What is an outsourced CFO & what do they do? 

What is an outsourced CFO & what do they do? 

woman reviewing financial data for inventory manager

An outsourced CFO is an experienced financial expert, outside of your own company structure, who provides strategic, fiscal & operational guidance. An outsourced CFO should exhibit both a strong financial background and leadership skills. The role has a variety of titles (Virtual CFO, Part-time CFO & Fractional CFO) but each provide the same solution; complete strategic guidance at the fraction of a full-time CFO salary. 

What does an outsourced CFO do?

As the highest ranking financial professional in the organization, a fractional CFO responsibilities include:

  • Optimize Cash Flow
    • Tracking revenue from sales, investments, interest etc. and how much cash is flowing out to cover costs and expenses.
    • Determining how to maximize liquidity and profitability while maintaing high levels of customer service
  • Short and Long-term Financial Planning 
    • Preparing for expansion or an exit is a common reason why fast-growing companies need to increase their financial insight with an outsourced CFO
    • Helping prepare for fundraising
  • Financial Modelling & Financial Analysis 
    • Scenario planning and forecasting
    • Searching for the areas of financial strength and weakness in the company.
    • Analyzing what investments had the best and worst ROI
    • Offering modelling for both stakeholders and lenders.
  • Regulatory Compliance
    • Managing the relationship between day-to-day financials and your tax accountant or auditor

Advantages of an Outsourced CFO 

The obvious answer is cost savings, but there are more benefits to hiring an outsourced CFO:

Cross-Industry Knowledge

Because outsourced CFOs work with a number of clients at once, they bring cross-industry experience that offers a unique approach to your business.

For example, one client in the health & beauty indsutry needed to consolidate financials across sales streams and their outsourced CFO was able to confidently recommend the move to NetSuite because they had the experience working with another consumer products company with big inventory management needs. Even though this client wasn’t in the same industry they both had large inventories and a need for consolidated financials because they sell across the USA and have varying revenue streams.

Faster onboarding

It’s faster than the typical hiring process. For example, our clients can move through the contract phase to be fully onboarded within 2 months. (With the weekly and day-to-day accounting being handled within the first week the contract is signed).

This provides a more immediate solution than hiring internally, plus outsourced CFOs are self-managed and any HR needs are normally looked after by the company taking the onus off of you.

Objective Insight 

Fresh eyes can recognize issues others, internally, are blind to which leads to unbiased strategy for your books.

Value

For many high-growth companies the option to outsource rather than build in-house teams is a huge value. And of course, for most business owners, the cost to outsource a CFO compared to hiring an in-house executive is huge:

The average salary of a full-time CFO in the United States is $415,000. When you hire ORBA Cloud CFO’s fractional CFO services the monthly fees start at $4,000 per month. That means you could see a 90% savings.

Why is the difference so dramatic? The reality for many businesses in the $5-$50 million in revenue range is that when it comes to their accounting needs, most of them only need strategic financial insight 10% of the time. What they need the rest of time is someone to look after the weekly accounting needs and the financial reporting.

A fractional CFO on their own may only offer the strategy piece, but is not willing to roll up their sleeves and do as much of the review or day-to-day bookkeeping. The flip side of this is an outsourced bookkeeping service that might cover the day-to-day, but cannot offer the strategic analysis. So, having just enough of each of those levels is something attractive and unique.

The option of outsourcing a CFO offers low overhead.

ORBA Cloud CFO can replace the equivalent of one full-time employee (plus, we often see an additional 20-30% savings in the finance department). For example, we also work with in-house CFOs, but recently one of our client’s CFO left and we simply increased our scope of work with the client to absorb the CFO’s former responsibilities. This was a win for our clients considering the current economic climate.

Related Read: 6 things to know when you’re about to hire outsourced CFO

When is it time to hire an outsourced CFO?

Here are some common situations that drive a company to hire a fractional CFO:

  • Rapid Growth 
    • New product launch
    • Influx of funding without financial direction
  • Behind on financial reporting or a lack of access to financial data
  • Need to identify key growth drivers
  • Unexpected cash flow issues
  • Lack of financial input in overall business strategy 
  • Outdated accounting practices
  • Compliance issues 

6 Reasons to Hire Outsourced CFO | Infographic

Skills to look for in an outsourced CFO

  • Financial expert; taking raw data and providing business insights
  • Retargets KPIs to matter
  • Strong leadership and coaching skills
  • Cross-industry knowledge
  • Technology-oriented executive
  • Collaborative communicator with understanding of internal politcs
  • Follows and understands economic trends
  • Drives discussion around financial analysis, outstanding and recurring questions

The Bottom Line:

If your needs aren’t overly complex and your finance plan is costing you more than 2% of your revenue, ask yourself why? Outsourcing a fractional CFO may be the answer.

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