What is a CFO
A Chief Financial Officer, or CFO, is one of the key leaders of a business organization. They are responsible for all financial activities within an organization, which include accounting, finance, treasury, tax and administration. In small to medium sized companies, it is also common to have information technology, human resources and facilities functions under the CFO. The CFO is the right-hand man to the CEO, a key contributor to setting the strategic direction of the business, and someone who is accountable to the board of directors. The CFO is also an important interface to outsiders such as stakeholders, commercial bankers, CPA's, insurance brokers, lawyers, strategic partners, investment bankers, prospective investors, IT consultants and many other service providers.
What is an Outsourced CFO
An outsourced CFO is just like a regular CFO with the same skillset and training, only they provide their services on a part-time basis to multiple businesses as an independent contractor instead of as an employee. Outsourced CFO's have extensive experience because, unlike employee CFO's who have worked for only a few companies during their career, outsourced CFO's have experience with a large number of businesses, encompassing a variety of industries, at all stages of growth. Many companies are not large enough to need the services of a highly compensated, full-time CFO, yet every company can benefit from having a CFO accessible to its management, outside service providers and board of directors. The outsourced CFO provides an excellent solution by offering their services on an "as needed, pay as you go" basis.
What is the difference between a CFO and a Financial Controller
There are two types of financial leadership roles in a business, a financial controller and CFO. Financial controllers are responsible for managing the accounting operations of a company. A Chief Financial Officer (CFO) is a strategic partner to the CEO and the senior leadership team who is charged with financial responsibility for the whole company.
A financial controller is responsible for overseeing the accounting function,
generating financial and management reports, managing day to day cash flow, preparing operating and capital budgets, establishing and maintaining policies, procedures and internal controls and ensuring the integrity of financial records.
The CFO is responsible for fiscal oversight of the entire company, financial analysis and forecasting, cash flow forecasting, strategic planning, risk management, tax strategy, managing relationships with banks, CPA's and insurance brokers, developing company key performance indicators (KPI's), and capital formation strategy (debt and equity) and execution.
Every company needs both roles but not all companies need or can justify the cost of staffing both roles on a full time basis. This is the primary reason that many small to mid-sized companies have embraced the concept of adding an outsource CFO to their team.
Why does every company need a CFO
Every company, regardless of size or stage, has needs that fall directly within a CFO's area of expertise. Regardless of company size, it still keeps books and records, files taxes and other statutory reports, has employees, prices products and services, manages cash flow, plans for the future, obtains capital for growth, communicates with a board, stakeholders and service providers, etc. Many smaller companies have full charge bookkeepers and/or accountants (either employees or service providers)
who handle much of the day to day recordkeeping and reporting, but they are not qualified to contribute at a strategic level or to be the primary company interface with outsiders. They also lack the knowledge and experience relating to capital formation, accounting best practices, taxes, rules and regulations, financial planning and analysis, to name a few of the many areas that a CFO usually covers. Furthermore, it is somewhat counter-intuitive that often the earlier stage company needs access to expertise that only a senior level, strategic CFO can provide. Having a CFO on your team on an outsourced basis provides an ideal solution. Although the typical company that utilizes an outsourced CFO is one that doesn't have a full time, employee CFO, that isn't always the case. Sometimes a company will bring on an outsourced CFO to supplement an in-house CFO in areas where the in-house CFO lacks the time, experience, training or connections.
What types of businesses can benefit from having an outsourced CFO
A typical client is privately held, growth-focused, and addressing larger market opportunities, with sales between $1 and $75 million. These companies can represent a wide range of industries, including manufacturing, distribution, technology, medical device, construction, and services businesses. Although most of the companies I've served do not have a full time CFO, that is not always the case. In certain cases, a company may encounter a situation outside of their CFO's expertise and experience, or one that requires additional resources for a limited period of time. Those situations are ideal for an outsourced CFO who can both complement and, when needed, mentor the company's full time CFO.
What are the benefits of having an outsourced CFO on your team
There are many benefits of having an outsourced CFO on your team. They include, but are not limited to:
Cost effective solution eliminating the need for a highly compensated, full time CFO; an outsourced CFO is available to your company on an "as needed, pay as you go" basis
-
Access to broad expertise because an outsourced CFO has experience in many businesses across a wide range of industries and stages of maturity
-
Valuable Connections will be available to your company by leveraging an outsourced CFO's network
-
A Trusted, Unbiased Advisor An outsourced CFO is independent, and objective is a sounding board and valuable resource to the board, senior leadership team, employees and the company's other service providers
-
CFO expertise will be available to a company that doesn't have or need a full time CFO
What are some of the reasons why a company may need an outsourced CFO
When your company needs to do one or more of the following...
Accounting & Financial Reporting
-
Evaluate and tighten internal controls
-
Convert from cash to accrual accounting
-
Convert to GAAP reporting
-
Have an audit, review or compilation
-
Develop a staffing plan for finance, accounting & administration
-
Improve timeliness and accuracy of financial reporting
-
Provide information to the banks or investors that you don't have or know how to prepare
Planning & Analysis
-
Plan for, or when you are beginning to experience rapid growth
-
Develop new products, markets or service offerings
-
Forecast short-term or long-term cash flow
-
Know how much capital is needed to fund the future
-
Prepare financial forecasts for the next 1 to 5 years
-
Develop a business plan or operating budget
-
Develop a capital expenditures plan
-
Shelter income
-
Minimize taxes
-
Understand & improve product and service pricing, cost & margins
Debt & Equity Financing
-
Raise capital - debt, equity or both
-
Develop a financing strategy
-
Improve relations with a bank, lender or investor
ERP Systems
-
Select or implement a new or replacement ERP system
Management & Operational Support
-
Begin or expand international sales, service &/or operations
-
Know what your company is worth today and how to improve it
-
Improve top-line growth
-
Improve gross margins
-
Improve profitability
-
Reduce operating expenses
-
Improve cash flow
-
Identify KPI's (key performance indicators) for your business
-
Develop dashboard reporting
-
Implement or improve your manufacturing cost accounting system, reporting and analysis
-
Provide the senior team with operating performance reviews and analyses
-
Be introduced to a commercial banker, attorney, intermediary, insurance broker, commercial real estate broker, consultant, CPA or other service providers
Business Transition Planning & Support
-
Plan an exit strategy
-
Know what your company is worth & how to improve it
-
Plan, prepare for or manage a business transaction such as a sale, merger, acquisition or ownership change
-
Plan & complete a transaction with a strategic partner