What to Expect from an Outsourced CFO

There’s a reason why outsourced CFO services are increasing in demand.

Startup financials can be challenging, and there are unique difficulties for every stage of a startup’s life.

Depending on your situation, to handle those challenges you might need more than a simple bookkeeper or even more than a CPA. Especially if your company is expanding rapidly or operating in a challenging market, you might benefit greatly from having a CFO.

But, hiring an in-house CFO can come with its own challenges. You might need to go through a lengthy search process and period of on-the-job training while the person you’ve hired gets up to speed.

For small businesses and earlier-stage startups, it can also be prohibitively expensive to hire a full-time CFO. And if your business isn’t yet large enough or complex enough to occupy one person on a full-time basis, a full-time CFO would likely be overkill.

Fortunately, there is another option.

Startup founders looking for someone to create accounting systems, build models and forecasts, and offer valuable advice should consider engaging an outsourced CFO.

Here’s what you can expect from an outsourced CFO.

What to Expect from an Outsourced CFO

Financial strategy and long-term planning

An outsourced CFO can help you define where you want to go, and how you’re going to get there. To do this, you’ll need to engage regularly in long-term planning (5-10 years). This expert can help you with financial modeling to make sure that you’re ready no matter what happens in your sector.

Annual Budgeting and Short-term Forecasting

While long-term strategic planning is critical for achieving your overarching goals, a budget can help you plan and execute better in the short term. The budget can also help to guide financial decisions for the year. More advanced CFOs can also implement processes to utilize rolling forecasts as a sort of continuous budgeting process, another tool for achieving your goals.

Financial Systems Strategy and Design

While the outsourced CFO likely won’t be the one building or installing your financial systems, they can help you lay the groundwork:

• Which software and systems are you using to track financials and other internal metrics?
• How do the systems talk to each other?
• Which internal controls and approval processes are in place (or need to be implemented)?

These systems are critical for making sure your team is making decisions based on timely and accurate reporting.

Addressing Financial Challenges

If your business’s cash flow isn’t where it needs to be, or your costs are growing faster than revenues, you have some financial challenges to address. A round of cost-cutting or perhaps even some restructuring might be necessary.

These can be difficult decisions leading to hard conversations with the organization. An experienced, outsourced CFO can provide an objective voice to help the CEO make decisions motivated by the good of the company.

Raising Capital, M&A, and Asset Sales

When making major decisions about the company’s capital structure, it’s crucial that the management team makes well-informed, data-driven decisions about the future of the business.  Having a CFO on hand to help with analysis, reporting, and strategic vision can make the process smoother.

Why Not Hire In-House?

At some point, you may decide that the company needs a full-time CFO. But typically that point comes once you hit a certain size or have successfully raised several rounds of funding.

Toward the beginning of your startup’s journey, there are some major advantages (and a few disadvantages) in deciding to go the outsourcing route.

Advantages of Hiring an In-House CFO

Hiring in-house gives you the opportunity to bring someone in early. They are able to steer the financial side of the company in a direction that fits his or her strategic vision from the beginning.

An in-house CFO also typically means you have a full-time person dedicated to your company. As their sole employer, they will be committed to your company and its vision.

Advantages of an Outsourced CFO

With typical full-time CFO salaries starting in the $180k+ range, an outsourced CFO can be a much more affordable option. Only paying for the services you need can be much more doable for a smaller or earlier-stage startup with limited resources.

An in-house CFO probably has a lot of experience and a solid network to turn to in difficult situations. But an outsourced CFO likely has other experts in his firm that you or he can tap into when challenging situations arise.

Getting up and running with an outsourced CFO is typically much faster than hiring. There’s no lengthy search period, and when you choose the right experts, the training period will be much shorter. Outsourced CFOs have experience getting up and running with a minimal ramp-up phase.

Partner with Startup-Focused CFO Solution

If your company is at a stage where you need more than a bookkeeper or CPA, but aren’t ready to hire a good CFO, engaging an outsourced CFO is an excellent option.

With Founders, you’re getting access to experts who know the startup space and can help you make sure your company is on the right financial path.

At Founders CPA we provide outsourced CFO and financial services focused exclusively on startups. If you’re ready, schedule a free consultation to talk to us about taking your company to the next level with an outsourced CFO.