Key Steps for Successful Transition to Outsourced Controller and CFO Services
Assessment of Current and Future Needs Shapes the Service Package
When a business owner decides to outsource the operation’s controller or CFO function, the process that lies ahead should be carefully managed to ensure a smooth transition from internal finance functions to external.
The key steps to a successful transition start with identifying why outsourcing may be beneficial to the organization. That starts with an assessment of the organization’s current financial management processes. Are things going well? Or not?
If your current controller or CFO is retiring after a long career, recruiting a qualified replacement may be difficult, particularly in smaller cities and rural areas. This dynamic is heightened by a nationwide shortage of candidates with high-level finance experience and credentials.
In some cases, departing finance managers filled functions that are not intrinsically part of the finance role. It’s common in smaller organizations to find controllers and CFOs also wearing the Human Resources hat, and in some cases managing the IT function and keeping an eye on the safety program, as well.
These are factors that point to outsourced controller and CFO services as a beneficial option.
Key Steps for a Successful Transition
To best serve the business or organization in an outsourced controller or CFO capacity, it’s important to determine the shape everything is in. The departing controller should discuss how things are done. This includes internal processes such as:
- accounts receivable and accounts payable,
- the payroll process,
- how the company pays its bills,
- and the kind of financial accounting software being used.
Generally, this learning process takes about one month. The “discovery” process helps ensure that nothing falls between the cracks and that all documentation is up to date. It also helps determine how much support the organization needs. For example, one company may need an outsourced controller for one day a week, while another will need a controller two days a week and an outsourced CFO for one day per month. This transition period is a good time to set expectations and learn more about the way outsourced accounting service agreements work.
The transition period also is an important time to identify all the roles the departing person has filled that will need to be reassigned to others in the company. This could include HR functions, IT functions, safety monitoring, or basic tasks as scanning documents or opening mail.
Determining what the client needs and wants from an outsourced relationship involves assessing their current and future situation. Does the business have a financial statement, and are their monthly or quarterly meetings at which it is reviewed? Is the business on a full accrual basis or operating out of a checkbook? Is any financial analysis being done?
No Longer Mom-and-Pop
Some business owners have never implemented financial best practices in their companies, so they often don’t know what a true controller or CFO should be reporting, or the kind of insights they could learn that can help improve the organization. In other cases, the company has outgrown the abilities of the person who holds the controller title. It may have started as a mom-and-pop operation, but now has expanded to become a more complex business that needs more financial reporting and better real-time insights.
In these cases, we may provide a controller on a weekly basis, and a part-time CFO to help the owners read the reports and do some strategic planning.
For example, one client was a small business owner who planned to retire. His wife kept the books and ran the business out of a checkbook. There was no real financial reporting, and the information was just enough to get a tax return done. We worked with the new owners on a needs assessment, then provided an outsourced bookkeeper and part-time controller services. We shifted the business to full accrual basis, and now the outsourced professionals are doing cash flow projections so we can see future trends. The new owners understand when they will have an influx of revenue, which makes it easier to have a conversation with the bank about help with cash flow. The company also has started budgeting, since the owners now have solid numbers to create future forecasts.
If you think outsourced finance functions may be beneficial for your business, consider the following:
- Look at the job market. How many qualified candidates are out there and how much would they cost? Geography matters here. If you’re in a smaller city or rural area, you’re going to have a more difficult time finding qualified candidates.
- Do you really need a full-time controller or CFO? Or could a team of fractional outsourced professionals do the job on a part-time basis?
- What qualifications and experience level do you need in a controller or CFO? If you need these high-level abilities only a few days a month to provide the data and insights your business needs, why pay a full-time salary?
- Outsourced finance teams never take vacation. When one team member is unavailable, other team members who know your business step in to keep the services flowing seamlessly.
If you are considering outsourced accounting and finance services for your business, contact your Adams Brown advisor.