This post was originally published January 19, 2016 and extensively updated November 23, 2017.
Having a Chief Financial Management Officer (CFO) is an integral component to your organization’s financial stability. Whether you’re a small company or a medium-sized business, your CFO will oversee financial reporting, accounting, audit prep, and other financial-related business tasks, helping you take your business to the next level.
But should you use a virtual CFO? Or hire an in-house CFO?
To help illustrate the benefits of CFO services, we’ll talk about two companies below: Company A, who hired an in-house CFO, and Company B, who decided to rent one. We’ll also go over the x main benefits of CFO services and why more businesses are outsourcing their CFO.
Benefits of Outsourced CFO Services
1. Saves Money
Company A decided to hire an in-house CFO. They thought this would help them save money over the long run. However, what they failed to realize is that it’s not just his/her six-figure salary they are paying for. Company A also has to pay their benefits, taxes, and work-related resources.
Company B on the other hand chose to rent a CFO. By renting, they do not have to pay a full-time salary, benefits, taxes, or most work-related resources. In fact, they’re only paying their rented CFO when he/she actually works.
According to this Entrepreneur article, a full-time CFO, including base salary plus taxes and benefits, costs a small business about $218,750 per year, or $18,229 per month; however, most small companies might only need a CFO about one day per week, at an estimated monthly cost of only $6,400. That’s a savings of almost $12,000 per month!
If you’re a small business (or medium-sized business), hiring an in-house CFO can put a financial strain on your organization. By renting a CFO, you’re able to save that money and apply it where it’s needed most: back into your business.
2. Saves Time
Because Company A’s employee’s wear a lot of hats, their full-time, in-house CFO ends up spending time doing tasks that don’t always relate to the business’ financial goals. This can be disastrous for Company A, especially if it means the CFO isn’t able to truly focus on the important tasks when it’s necessary.
Company B, however, relies on their outsourced CFO to handle only their financial data. And because this CFO isn’t in the office all the time (or never if it’s virtual), there’s no way he/she can get pulled into other projects and tasks.
3. Third-Party Financial Management = Better Controls, Reduced Fraud Risk
Company A’s team, including the CFO, all get along. They work well together, they collaborate on projects, and they help each other out when needed. While this is a good thing, it can also mean that information, data, passwords, etc. can be freely shared. Or even if it’s not freely shared, the risk of other employees getting access to confidential financial data is higher than Company B.
With their virtual CFO, Company B has better control over their financial systems. This CFO is able to delegate access as necessary and reduce fraud, giving Company B security and data integrity. They are also able to provide better internal controls, as the virtual CFO has no ‘horse in the race’ so to speak.
4. Help with Large Projects
If Company A decides to go through a merger or some other important transaction that requires a significant amount of financial data, an in-house CFO might not be prepared to handle such a project. It’s not because the CFO isn’t capable, but because they have never experienced anything like this before.
If Company B decides to do the same thing, they are much better prepared because their outsourced CFO has a wealth of experience and knowledge at their fingertips. Plus, Company B knowing ahead of time where they’re headed, expressly asked/looked for a CFO with the skills they need.
Virtual CFO’s can help with the following:
- Paying your bills
- Processing your payroll
- Handling financial paperwork
- Cash flow forecasting
- Profitability analysis
- Accounting system design and implementation
Outsourced CFO services include both day-to-day business operations, as well as long-term financial planning to ensure your company is set up for a profitable future.
5. Independent Viewpoints
Company A’s CFO is in the thick of the things during the work day. This can make seeing the bigger picture difficult, as it’s hard to see how far you’ve come when you’re always heads-down. The in-house CFO might also have a hard time making independent opinions, as they would not want to disrupt the team dynamic should they disagree on important issues.
But Company B’s CFO for hire is able to see things differently. By working with Company B on contract, this CFO always has the big picture in mind. They will always have objective viewpoints and opinions, as they only have Company B’s best interest at heart. They want to Company B to be financially successful.
Why Are More Companies Using Virtual CFOs
Virtual CFO’s provide a lot of value to small and mid-sized businesses. By utilizing these services even once a week, businesses will have greater insight into their organization, be able to make data-driven decisions, and scale their business effectively.
The cost savings alone make outsourced CFO services attractive. And with the ability to contract the work, you can utilize your CFO help for as long or as little as you like.
Using Outsourced CFO Services for Your Business
More companies are outsourcing their CFO services to better their financial management and overall financial stability. If you’re ready to benefit from a virtual CFO, you can learn more about CMP’s CFO solutions here or by contacting one of our offices – Salt Lake City: (801) 467-4450 or Logan: (435) 750-5566