By Patrick Curtis, CPA, CGMA
There comes a time in the life of a growing business when critical decisions need to be made. One such decision is whether or not it makes sense to hire a full-time Chief Financial Officer or outsource the position. There are many factors that play into which way a company may decide to go; factors such as cost and available resources, among others. Either way you decide to go, it’s a decision that should not be made lightly.
Many business owners feel like they are at the point where a full-time CFO makes sense but lack the resources to bring someone onto their payroll on a full-time basis. In cases like this, outsourcing the function makes sense. Hiring an outsourced CFO allows a growing company to gain the financial and operational expertise necessary without having to invest in paying a hefty salary and benefits.
As a business grows it may need more sophisticated advice than what a bookkeeper, or even a controller, can provide. However, in many cases it may be difficult to justify the cost of a full-time CFO. This is where hiring an outsourced CFO just might be a more cost-effective alternative. Contracting with a CFO on an as-needed basis allows you to receive strategic financial expertise and experience while saving money in salary, benefits and additional overhead that is associated with hiring a full-time employee.
An outsourced CFO works closely with business owners on financial strategy and analysis. He or she becomes part of the executive team. By collaborating with a financial expert at this level, you can plan and implement projects and programs designed to reduce costs and increase profits.
There are several specific responsibilities an outsourced CFO can perform for businesses, including:
• Oversee financial and accounting functions and train staff on accounting best practices.
• Develop cash flow improvement programs, manage capital to improve profitability, and produce accurate, meaningful financial statements.
• Evaluate internal controls and help initiate processes to reduce the risk of theft and fraud.
• Assist with taxes and adherence to Internal Revenue Service rules to minimize overall tax liability and exposure.
• Serve as a liaison with lenders, investors and other outside financing sources.
There are multiple models for utilizing an outsourced CFO. The traditional CFO outsourced model is on a part-time or temporary basis. This option is typically used when your business doesn’t need or can’t afford a full-time CFO. Using an outsourced CFO in this capacity allows you to have the flexibility to retain a CFO for as much or as little time as you need at a price that is affordable and agreed upon ahead of time.
Another popular option is to hire on a project or transaction-based basis. In this model an outsourced CFO is hired to work on a specific financial project or assignment. The project is usually short-term in nature and once it is finished, the engagement is complete. When you are integrating or dealing with a merger or acquisition, financial modeling or revenue recognition, a transaction-based engagement might make more sense.
Businesses may also hire outsourced CFO services on an interim basis. This model allows owners to fill a financial officer role on a temporary basis until a new, permanent CFO can be hired. In this model, an outsourced CFO might be able to help in the recruiting and hiring process by recommending candidates, participating in interviews and providing feedback on the final hiring decision.
Outsourcing all or some of your financial needs can be a very practical and cost-effective solution. An experienced and qualified CFO, who understands the dynamics of owner-managed businesses, can provide the financial advice and assistance you need to help make your business more successful.
And if, and when, the time comes to transition to an in-house financial officer, your outsourced CFO can train and smoothly transfer all of the important information to your new full-time hire.
Making decisions of this nature are not easy and there is not always a right or wrong answer. Examining what your needs are, developing a realistic budget and focusing on the objectives you wish to reach will help guide you in the decision making process.
Patrick is a partner with Rubino & Company with over 15 years of experience providing audit and consulting services. He has a broad base of experience to include audits of government contractors, nonprofit organizations and employee benefit plans as well as providing outsourced accounting services. Patrick’s clients are primarily small to mid-sized government contractors, trade associations, and those not for profit organizations that receive Federal Awards.