Companies without a Chief Financial Officer are at a competitive disadvantage. It’s not unusual for small to mid-sized firms to have sophisticated operations, complex cost structures, and financial challenges like large companies. This often means that the CEO or the owner of the business needs the expertise of a senior financial executive.
As an owner or CEO of a company, have you ever wondered how to solve the problems you’re facing? Have you ever spoken with another owner and come to the conclusion that what you really need is the advice of a CFO . . . but knew that you either didn’t need a CFO on a full-time basis or couldn’t afford the cost of a full-time CFO? Did you then decide to give up on finding the advice you need?
You are not alone. You are probably doing what most owners do and live with the problem or spend countless hours trying to figure it out yourself. Let’s be honest, is this really the best use of your scarcest resource, your time. Are you really the right person to do that? Do you have the background or expertise to prepare financial statements, or even fully understand them? Is digging into these areas even a good use of your time? As the owner, you need to be the visionary, focusing on the future and spending time with your customers.
Using your time to develop financial information or analyzing your cash balance and future needs is something that someone else should be doing. What you need is the assistance of a high level financial professional. Outsourcing this function is an attractive alternative to hiring another employee and adding the associated overhead (salary, payroll taxes, and fringe benefits).
ADVANTAGES OF OUTSOURCING CFOs
Better financial information for key decision-making. If you have found yourself frustrated with the lack of information from your bookkeeper or controller, chances are the information they are giving you is of questionable value. You cannot effectively run a business in that situation.
A couple of facts about small to mid-sized businesses:
- Most either don’t prepare financial statements, or they are not reliable.
- Models do not exist that interpret the future results of the business decisions made today.
- You simply cannot make important business decisions while relying on bad, inaccurate, or incomplete information.
More time to spend with customers. To be competitive, you need to spend most of your time with current and prospective customers. Particularly today, you need to be with your customers as much as possible. Just as you are trying to get new customers, your competitors are trying to meet with your customers. You need to be sure your customer’s needs are being met.
More money from the bank and from vendors. Bankers and vendors are more sophisticated than ever. With the current financial situation affecting all businesses, many are nervous about lending to anyone other than the largest and safest companies. They require regular and reliable financial statements. The financial statements must look professional, follow accepted accounting principles, and highlight the company’s key ratios. A CFO working with you on an as needed basis can improve your company’s external “image” and assist you with opening doors to banks and obtaining better vendor terms.
Other advantages to having an outsourced CFO include:
- A sounding board for the owner in making key decisions
- Fewer cash flow surprises
- Better trained accounting staff
- A theft deterrent
- Better documentation and controls
- Fewer surprises relating to tax payments
- Solutions to company problems
SOME THINGS TO CONSIDER
A CFO is a proactive professional that has a pervasive knowledge of information important for the owner to properly run the company. This includes handling not only financial matters but also addressing HR, sales and marketing, IT, and other issues needed to help take the company to a higher level of success.
A common misconception is that a CPA can take the place of a CFO. The reality is that a CPA cannot do the work a CFO does because each has a different set of skills. As noted above, a CFO has a broad range of experience in financial and non-financial areas. The CPA and the CFO should work very closely together, but neither has the ability to step into the other’s shoes.
So, when you are looking to outsource the CFO position, you need to look for a professional with 20-plus years of experience. You should be sure that the CFO is supported by a national organization that has the resources to give you the support you need. With these qualifications it is highly unlikely that a problem or issue will arise that can’t be resolved.
Avoid signing contracts. If an organization is not confident and competent enough to perform these services based on a hand-shake, consider walking away.
You should be comfortable the fee fits comfortably within your budget. Ask for a monthly “ceiling” on the fees to be paid; there should never be any surprise on fees.
Finally, be sure that you are comfortable with the CFO. With a high level of trust between the owner and the CFO, the company will be in a better position to meet the challenges it faces.