A Chief Financial Officer (CFO) is a huge component of how we think of big businesses. Corporate structure, huge conglomerates, there’s always a CEO at the helm and a CFO making the big money-making decisions. Why do we think this kind of big-picture financial planning is too big for small businesses?
The answer is it isn’t. If you're looking to grow, scale, or expand your small business, financial planning is an important area to direct your scrutiny. Regardless of why you think you need one, outsourced CFO services could be the alternative you’re looking for to paying a CFO salary and hiring a full-time CFO.
A CFO is responsible for the present and future health of a business, big or small. This involves coordinating bookkeeping, overseeing accounting practices, and implementing financial changes in response to data and trends. It is this individual’s job to utilize financial information to make course corrections, facilitate change, and make big-picture decisions about the financial health of the business.
Here are some of the tasks that fall under the purview of a CFO:
Functions like these, especially financial reporting, are significant contributions an experienced CFO brings to the table. When it comes to business growth, long-term financial planning, and coordinating financial teams, a CFO does far more than an accounting team and a bookkeeper can do alone.
Depending on the structure of an organization, a CFO doesn’t necessarily start with the company. As financial needs and ambitions become more complex, a company may bring on a CFO to contend with financial developments and offer crucial financial advice.
Depending on the teams or individuals you already have in place, you may not need a full-time CFO. In fact, a full-time CFO can cut into valuable profits when you really only need them for a limited time for a project or for a small portion of your business’s lifespan.
Whether you’re looking for a short-term solution for a big financial issue or planning for a major financial strategy, sometimes you need a more limited CFO role. If you only need a CFO temporarily, why not pay a fraction of the cost by paying an hourly rate instead of a full-time CFO salary.
Managing risk is a key component of any financial executive’s daily responsibilities. By overseeing financial, accounting, and regulatory compliance risks, you may require part-time CFO services. Whether your business is entering a due diligence process, being vetted, or even audited, you may utilize a part-time CFO to get all your ducks in a row.
Conversely, a CFO can help with the ramifications of these financial processes. If an audit discovers certain financial gaps or inefficient processes, a CFO can address a specific issue and suggest a correction for better performance.
Whether small businesses, mid-sized companies, or corporate conglomerates, a CFO’s insight is invaluable for business growth. If you’re planning scaling or expanding your business, a CFO plans the next steps. Determining the ROI of a merger or business procurement? Analyzing quarterly data to make financial projections for an investment? For temporary, but pivotal, moves like this, part-time CFO services may be an ideal solution.
When your business is growing, you’re starting to see real income in proportion to more efficient spending. By being proactive about your budgetary development, you’re taking the first steps you need to maximize your output and increase your revenue. Sometimes that takes investments, big moves, and even small business loans. To incur those potential costs, you’ll have to develop an entirely new budget to understand your business’s financial timetable and an estimated ROI. Paying for fractional CFO services for projects like this is a worthy investment of your time and business’s money.
Depending on why your business needs to incur a fractional CFO cost, part-time CFOs typically sign up for ongoing projects. Whatever financial need you’re trying to fulfill, you’ll only see the benefits a CFO can bring if you retain their services for at least six months.
Typically, especially if you’re searching for dramatic financial growth or change, a fractional CFO will require years instead of months. Whether you’re trying to address serious problems in your accounting services, budgetary deficiencies, or efficient financial growth, the more time you give a CFO, the better. After all, they’re not here just to peruse balance sheets and analyze income statements - you want their expertise to enact real financial moves and improvements.
Considering the amount of data procurement, analysis, and implementation of new protocols, it may even be longer. The type of project you’re seeking a CFO will help determine how long your small business needs a part-time CFO. Having a specific goal or direction when entering talks with an outsourced CFO will provide more context for the length of your arrangement with them. Chances are, if they’ve overseen or consulted on a similar project at a comparable scale, they can provide context for your timeframe.
There’s no sticker value to attribute to the cost of a fractional CFO. There are many factors that contribute to how much you should expect to spend. The more you know about your business’s needs, its current systems, and its goals from a fractional CFO, the better prepared you’ll be when determining this cost.
Whether this is the size, complexity, or growth patterns, your current business structure and its makeup will factor into the hourly rate of a fractional CFO. This will impact how quickly they can get up to speed on your business’s finances, the goals you’re trying to achieve, and the rate at which change can be implemented. The bigger and more complex your business is, the higher the level of difficulty for a fractional CFO and they’ll be paid accordingly.
If your part-time CFO is needed for something more complex than basic CFO duties, you should expect to pay more. The more complex the task, whether that be financial reporting or planning, it will be more expensive. That’s a result of the amount of effort expended, support staff necessary, and time spent on the project that increases the cost.
If your financial systems are in disarray, your financial teams are siloed, and there are communication deficiencies between accounts payable and accounts receivable, you’re giving your fractional CFO a lot more work. These are integral issues that need to be resolved and a CFO can help. If they come into a system that’s barely functioning, they’re work is cut out for them and the cost will rise proportionately to the degree of difficulty.
Depending on the level of work needed, a fractional CFO may need additional support staff. This will be the case if you have small teams or financial departments that consist of one person utilizing software. Whether they’re responsible for providing their own support staff or they want to add to your existing teams can mean all the difference in price. Be sure you understand what a fractional CFO will need to analyze the business’s financials and what you’re expected to provide in terms of manpower and software.
Depending on how much a fractional CFO improves your business’s finances and general operations, you may decide to enter into a full-time CFO arrangement. However, that’s a big investment to incur without understanding its true worth.
An in-house CFO will cost your company hundreds of thousands of dollars a year. Though that investment may be worth it in the long run, you want to be confident it’s worth the price you’re paying. Outsourced CFOs allow you the best of both worlds - the increased efficiency and financial growth of having a CFO without having to pay the exorbitant price of keeping one on the payroll.
By hiring a fractional CFO, the terms of the agreement would be up to the two of you. Whether they work remotely, how involved they are in the daily finances, if they utilize a preexisting team or bring their own, and more are all up to you to decide. If after you’ve utilized a fractional CFO and you find their hands-on attention beneficial, you could extend the arrangement or begin the hiring of a long-term, in-house CFO.
Regardless of whether you’re seeking a fractional CFO or looking for a more long-term arrangement, you want to have all the information you need to make an educated decision. Bringing on this team member, whether temporarily or otherwise, is an investment of your business’s time, money, and resources.
Learn more about what an outsourced CFO can do for you, the services they can provide, and how the long-term investment of a fractional CFO can improve your business here.