOs may not have much to do apart from providing basic financial ideas on the budget and other relevant matters. However, as a start-up firm, hiring a CFO outsourced service provider on a contract is in itself a costly measure to think of.
Basic CFO services may take a short time, but temporary contracts can take care of it. You will need a dedicated CFO service provider with vast financial knowledge and an understanding of the business requirements and challenges. Only a working knowledge of the company can deliver accurate insights and genuine advice about the budget and expenses.
What Is The Job Of An Outsourced CFO In General?
When starting up a business or a company, hiring employees is an important part that requires scrutiny and proper involvement from the owner. Among the several employment roles, one is crucial, and that is the Chief Financial officer. Even if not at the very beginning, there must be at least some setup required for financial management.
A CFO outsourced service provider can help you in several financial matters where your knowledge is limited. While full-time CFO hiring is considered a higher feat, it also comes with a higher budget. Hence, outsourcing part-time, temporary, or contracted CFO services is gaining much prominence these days. However, the job of an outsourced CFO remains unchained in comparison to a full-time CFO.
- Among the key functionalities of an outsourced CFO provider, the most prominent one is strategizing. They will be planning many strategies throughout their time, but the strategies for cutting costs are the most relevant.
- Apart from looking over the finances and curating plans for managing them, the CFO is also involved in managing the cash flow. They will also provide certain predictions based on their analysis of the same.
- A CFO outsourced service provider will assist and provide insightful advice to the company in making capital purchase decisions.
- While they manage the cash flow and provide rare insights into financial management, they may also be involved in forming a budget for the company.
- Lastly, they may be hired to manage the inventory of the firm. A firm with a diverse inventory may require assistance dealing with the various items, supplies, payments, and other relevant factors. A CFO’s duty also captures this part of the business management.
When Is The Correct Time To Seek Assistance From A CFO Outsourced Service Provider?
Any CFO outsourced service provider needs advanced planning and the forward vision to predict financial events with subtle accuracy. A CFO has to consider finance, market, governmental policies, and tax in managing the whole financial structure of the business. However, it is upon the company to arrive at a genuine decision of whether they require any CFO services at the current moment. Here are some questions that business owners can work their minds through before contacting any CFO service provider.
- The budget for the company is perhaps the most important thing to consider. Hence, the debate is on hiring a full-time CFO service provider or hiring one on a temporary contract, which is more feasible. While comparing the two and calculating the budget, do not leave out the payment and the benefits you will receive.
- There is a constructive debate on whether you are wasting time finding a CFO outsourced service provider when you could be doing something else for the business. If this possibility strikes your mind, you better think it through.
- If you have recently encountered fraud or your firm may have a problem with excessive expenditure, hiring CFO services can be one way to solve the problem from the outside until you can build internal stability.
- There can be no need for a CFO if the company is not rushing towards instant growth. In that case, the company can take some time and manage its finances independently, until the requirement is unavoidable.
If the answer is leaning on an assertive note, then hiring a CFO outsourced service provider may be the best option. However, if the answers are mostly negative or make you hesitant or confused to some extent, then it would be better to reconsider. Other than these, there are two reasons why denying CFO services can come back to bite the business.
As a start-up, there are fewer requirements on an accounting standard which often minimizes to almost eliminates the need for hiring CFO services. This has given rise to part-time or contractual hiring of CFO services and gradually asking the independent CFOs as permanent employees.
CFO services usually have many bookkeepers in their contact or working under their firm. They can surely hook you up with a CFO outsourced service provider who can manage your company finances remotely. This gives outsourced bookkeepers additional knowledge and experience in working with various businesses compared to a permanent bookkeeping staff.
If you require a loan for the business or financial assistance from any investors or VC firms, you will need your CFO to do a few things first. Your CFO is responsible for building a comprehensive accounting system and updating it from time to time. At the same time, they will also have to present an informative financial report to help you get the funds and manage them wisely.
What To Look For When Hiring A CFO Outsourced Service Provider?
Based on the statistics, start-up businesses are increasingly leaning towards a low overhead cost. This phenomenon has paid out for many companies with a CFO outsourced service provider guiding them in the right direction. As properly compensating a CFO can be costly in terms of outsourcing CFO services, CFO outsourced service providers are currently in demand. However, coming back to the point, we have a few factors that will help you get the best CFO services based on your requirements.
The pricing is the most important thing, considering the reason for outsourcing CFO services is rooted in staying within the budget. For an outsourced CFO, the charges can fluctuate based on the number of services provided within a certain period. Most of these are flat fees, eliminating any chances of surprise payment.
