By: Ryan Lynch, CPA
Key Takeaways:
- The sudden need to fill a high-level finance role, such as CFO, can have a major impact on a company and require an immediate solution.
- There is a shortage of finance professionals with the training and experience to serve in such roles, making it difficult for some companies to fill the position.
- With the rise in fractional outsourced services, more small and medium-sized businesses are turning to outsourced CFO services as an alternative full-time CFO option.
- To determine which option is best for the company, an initial evaluation of the CFO’s daily function is key.
- Outsourced CFOs bring valuable experience and industry insights, helping companies make informed decisions; They also keep up with financial technologies and offer specialized expertise when needed.
Is it Time to ‘Right Size’ the Financial Leadership of Your Company?
Losing a high-level finance professional like a CFO has a major impact on a company and creates a hole that must be filled quickly to ensure that the business stays on track with strategic financial and operational plans.
Besides overseeing day-to-day accounting activities, CFOs provide strategic and analytical insights that help business owners make informed decisions about their company’s future. A strong CFO functions as the CEO’s top advisor, reporting key performance indicators to both the CEO and the board of directors.
But while the image of the loyal, long-term company CFO is common, two factors are fueling a growth in outsourced CFO services among small and medium-sized companies:
- A shortage of finance professionals with the training and experience to serve in a high-level advisory CFO capacity has rendered many companies unable to fill such a position easily – or at all.
- As the concept of fractional outsourced services grows in many industries and in many professional roles, more small and medium-sized companies that don’t need a full-time CFO function are embracing the idea of outsourced CFO services. The decision to outsource financial leadership positions can offer numerous benefits for companies, particularly those navigating growth, cost-efficiency and expertise challenges.
What To Do When Your CFO Leaves the Company?
When a CFO leaves a company, the immediate concern is ensuring that the CFO’s role is filled either by a new hire or – more likely – by a temporary solution. For companies intent on having a full-time internal CFO, an outsourced CFO professional can fill the role until a permanent CFO is hired, a process that could take several months.
For companies that are open to re-evaluating the CFO role and “right sizing” it to their needs, turning to outsourced CFO services may be viewed as a long-term temporary or permanent solution.
To figure out which camp your company may be in, an initial evaluation of the CFO’s day-to-day function is crucial. Is your CFO more strategic, relying on data and analysis that is generated by lower-level personnel such as a controller and accountants? Or does the CFO actively participate in payroll, AR and AP analysis, bank reconciliations and monthly or quarterly analyses? The CFO’s participation in these functions often depends on the company’s size and the configuration of the finance or accounting department.
Determine what functions are crucial to the company’s operations and whether there is someone internally, such as a controller, who can fill the CFO role either temporarily or permanently. But don’t engage in magical thinking – if the right person for the job is not available internally, putting someone without the education, skills and training in the role is setting that person – and your company – up for failure.
When Outsourcing is the Best Solution
Outsourced CFOs bring a wealth of experience and diverse industry insights to the table. These professionals often have broad exposure to various business models, strategies and financial practices gained from working with multiple clients across different sectors. This allows them to identify innovative solutions, best practices and potential pitfalls that may not be readily apparent to an in-house finance team focused solely on the company’s internal operations. The external perspective provided by outsourced financial experts can lead to more informed decision-making and strategic planning.
Technology
The pace of technological advancements in finance is another compelling reason for outsourcing financial leadership roles. Modern financial management relies heavily on digital tools, data analytics and automation. Outsourced CFOs and controllers are typically well-versed in the latest financial technologies and can assist companies in building the right tech stack to enhance efficiency, accuracy, and real-time reporting.
Cost Efficiency
For companies that only need CFO services for 10 to 20 hours a month, outsourcing can be more economical than hiring and paying salary and benefits for a full-time professional. Moreover, outsourced CFOs provided by a CPA firm come with built-in tax expertise, ensuring that a company’s accounting, strategic financial management and tax work are handled seamlessly by one organization.
Specialized Expertise
Outsourcing financial roles also allows companies to tap into specialized expertise as needed. For instance, if a company is facing specific financial challenges such as tax compliance, restructuring, or risk management, they can engage an outsourced CFO or controller with a proven track record in that particular area. This targeted expertise can expedite problem-solving and reduce the learning curve associated with addressing complex financial issues. It can be particularly beneficial for companies undergoing significant changes, such as mergers, acquisitions or international expansion.
The decision to use an outsourced CFO or controller is usually driven by a combination of factors including flexibility, cost-efficiency, access to diverse industry insights, technological proficiency and specialized expertise.
If you would like to discuss how outsourced CFO services or, more broadly, outsourced accounting services may benefit your company, contact your KRD advisor.
