In our current labor market, employers are scrambling to hire and keep qualified employees. Many small businesses are growing and desperately need help navigating their financial statements. The cost of a full-time CFO starts at $150,000 and goes up from there. For small and medium businesses, this cost is likely too high. Therefore, outsourcing the role of the CFO makes the most sense.

 

The CFO

 

The terms Controller and CFO, or chief financial officer, are sometimes mistaken for one another.

A Controller will coordinate all the accounting of a company. They will then verify the accuracy of the financial information as presented to management. A Controller is more proactive in their approach to the financial statements.

A CFO is the person responsible for the strategic financial outlook of a company.

CFOs provide higher level analysis of a company’s financial statements. The CFO must understand all the complex rules of accounting, while providing forward looking advice.

Think of it this way, the Controller is like the quarterback of a football team. They make sure the players are in the right spot and the run the play called.

The coach is the CFO. The coach is usually thinking 2-3 plays ahead. The CFO is ultimately responsible for the strategic vision and direction of a company. They will evaluate revenue earned by a company from a historical standpoint and then apply it to future revenue streams. The CFO will also make sure that the company has maintained enough liquidity or seeks out access to liquidity. All of these processes are done well in advance to when the actual product or liquidity is needed.

Without a CFO, a company will be sailing blindly into each phase of development or miss out on opportunities.

 

CFO Outsourced Services

 

Currently, many business owners outsource one or several aspects of their business. Payroll is the most common outsourced service. Because of all the rules and requirements in payroll, it is easier to outsource that process versus trying to maintain a payroll department.

CFO outsourced services are no different.

An outsourced CFO will bring their analytical knowledge and business experience, but at a fraction of the cost. Sometimes outsourced CFO services are referred to as fractional CFO or virtual CFO. No matter the title they take, outsourced CFOs will bring substantial knowledge and experience to any organization. They bring strategy that many small and medium businesses are searching for.

 

CFO Services for Small Businesses

 

Some small business owners mistakenly believe that they cannot afford CFO outsourced services. They try to just go it alone. With most outsourced CFO services, you can start on the lower end of the fee schedule.

There is not a requirement to need all services offered. The beauty of outsourced services is you pick and choose from a menu of services.

Maybe you just need help setting up a key performance indicators (KPI). Once they are set up you plan on managing yourself. Or, you just want training on how to analyze your financial statements. It is not uncommon for smaller businesses to start out with only a couple of services and then build up to all the services. These are referred to as corporate finance services. You only pay for the actual services you need.

 

Recommendations for New Businesses

 

For newer businesses, I recommend the following outsourced accounting services:

1. 1. First, start out with a virtual or outsourced controller. To be able to analyze and react to changes in your financial statements, you need to be starting with accurate financial data. Bookkeepers work more with data entry than strategy. An outsourced Controller will have more experience in making sure all the information is accurate and correct. There was a saying in the 1980s that dealt with computers. That saying was ‘garbage in garbage out’. For your accounting records, if the information going in is not correct then the decisions you make for the future won’t be correct.

1. 2. Second, start in on some of the smaller items with the outsource CFO. In order of necessity, I would recommend:
      • Cash reserves. Ensure your cash reserves are set up correctly. Running out of cash or access to cash will be the quick end to your company. Have the outsourced CFO get you set up properly on the reserves. While this won’t necessarily bring in revenue, it will put your company on solid financial ground for the future.
      • Identify your end goals. The biggest issue business owners face the question of their ultimate end goal. Do they want to retire in 10 years? Sell the company for $5 million? Expand to a new market by next year? Whatever the goal is, the outsource CFO can help identify steps you need to take to get there.
      • Set up your financial levers. Now that you have your goals identified, the outsourced CFO can help you set up your financial levers. These levers will usually be analytical templates that help you, the owner, adjust your company to keep on a correct path. These templates also help you run ‘what if’ scenarios, such as what will the impact be if you discontinue a product or introduce a new product. For an example of financial levers, please see the following YouTube video on Virtual CFO Services.
   3. Third, meet weekly with the outsourced CFO. You must make this a priority. Challenge them and ask ‘what-if’ questions. Include them in executive meetings. You need to think of them as part of your C-suite team. They have a wealth of knowledge, make sure you are utilizing that in your company.

Steven D Hovland is a Certified Public Accountant and a Certified Forensic Accountant. He has 20+ years experience in auditing, accounting, and forensic investigations. He is the founder of Hovland Forensic and Financial, a virtual CFO service company as well as forensic litigation services.