Your Startup Should Outsource These CFO Services

Written by David (DJ) Johnson
Startup Finance
Two people discussing paperwork and working on a laptop

An outsourced CFO is a financial expert who partners with an organization to provide strategic guidance and financial oversight. Their primary responsibility is to ensure that all financial transactions are executed according to industry best practices and compliance regulations.

What is an outsourced CFO?

An outsourced Chief Financial Officer (CFO) is a financial executive who provides strategic, business decision-making expertise to help clients achieve their objectives and maximize their financial resources. This model of contract-based financial leadership allows businesses the advantage of having a senior executive-level finance partner without taking on the responsibility or cost associated with full-time hiring.

The outsourced CFO offers advice on many topics, including cash flow forecasting, budgeting, cost management, capital raising, strategic planning, tax filings, debt financing and risk management. In addition, they advise on long-term strategies for achieving business goals such as cost-cutting measures, restructuring operations and growing revenue.

Outsourcing is a great option for businesses who don’t have the internal resources to employ a dedicated Chief Financial Officer on-site. By leveraging an outsourced CFO’s unique set of professional experiences, businesses can quickly get up to speed on sophisticated accounting and finance needs.

How do they benefit small businesses?

Hiring an experienced CFO for a small business can be an invaluable decision. CFOs are instrumental in helping small businesses set up processes, procedures and systems to ensure operational efficiency and sound financial management of the company’s finances. They provide crucial financial and market analysis that can help drive profitability and growth, allowing small businesses to plan ahead, remain competitive, and set the foundation for success.

They are also experienced at developing strategies for meeting goals, providing capital requirements solutions and managing budgets. Outsourcing CFO services provides the opportunity for small businesses to benefit from the expertise and guidance of an experienced CFO without having to take on the cost of hiring one full-time. As a result, these companies can flourish without having to make significant investments in personnel or technology-based solutions.

Which tasks should I consider outsourcing?

Financial Planning and Analysis (FP&A)

Small businesses stand to benefit greatly from outsourcing CFO services for FP&A. Financial planning and analysis (FP&A) is the process of examining an organization’s financial position and taking steps to maximize their return on investments and reach short-term or long-term goals. This involves both strategic analysis, such as examining economic projections and market conditions, and tactical elements, including optimizing budgeting decisions and leveraging financial resources.

Using data-driven analytics such as cost-benefit analysis, key performance indicators and other trend metrics, FP&A provides the essential information needed to proactively plan for the future through initiatives such as cost saving, cash flow improvements, and growth strategies.

When you outsource a CFO for FP&A purposes, you bring in an experienced professional who can identify opportunities to cut costs and maximize efficiency within your spending. With an outsourced CFO analyzing their books, business owners can do so without possessing a CPA or CMA certification themselves.

CFOs can also aid in goal setting by evaluating financial trends and developing future projections that will help you estimate profitability and plan ahead for upcoming expenses. CFOs are also informed about current regulatory trends that may affect a small business’ finances. Plus, companies utilizing CFO outsourcing services have access to advanced data analytics and reporting tools which can offer key insights into risk management, cost optimization and more.

Budgeting and Forecasting

Many businesses recognize budgeting and forecasting as important tools for achieving financial success. At their core, budgeting and forecasting are two activities that enable businesses to set financial goals and plan how to achieve those goals. Budgeting is a process of allocating existing resources such as income and capital in order to accomplish a specific objective or goal. Forecasting works in tandem with budgeting by estimating likely future results based on past performance or current movements within the market. Combined, budgeting and forecasting offer business leaders a powerful way to make well-informed decisions about the present, as well as prepare for any potential changes in the future.

By outsourcing a CFO for budgeting and forecasting, small business owners can benefit from taking the financial expertise of an experienced CFO and applying it to their specific business needs. Without this in-house knowledge, small businesses may often be unable to effectively measure their processes for efficiency or evaluate financial situations accurately.

With an outsourced CFO in place, companies can receive professional advice from an expert source on where to focus efforts, how to improve operations, and how to plan for the future. Additionally, CFOs are able to provide valuable analysis about past performance and real-time insight into upcoming risks that could impact overall financial goals. Since CFOs understand the industry trends and have a good knowledge of tax rules and regulations, they are well-equipped to help small businesses set themselves up for success in uncertain times.

