Outsourced CFO: Why You Should Consider an Outsourced CFO

Scaling a business is a herculean task. You need to hire talent, build a great product, and sell it. Along the way you need to develop the infrastructure to scale and grow your business. A CFO is key to that process, but you can’t afford one. An outsourced CFO can help you get your business to the next level without breaking the bank. Here are a few reasons why an outsourced CFO is right for your business.

1. Why Do Small Businesses Need a CFO Role to Scale?

Small businesses often find that the first stage of growth is organic. The founders see a “white space” in the market and come up with an innovative idea. Early adopters start lining up. That first stage of growth demonstrates proof of concept and provides a tailwind to develop new offerings.

The next stage of growth, actually scaling the business, requires a new skill set. Founders might not have the financial or operational expertise to guide this phase of growth. A CFO skill set is critical at this stage, particularly as the organization begins to mature.

Hiring a CFO, or considering an outsourced CFO service, is the next logical step.

2. What Does an Outsourced CFO Actually Do?

CFOs manage the financial health of the business and help it grow sustainably. Outsourced CFO services mirror those core responsibilities and provide a wide range of services:

Budgeting and Forecasting: This is the most obvious CFO function. Financial budgeting and forecast is critical because it helps you determine how much you’re spending and how much you’re going to need to spend on future projects. Doing this accurately requires extensive financial knowledge, especially in small businesses that might not have mature reporting processes.

Cash Flow Analysis: This is similar to budget analysis but focuses on how much physical cash you have on hand at any time. It’s particularly important for small businesses that might face cash flow shortages at critical junctures. Having a lot of orders for your product is great. Having a lot of orders on credit is less great when you don’t have the cash to actually operate your business. An outsourced CFO makes sure you never find yourself in that position.

Monitoring KPIs: Aside from budgeting and cash flow analysis, CFOs keep track of your firm’s general health. They evaluate key performance indicators and financial ratios to see how well the company is doing. Those metrics might include inventory turnover rates (how long it takes to sell inventory), customer conversion rates, return on assets, or other metrics. A law firm accountant or restaurant accountant can build a budget, but they may not be able to develop true insight into your business. An outsourced CFO can neatly aggregate that data and determine how well your business is performing.

Determining the Optimal Capital Structure: This is where your outsourced CFO really adds value. You need to raise money to grow your business, either through debt (loans) or equity (selling shares). An outsourced CFO can evaluate market conditions and your company’s performance to determine the appropriate capital structure (or debt to equity ratio). This ensures that your business has the resources it needs at the lowest cost of capital. It’s also important to make sure you grow in a way that doesn’t dilute your ownership of the company or put the business at risk.

Do you have the human capital to carry out these key tasks and get it right, every time? You may be able to perform some of these functions internally, but in most cases you’re going to want a professional. Outsourced CFO services are financial “Swiss Army knives” that can add value on day one. Choosing not to have a CFO means choosing not to set your company up for success.

3. Benefits of Selecting an Outsourced CFO Instead of a Full-Time Hire

It’s clear by now that you need a CFO. The question is, do you need to hire a full-time CFO? In most cases, the answer will be no.

Hiring a CFO is an expensive investment because you’re paying for extensive training and work experience. Smaller businesses can’t offer the same salary as larger firms and need to offer considerable equity to make up the difference. You’ll also have to provide an extensive suite of benefits and integrate the new CFO into your existing organizational structure.

An outsourced CFO service also offers you greater flexibility. You may only really need the services of a trained CFO during a few periods each year. That might be capital raises, enterprise budget reviews, or major meetings with investors. Outside of those make or break events, your CFO might be twiddling their thumbs with not enough to do. Outsourcing the CFO role gives you the ability to tap into first-class expertise when you need it and where you need it.

4. Why Honest Buck Should Be Your Outsourced CFO

Honest Buck offers monthly CFO services to provide you first-class financial support on demand. Those services include preparing monthly financial reports, developing KPI dashboards, payroll processing, and more. Enjoy all the benefits of a full-time CFO at a fraction of the investment with flexibility tailored to your business. Honest Buck has particular expertise serving clients that need restaurant, law firm, or online retail accountant skill sets.

Managing a fast-growing business is a challenge, and you need support. Even if you have extensive financial knowledge, you need dedicated CFO support to keep your business running at peak efficiency. Honest Buck’s outsourced CFO service makes sure your finances are in order so you can focus on getting your business to the next level.

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