How an Outsourced CFO Brings Value to a Business

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Strategic Insights and Knowledge of Other Companies

by Michelle Ryan, CPA

Ace Fertilizer Company operated for 30 years with the help of a trusted Chief Financial Officer, who kept the books, arranged for financing, and made sure the taxes were paid. But when it was time to retire, the CFO sat down with Ace’s owner and made an unexpected recommendation.

“Don’t replace me with another fulltime CFO.”

Keeping abreast as much as possible with changes in the finance marketplace, the CFO knew the company needed to upgrade and customize its accounting technology, as well as become more strategic in its decision making. The CFO had been functioning more as a controller for many years, with little time to outgrow the pattern of bookkeeping, reconciliations and accounting tasks.

The kind of strategic thinking and visioning that CFOs bring to the table was impossible, no matter how much the growing company needed it.

 

Outsourced CFO

The owner took the advice and hired an outsourced CFO, a professional with the credentials and experience to provide strategic guidance that would help the company adapt to a changing marketplace. Since the skills of a CFO were needed only some of the time, the company paid for 24 hours per month of an outsourced CFO’s time.

The scenario at Ace is repeated in many small to medium-sized companies, where a single professional or two people fill all the roles needed in an accounting and finance department – AR/AP, bookkeeping, controller-level analysis and CFO functions. Often, budgets don’t allow for hiring the right people at the appropriate levels, so everyone multi-tasks.

But this often results in highly paid executive-level professionals performing functions that could be done by lower-paid staff or, conversely, less-skilled and lower-paid workers doing work that really requires the skills and analysis of more educated and trained professionals.

In today’s rapidly changing marketplace, business owners can’t afford to let the critical position of CFO go unfilled or fill it with someone who is not qualified.

Strategic Insights

An outsourced CFO brings to the table the perspective of working with several different companies in different industries. They know how things are done in other companies, what the “best practices” are and how customized accounting technology can streamline the efficiency of an accounting and finance department.

They keep their eyes on financial trends that may impact your company down the line, for which you should be prepared. Business owners usually don’t have the time to learn how others are taking care of their businesses.

Just as important, when you decide to work with an outsourcing organization, they will first come in and assess your company’s needs. They know what an accounting and finance department should look like and will assess what you are missing. Is a controller needed? How many hours per month of CFO skills will serve your business? Are you overpaying for a fulltime payroll clerk when that position could go part-time? Part of the value of outsourcing is having a knowledgeable team come in to do the mixing and matching necessary to get your accounting and finance operation to the right size and configuration.

Hit the Ground Running

An outsourced CFO who replaces a departing full-time CFO can hit the ground running with very little training or orientation, focusing immediate attention on critical operations and needs. Coming on board before the departing CFO leaves enables coordination and assistance through the transition, assuring business owners that nothing will fall through the cracks.

Staffing changes come later, after the transition, to increase efficiency and effectiveness of the accounting and finance department.

Who Should Consider an Outsourced CFO?

Outsourced CFOs are particularly effective in companies that have some level of complexity, such as multiple locations, high volume of transactions, subsidiaries, or an audit requirement, among other factors.

Additionally, companies that are growing or expanding can benefit from an outsourced CFO’s ability to complement the owner’s strategic vision with an understanding of the financing options, staffing requirements, and operational enhancements that may be needed. The outsourced CFO’s knowledge of other companies’ experiences is particularly valuable in this kind of setting.

With a CFO providing such critical guidance to a company owner, the prospect of losing that individual – who possesses a tremendous amount of institutional knowledge – to another company or to retirement can be daunting. Outsourcing the CFO position avoids that pitfall by institutionalizing the CFO’s knowledge with the company, rather than with an individual.

Every business is unique, and an evaluation of a company’s needs, operations, and markets is an important part of determining if an outsourced CFO (or other accounting positions) is right for you

To find out if an outsourced CFO would bring value to your organization, contact your Adams Brown advisor to start the conversation.