Bookkeeping and Financial Reporting

Bookkeeping and financial reporting are two essential principles that underpin a business’s bookkeeping system. Bookkeeping is the practice of systematically recording and storing all financial activities, such as income and expenses, in an organized manner for the purpose of obtaining financial information about the business.

Financial reporting is the process of providing written records about the financial status of a company, including balance sheets, income statements and cash flow statements. These documents provide insight into how well a company is performing by providing a summary of cumulative transactions throughout certain periods of time.

Professional bookkeepers and financial reporting experts can help businesses register bookkeeping entries on time and compile balanced and accurate financial reports for external purposes. Outsourcing a CFO can be an invaluable benefit that helps to ensure accurate reports, insightful analytics and advice on best practices. CFOs are uniquely positioned to provide sound fiscal guidance that helps businesses optimize cash flow, create sustainable growth plans, and comply with new regulations. CFOs are also able to provide unbiased insights that help businesses make strategic decisions while staying within their budget.

Risk Management

Risk management is the process of identifying potential risk factors in an organization or project and managing those risks accordingly. Understanding risk assessment is essential for any organization or project to be successful, as it helps them to identify risk factors and put strategies in place that address them in a timely and effective manner. Risk management looks at risk from a broader context than just traditional risk assessment, looking at risk prevention, risk monitoring, risk control, risk reduction and risk transfer techniques.

It’s important to select the right risk management strategies for the company, as different risk management approaches have different levels of cost and effectiveness. The goal of risk management is to minimize the impact of losses caused by uncontrollable risk factors without blocking potential profit opportunities. Having a sound risk management strategy helps organizations protect value as well as ensure sustained success in today’s ever-evolving business environment.

When it comes to mitigating risk in a small business, engaging the expertise of a CFO is one of the most valuable actions that can be taken. One area that many small businesses do not have an in-depth understanding of is risk management. CFOs are uniquely positioned to identify, evaluate, and ultimately limit risk for businesses of any size.

CFOs are able to anticipate potential risks and bring them up as important considerations within the organization. There is no replacement for a CFO’s advanced knowledge when it comes to providing sound advice on how to manage your business’s financial risks and ensuring that you maintain optimal profitability.

Strategic Planning

Strategic planning is a systematic process that helps organizations focus on their strategic goals and objectives. It is a disciplined effort to produce decisions and insights that help shape the future of an organization.

The strategic planning process involves analyzing the current environment, setting strategic goals and objectives, identifying key initiatives, and creating actionable plans for implementation. Strategic planning also involves monitoring progress through periodic reviews to ensure all stakeholders remain engaged in achieving success. Ultimately, strategic planning gives teams structure for assessing strengths, identifying critical opportunities for growth, devising strategies for long-term success, and ultimately pursuing long-term strategic objectives.

CFOs bring a critical eye to data analysis, financial linkages and forecasting, enabling a deeper understanding of operations, costs and patterns. With access to strategic expertise that minor businesses wouldn’t otherwise have access to, CFOs can help build realistic business plans and budgets focused on sustainable long-term growth. CFOs are incredibly knowledgeable of how different business decisions will affect a company’s overall financial well-being and can act as a guide to keeping the company on track and meeting its financial priorities. This gives much needed insight into the potential returns of any investments, as well as what resources may be necessary in order to reach those goals.

CFOs also bring knowledge from their previous experiences working with other similar businesses to that of the client they are currently working with; this will give access to resources and advice tailored to exactly where the company needs it most. CFOs provide an outside perspective that business owners or executives may not have access to, allowing for more comprehensive analyses and ultimately providing cost savings in the long run by helping companies better navigate their finances.

Capital Raising

Capital raising refers to the process of obtaining capital through financing or investment from multiple sources. These sources can include private investments from venture capital firms, crowd-funding campaigns, bonds, and commercial financing. Capital raising is often necessary for a business to grow, fund research and development projects, pay down debt, expand into new markets, and maintain capital reserves.

Capital raising can also be done for potential mergers and acquisitions, buyouts or recapitalization of existing companies. Capital raising is a complex process that requires a thorough understanding of finance and implies challenges related to due diligence and legal agreements. It’s important to have professional advisors involved throughout the entire process who are aware of different methods on how capital can be most effectively raised.

