The Benefits of Outsourced CFO Services

According to Price Waterhouse Cooper’s 2022 survey, “Outsourcing is delivering results. A large majority of customers (87%) say that today’s outsourcing delivers the benefits projected in the original business case, whether partly or completely”

Additionally:

“Many respondents (53%) indicated they outsource activities that they consider to be ‘core’. For example, in the finance function, this could be a move from outsourcing payroll and accounts payable towards seeking assistance with budgeting, forecasting and management reporting.”

It takes a wide variety of specialties and skills to run all types of businesses, and outsourcing some of these roles can provide a depth of expertise and breadth of experience that would be otherwise unattainable. Either unattainable because of cost concerns, or because of the tight labor market.

What should I expect from Outsourced CFO Services?

Saving money is not the primary benefit of hiring an outsourced CFO and accounting partner, though it is a nice side effect. Many companies who are facing financial challenges cut back on hiring higher-level finance leadership roles (like an in-house CFO) just at the time when those insights and guidance are needed the most.

According to PwC’s 2022 Pulse Survey, “Labor costs will have the strongest impact on corporate margins in 2022. Changing processes to reduce reliance on employees, allowing permanent relocation outside of corporate offices and outsourcing are all part of the strategy to reduce costs.”

Leveraging outsourced chief financial officer (CFO) services can save your business more than you invest through the financial, operational, and strategic insights they bring to the table. As an active part of your leadership team, your outsourced CFO partner can help business owners and CEOs drive greater profitability and business growth through full service consulting firm services. They will also help you make decisions based on accurate data, future projections, and financial expertise.

In addition to the flexibility and insights an outsourced CFO solution can bring, a fresh set of eyes can illuminate areas of inefficiency that have become so much a part of the fabric of the day to day operations of an accounting department that they go unnoticed.

The CFO’s role within an organization depends on several factors. These components may include the expectations coming from the CEO and board of directors, and may also vary depending on the industry, corporate strategic planning, and the goals of the business. A company’s size can also have a significant influence on the CFO’s role.

The Importance of Forward-Looking Financial Analysis

The foundation of any company’s accounting and financial management is to produce timely and accurate financial data for the business. The CFO oversees these accounting services and finance functions, but their true value comes from the ability to provide forward-looking financial forecasting and analysis. This analysis should be focused on driving additional profitability and increasing the company’s value.

Whether you have a full-time, part-time, or outsourced CFO, below are some examples of the forward-looking financial analysis you should expect from the CFO role:

Cash Management & Forecasting

Can you predict when your business will have a surplus of cash that needs to be managed or when you will have a shortage of money that requires financing?

Cash flow problems can kill businesses that might otherwise survive. Your CFO should be monitoring cash flow and analyzing cash flow projections regularly to ensure your business does not run out of cash.

If your company is struggling with cash flow issues, there may be hidden inefficiencies, accounting practices, and operational issues that can be addressed by a CFO who looks at the big picture

Budgeting & Expense Control

Does your business have a budget? Do you receive an analysis comparing prior year actual, current year actual, and current-year forecast on a regular basis?

Your CFO should own the budgeting process by incorporating input from each department for the most accurate and complete projections and financial reports. They should also be monitoring budgeted versus actual results on a quarterly or monthly basis and reforecasting accordingly.

The fresh perspective of outsourced contract CFO services can provide high-level strategic guidance to optimize revenue growth in new and exciting ways.

Compensation Plan Development

Is the compensation of your employees aligned with the goals of the company?

The CFO of a company should help to structure employee compensation plans that incentivize efficiency and align with the financial projections and goals of the company.

eGuide: What Business Should Expect From Their Accounting Department

KPI Development & Analysis

Are you maximizing margins? Are profits analyzed by revenue stream? Are employees being utilized appropriately to maximize profitability?

KPIs (Key Performance Indicators) are different for every business. They should act as the company’s compass, and the CFO serves as the navigator.

Finding one source of truth and ensuring that the data driving financial statements and reporting are accurate, relevant, and timely is essential to the function of an outsourced CFO.

It is the responsibility of the CFO to work with those in operations to help develop KPIs applicable to the company and support the analysis of those KPIs regularly. The CFO should be using the data from the KPIs to assess business performance in real-time. Making changes that directly improve KPIs can help build the future value of the company.

