Does my business need an outsourced CFO? Key benefits and insights

Strong financial management plays a critical role in determining the success and sustainability of any business. As your business grows, so do the risks and financial complexities. The article will explore the signs that your business might need some external help, and the benefits that an outsourced CFO will bring.

What is an outsourced CFO?

CFO is short for Chief Financial Officer, and this is the most senior and experienced finance professional in most big businesses. A CFO provides high quality finance, accounting, commercial and operational advice to a business. Not surprisingly, a CFO comes with a hefty salary and cost to the business, and so it is usually only larger businesses that hire a full-time CFO.

Smaller businesses, particularly those that are looking to grow and expand services, also need the advice and services provided by a CFO but not on a full-time basis. This is where an outsourced option comes into play. An outsourced CFO could work on a one-off project or on a retainer, for a much smaller number of hours per month. This means the cost is substantially lower than hiring a full-time resource.

How do I know if I need an outsourced CFO?

There are several scenarios in business where the services of an outsourced CFO may be just what you need:

Rapid business growth

As a new business entrepreneur, you are busy focusing on marketing, sales, servicing customers, and you just don’t have time for budgeting, reporting and building a cash flow forecast. An outsourced CFO can ensure your financial strategies align with your growth goals.

Limited financial expertise

As a small business owner, you know your business and your customers, but you don’t really know your numbers. Some of your decisions are made based on gut instinct and you don’t really know whether you are making as much profit as you should be.

As a more established business owner, you have an internal accountant who looks after your bookkeeping and compliance, and who provides you with monthly reports on business performance. However, you don’t really understand them and need more financial planning and analysis. An outsourced CFO can fill this gap.

Cash flow issues

Are you experiencing cash flow challenges, such as difficulty covering operating expenses or managing the collection of debtors? An outsourced CFO can help identify inefficiencies and implement solutions to improve cash flow management.

Fundraising needs

If you are seeking to secure funding from investors or lenders, an outsourced CFO can prepare detailed financial statements, create forecasts, and present a compelling financial story to attract potential backers.

Preparing for sale or acquisitions

If you are planning on selling your business in the next 3-5 years, now is the time to seek the financial expertise of an outsourced CFO to ensure your financial results show the consistency and improvement over a 3-5 year period that will show your business in the best light to prospective buyers.

If you are considering making acquisitions to support strategic goals, your outsourced CFO can assist with financial modelling, investment requirements and ensuring that you get the best value from the transaction.

What benefits would an outsourced CFO bring to my business?

Performance visibility

Timely management reports and dashboards provide visibility over business performance that allow you to make better business decisions. Establishing KPIs and reporting against these will highlight the levers to pull to impact business performance. Your business should also have an annual budget so that you know how much you can spend, and to help build financial control into business operations.

Planning with clarity

Improving cash flow is critical to all businesses, and equally important, knowing that you have enough cash in the bank to pay those large, periodic liabilities such as your quarterly BAS, superannuation, and for investing in new equipment. An outsourced CFO will build you a forward-looking cash flow forecast that predicts cash inflows and outflows for the next 12 months and use driver-based modelling to support flexible scenario planning.

Improved financial performance

With knowledge and analysis comes the opportunity to improve performance. Your outsourced CFO will use their vast experience across a variety of commercial organisations to highlight areas for improvement and suggest ways to improve profitability and cash flow generation.

With the financial insights you will now be receiving, you can be confident that you are making better data-driven business decisions.  

Risk management 

As your business grows in size and complexity, so do the risks that it faces. Your outsourced CFO is your experienced risk management partner. Identifying and managing risk in your business ensures that your hard-earned business success is not derailed by events that could have been avoided.

Business partnering

Knowing that you have top-tier expertise and experience on your team brings peace of mind that you have someone who knows your business and who you can bounce ideas off, particularly about understanding the commercial implications of strategic changes you may be considering.

Your outsourced CFO will also be able to draw on their experience in larger organisations to assist with best practice systems and processes to introduce as your business grows.

How to choose the right outsourced CFO for your business?

Choosing the right outsourced CFO for your business can be a daunting prospect. Here are some tips to help you make the right choice.

Assess their experience

Look for a professional that has experience working in businesses of a similar size and industry. Many accounting firms offer outsourced CFO services; however, they are often serviced by qualified accounting staff and partners that have only worked in public practice. Whilst they will undoubtedly be able to produce management information and cash flow forecasts, their lack of experience in running a business can lead to a lack of true business partnering.

Define your goals

Before hiring, clearly outline what you hope to achieve by bringing an outsourced CFO on board. This will help you identify candidates with the skills and experience to meet your objectives.

Evaluate communication skills

Strong communication skills are essential for an outsourced CFO to work effectively with your team. This will become one of the most trusted relationships in your business, so make sure they can explain complex financial concepts in a way that is easy to understand, and at the same time, that they can present to your board and investors as needed.

Consider their availability

Do they have the time and flexibility in their schedule to meet your business needs? Make sure you understand who will be completing the work and who will be your primary contact. Some outsourced CFOs will allocate set days each month to your business, and some will be more flexible to meet the needs of their clients. Determine which will work best for you.

Understand their pricing model

Discuss pricing and service packages upfront to avoid surprises. Outsourced CFOs could charge hourly rates, project fees, monthly retainers, or a combination of all three. Make sure you understand the cost and that it fits within your budget.

Conclusion: Is an outsourced CFO right for my business?

Deciding whether your business needs an outsourced CFO ultimately depends on your current financial challenges and goals. If you’re facing cash flow issues, preparing for growth, or seeking expert guidance without the cost of a full-time hire, an outsourced CFO could be the perfect solution.

By bringing strategic financial expertise, commercial advice and business partnering, an outsourced CFO can help your business navigate complex financial challenges and position itself for long-term success. Take the time to assess your needs and find the right partner to support your journey.

Ready to explore outsourced CFO service?

By outsourcing financial management to an expert in the field, you can focus on what you do best – running and growing your business.

Get in touch with GearChange Business Advisory for a no obligation chat to see if we can help your business move up through the gears.

Web: www.gearchange.com.au

Email: info@gearchange.com.au