Hiring an external CFO who specializes in capital raising ensures that small businesses have access to an experienced professional with specific knowledge of the process, who can develop a comprehensive plan and secure necessary funding quickly and efficiently. CFOs have familiarity with potential investors and possess knowledge about what funding sources may be more receptive to your specific project or business plan. More importantly, they have the acumen to comprehend where a small business’ strengths lay within its respective market and industry, providing invaluable insight into how best to position itself when it comes time to fundraise.

Mergers and Acquisitions (M&A)

Mergers and acquisitions (M&A) occur when two or more companies combine to form one larger entity. They play an important role in the business world by helping companies expand into new markets, capitalize on complementary expertise, reduce competition, and meet certain financial goals.

This process can also help companies increase market share for existing products and services, boost overall efficiency, access resources unavailable prior to the merger or acquisition, gain additional sources of funding or investment capital, better manage financial risks and liabilities, and scale up faster in order to remain competitive in their respective industries.

For small businesses looking to grow through mergers and acquisitions, a CFO for hire provides a great asset for executing deals. CFOs have the business acumen, financial knowledge and industry contacts necessary to lead M&A from start to finish. They bring high level thinking and can offer strategic advice on best practices in addition to handling the transactions. CFOs know what questions need to be asked (and answered) – they can see opportunities that might not even be obvious to those on the inside, since they don’t have day-to-day operations blinders on.

Debt Restructuring

Debt restructuring is a process of reorganizing debt obligations by negotiating alteration in the terms of debt such as payment schedules, interest rates and other variables. The goal of debt restructuring is to make debt payments more affordable for debtors while creditors receive an expected return on their investment.

The debt restructuring process may also involve debt consolidation, which involves combining multiple debts into a single debt with an agreeable repayment plan. An important part of debt restructuring is understanding how different types of debt, such as secured and unsecured debts, can affect the overall debt profile. This allows the debtor and creditor to come to an agreement that meets both parties’ goals.

CFOs are experienced financial professionals with the expertise required to evaluate debt strategies, find savings opportunities, and restructure existing debt into something that is more affordable for the business. CFOs also have more power to renegotiate with creditors, allowing businesses to navigate tough economic times with a far better understanding of where their expenses are at, and how much wiggle room they have for repayment terms and interest rates. Hiring a full-time CFO can be expensive, but outsourcing a CFO for debt restructuring can provide cost savings while still providing the same strategic advice to restructure a company’s finances.

Tax Planning

Tax planning is the process of researching tax laws to structuring investments, income and expenses in order to reduce tax liability. This type of planning is based on tax rules and regulations, which are constantly changing as new tax laws are implemented. It involves a thorough understanding of both tax avoidance and tax reduction strategies, examining what tax deductions are available for specific tax years and gathering records to prove any tax credits.

Good tax planning helps individuals and businesses identify possible tax saving opportunities that may increase cash flow and improve their financial position. To do this successfully, it’s important to have a well-informed professional advisor managing the process from start to finish. With extensive knowledge on areas like tax law and compliance, they can be vital in helping you achieve better outcomes when filing taxes.

As CFOs are constantly focused on finding innovative ways to enhance profitability, they can greatly simplify the often intricate and complex process of tax planning for a business. They can also help manage paperwork, filing and compliance regulations related to taxes, keeping your business in full compliance along with offering guidance when making necessary purchases or investments. Since CFOs understand how different accounting standards impact taxes, they can also inform businesses what technology solutions will help improve financial visibility and lower taxes – an invaluable benefit that small business owners may not be able to tap into without CFO-level advice.

Hiring an outsourced CFO is the perfect financial solution for small businesses. An outsourced CFO can provide expert guidance and advice that would otherwise require a full-time commitment which many small businesses cannot afford. They can bring their experience and resources to the company, saving time and money in the long run as well as offer strategic insights and help discover new opportunities that may be valuable for growth.

By helping to devise strategies that respond to the changing market, develop more comprehensive financial oversight techniques, analyze financial models and estimate future budgets, the outsourced CFO could prove to be the difference between company success or failure – making it well worth their investment for small businesses.

Utilizing CFO services is an excellent method for maximizing the return on investment of your most precious resource: time.

About the Author

David (DJ) Johnson

DJ is the Director of Rooled. His entrepreneurial journey started as an accountant for two Big Four accounting firms, then to managing rock bands for 10yr. Financial advising called him, and he built one of the first ever outsourced accounting firms.