In the case of hiring a virtual CFO outsourced service provider, there have been many cloud-based applications that have become quite a favorite among managing start-up finances. As we are moving into a vastly digitalized era, integrating virtual tools has become necessary for learning the business in a digital sense. Digital tools also offer accurate financial predictions and solutions, resulting in better business performance.
As mentioned before, the roles and responsibilities of a CFO cannot be completely replaced. You can stave it off for a while or outsource CFO services, but eventually, you will require a permanent solution for the post. The matter is CFO’s responsibilities are vast, and you can divide it and outsource parts of the services, but once the company is established, it will require an organized setup to fall upon. As a startup, there is surely little financial management required, but still, it needs some management to get the budget right or other relevant matters.
10 Popular Outsourced CFO Services Of Our Time
As a start-up service, before its initial public offering (IPO), you can hire a CFO outsourced service provider to tackle the primary financial responsibilities of the firm. The range of outsourced CFO services can vary, so the business needs to decide on its preliminary requirements and what the CFO services cover. Here are the common CFO services that are most frequently outsourced.
1. Financial Strategy Development
One of the principal responsibilities of a CFO includes forming a financial strategy. In that sense, outsourced CFO services offer a better service option based on their diverse experiences. The CFO is responsible for curating your organization’s long- and short-term financial strategies. It may be tough for a start-up business to establish its empire without assistance and decisions that can very well backfire.
2. Proper Budgeting
Budgeting is setting up a limit or target for the company to achieve. A CFO outsourced service provider has the responsibility of designing the whole plan for budgeting. The company’s financial data will be compared with the budget, which will derive the company’s financial positioning. The CFO will review the budget and update certain portions as necessary to meet the market’s changing demands. For an outsourced CFO, the job ends at the point of reporting. You may require a full-time CFO for the full report and a powerful solution.
3. Financial Projection & Scenario Modelling
Financial projections are important for a start-up to plan the road to some extent. If the business has revenue potential, it is sure to attract investors. The financial projections also help create the basis for budgeting and the requirements for funding or raising capital for the firm. The CFO also needs to come up with alternative projections. This will provide insight into how the company may perform under different circumstances.
4. Financial Reporting
The CFO outsourced service provider may not be involved in internal meetings to take over the situation. However, they can surely be crucial in constructing financial reports, figures, and relevant slides for the meeting. Key documents regarding the company’s finances may be required in a meeting, especially involving investors.
5. Cash Flow Analysis
Among the many functions of a CFO, managing the cash flow and analyzing it is one of the most crucial functions to consider. The cash flow of a company is not just limited to revenue. It also considers the expenses. The job of the CFO in such matters is related directly to increasing the revenue while keeping the expenses under a limit. Vendor contract renegotiation, restructuring client contracts, managing the supply chain, aligned pricing, commission structure, revenue cost attribution, etc., are some things that a CFO is praised for.
6. Customer Contact Reviews
Most of the success in any business can be credited to the company’s customer contact. For a CFO outsourced service provider, the job is to advise business owners to negotiate the contracts with customers and make way for a profitable outcome. The CFO will look into the potential risk factors and derive solutions to lower costs.
7. Merger & Acquisitions
Financial matters of your company can range from mergers and acquisitions to other relevant factors regarding financial factors. The range may include preliminary analysis, reporting, forecasting, stabilizing financial functions, providing insightful advice to key members, and preparing documentation relevant to the scene.
8. Raising Capital
A business needs capital to initiate its functioning but gathering the funds is the most strenuous job. While it can be tough for a business owner, it is not so tough for a CFO outsourced service provider or any CFO services. From their experience and diverse associations, outsourced CFOs manage to establish their network of investors or financiers. They will help you develop a proper capital structure considering the requirement and tallying it with the debt and equity of the firm.
9. Legal Team Liaison
Apart from the basic requirement, the CFO may also require the company contracts and proper knowledge of legal obligations to produce the financial statement. You can set them up with your legal team to have all their queries answered. With the CFO looking into your financial and legal matters, you can get your legal terms and conditions reviewed.
10. Specific Guidance For Start-Ups
The needs of a start-up business are quite different from an established one. And an outsourced CFO already comes with a vivid experience working with several firms. They will guide you with team building, exploring different funding options, contract loopholes, and other relevant matters regarding your company.
You are not alone if you are looking for a CFO outsourced service provider. Rather, you are among the many starting a business for the first time. From temporary financial solutions to long-term strategies, CFO services usually have quite a range of expertise.