Board & Investor Communications

Are you providing valuable financial information to your Board of Directors so they can review the trends of the company’s operations and assist in making appropriate decisions? Is the information presented professionally?

Your CFO should be preparing presentations for your board members that effectively communicate the company’s financial information in an organized manner using key performance indicators. The information should illustrate trends to visualize projections so the data can help drive business decisions.

Securing Financing & Raising Capital

Do you review your banking relationships regularly? Are you confident you have access to financing on the best possible terms for your business? What are the capital needs of the company now and in the future? What is the best way to meet those needs?

Your CFO should play a key role in identifying and securing investment and financing. They should identify capital requirements before approaching financial institutions and investors to ensure you raise the appropriate amount of capital required to support your growth plans.

A successful CFO should also prepare presentations of the company’s financial information, allowing potential investors or lenders to understand the data and the company’s performance.

If your company is planning for an exit, an outsourced CFO can help you present your company’s finances to get the best possible valuation.

Tax Planning

How often are communications occurring with the company’s tax advisor to maximize all tax-related strategies?

Your CFO should maintain consistent communication with tax preparers to minimize your company’s potential tax liability.

Ongoing Analysis & Review

All of these responsibilities should be considered ongoing processes that are revisited on a regular pre-determined schedule and modified based on the most recent financial information available.

Furthermore, all of the results should be measurable to track the success of the performed analysis.

eGuide: What Business Should Expect From Their Accounting Department

Technology Streamlining or Upgrades:

Finding the most efficient tools can streamline reporting and internal processes and reduce wasted hours in your accounting department.

What to Expect from an Outsourced CFO:

While some accounting departments worry that an outsourced CFO will come in to be a hatchet person, that is rarely the case. To be successful, an outsourced CFO services company will work closely with the CEO or business owner and leadership team to align on goals and then share those goals with the accounting and finance service departments to make sure that the financial and accounting functions are aligned in supporting the business goals. .

Outsourced CFOs are advocates and allies, not adversaries. The added burden of being asked to conduct an audit, or to make strategic decisions and provide finance insights to a BOD or new CEO can overwhelm an otherwise functional accounting team. When you work with a high-level finance and business advisor they can put the right processes and procedures in place to avoid overburdening the existing team. Additionally, an outsourced CFO can see areas in which technology can help streamline processes to free accounting staff to do what they do best.

An outsourced CFO can help the existing leadership by serving as a finance and accounting coach to the CEO providing financial expertise and future-facing guidance for the organization.

When is the best time to bring on an outsourced CFO?

The best time to try outsourcing CFO services is not in a time of crisis, or as a last-ditch attempt to right a sinking ship, but in times of growth and prosperity when there is bandwidth and enthusiasm to create better processes and the financial leadership expertise to support growth and innovation.

However, if your business is in, or approaching, crisis mode an outsourced CFO services company may be exactly what’s needed. They will have helped other businesses navigate crisis situations and can implement strategies for your business leveraging their experience in multiple industries.

A Solution That’s Right For You

If your CFO is providing forward-thinking analysis, they are providing infinite value to your company. Think about how your business has grown and changed over the past 6 months, 12 months, and 3 years. Have you changed and elevated your financial and business model strategies to meet those changes?

Each of the outlined goals above can help maximize profitability and value for the business, and, if managed appropriately and adequately, companies with the correct financial infrastructure can witness significant operational improvements and growth. Having this kind of efficiency will allow you to think about your business in new ways and likely uncover new possibilities for what’s next.

It takes all areas of expertise to run a business. The role of the experienced CFO with its finance expertise and financial insights supports the CEO’s vision and the Controller’s daily operational duties. With the Outsourced CFO and Business Advisory services at Signature Analytics, you can have high-level finance insights that scale with your company’s growth.

If your business requires any (or all) of the forward-looking financial analysis mentioned above, but you’re not in a position to hire a full-time CFO or may have a team that just needs additional support, then explore the breadth of services offered by experts at Signature Analytics.

Our highly experienced accountants can act as your entire accounting department (CFO to staff accountant). If that solution isn’t the right fit, our team can complement your internal accounting staff, to provide the ongoing accounting support, training, and forward-looking financial analysis necessary to effectively run your company, analyze operations, and guide business decisions for the long term.

Have questions about our process? Contact us today for a free consultation.

The Benefits of Outsourced CFO Services

What should I expect from Outsourced CFO Services?