How to Outsource a CFO: Everything You Need to Know

Finding ways to cut operating costs is a concern for all companies, and outsourcing critical services such as accounting and finance is one potential area worth exploring. Outsourcing for these functions is commonplace and accepted in many businesses and industries. However, outsourcing senior C-Suite roles, such as a CFO position, doesn’t occur as often.

Still, these roles are suitable for outsourcing without compromising your bottom line. This article looks at how to outsource a CFO and why it’s a recommended practice for businesses.

Recap: What Does an Outsourced CFO Do?

Outsourcing a CFO is an easy and cost-effective way to achieve your company’s financial objectives. Outsourced CFOs fulfill similar strategic financial roles as in-house CFOs but work on a contract basis instead of joining as corporate officers.

An outsourced CFO meets your tax liabilities and oversees the financial teams responsible for tactical issues such as keeping accurate, timely books. In addition, they partner with your company to offer expert solutions to raise capital, generate revenue, optimize financial strategy, avoid financial challenges, implement rigorous economic systems, and grow your business.

Outsourcing a CFO helps your company save costs, gain an independent viewpoint, and make informed financial decisions. They also help fuel growth and innovation.

For Whom Are They a Better Option Than an In-House One?

From startups to private equity-backed and venture capital firms and every business in between, outsourced CFO services are the best way to address financial challenges. 

The following scenarios stand to gain from outsourced CFO services:

• An entrepreneur whose business is taking off lacks the time or expertise to budget, analyze financial results, and forecast.
• Outsourced CFOs are recommended for startups because they provide access to expertise and resources that founders may otherwise not have. Therefore, startups should consider outsourcing CFO services right from the start to get expert financial management services. They can access pivotal insights and data without hiring a full-time CFO to help them make informed decisions.
• Small- to mid-sized businesses that focus less on the company’s financial side than on improving product quality and customer satisfaction. Such business owners sometimes make rash decisions based on instinct rather than sound financial input.
• Founders who have raised venture capital to expand their operations. They need to update their investors about their financial outlook and other key performance indicators but don’t know how to do it.
• Businesses with a one-person finance department looking to expand operations and need more financial planning and analysis.
• Businesses that are not performing well and require financial expertise to turn things around.

Is It Time for an Outsourced CFO?

Outsourcing services is the best solution if you want to cut operating costs without compromising quality. Outsourcing a CFO gives you access to the best financial expertise without paying for office space, a full-time salary, benefits, and other expenses related to an in-house CFO, which makes it a cost-effective solution.

So when is it time to outsource a CFO?

The short answer is it depends on you and your business needs. An outsourced CFO is a financial expert on your terms. 

They usually work hourly, so you only pay for what you use. Such fixed fees are an excellent option for companies seeking assistance with specific projects. Therefore, an outsourced CFO changes and adapts depending on the client’s needs.

Business owners often feel that something is wrong with their company but cannot pinpoint it. It usually starts with your cash flow and cash at hand. Your financial statements show the business is making money, but you always don’t have enough cash for expenses.

The trigger could be a particular event requiring an in-depth financial analysis that takes too much of your time as the CEO; hence, the feeling ‘we can’t continue like this.’ Sometimes the CEO of a venture capital-backed firm is told to have a finance expert provide the needed financial breakdown to the board and use it to make informed decisions.

CEOs also have an unfulfilled need for expert assistance to help provide and interpret financial data but don’t have the budget to bring in someone full-time. Other times the company uses a committee to handle its financial matters because no one is genuinely responsible. In such cases, it indicates that it’s time to outsource a CFO.

9 Steps to Outsourcing Your CFO Function

Below are nine steps on how to outsource a CFO.

1. Determine Whether You Need to Outsource a CFO

First, determine whether you need to outsource your CFO functions and whether it’s right for your company. Some questions to ask here include:

• Can you afford a full-time in-house CFO? (Factor in the costs and benefits)
• Are you spending a lot of time handling CFO duties at the expense of other functions?
• Are you worried about fraud or wasteful spending?
• Do you lack the financial expertise to move your company to the next level?
• Are you committed to aggressive growth?

If the answer is yes to any or all of these questions, it’s time to outsource a CFO.

2. Know Your Vision

Have a solid vision for your company and know the type of help you need to achieve it. Some key questions to consider include the following:

• Where do you see your business in one to three years?
• Do you have or need succession planning?
• Are you considering exiting the business soon?

Know what success looks like to you, and think about the results you wish to see and how you want to grow your business.

3. Establish Your Goals

Your transition will be more successful if you understand and articulate your goals. Know why you want to outsource a CFO by completing a business audit and identifying core and non-core functions.

Identify business functions that directly impact your bottom line and give you a significant market edge because they need your attention during growth and transition phases. If finance and accounting activities fall outside these business-critical functions, you can outsource them.

4. Create a Plan

Next, create a joint plan with your top leadership to help everyone understand their roles and responsibilities and how the new outsourced services will fit into the current dynamic. A good plan helps everyone feel aligned and ensures nothing falls through the cracks.

5. Establish the CFO criteria

Given the rank and influence of a CFO on your business, ensure your outsourced CFO has the following:

• The necessary qualifications
• A proven track record and successful projects
• Extensive financial experience, ideally in your industry

You want someone with experience so you know your business’ financials are in good hands.

6. Cultivate a Feeling for Partnership

A spirit of collaboration and teamwork underpins most successful outsourced partnerships. Your full-time employees and outsourced CFO should have similar goals so everyone’s on the same page and can collaborate effectively.

7. Consider How You Want the Partnership to Work

An outsourced CFO has to work within the confines of your company culture, so ensure you have a good onboarding process. Then sit down with them to establish how the partnership will work. 

Things to consider include the following:

• Do you want a lot of face time and in-person meetings?
• Do you prefer virtual collaboration?
• Do you want specialized reports?
• Do you prefer regular meetings?

Discuss these and other preferences from the start and establish a productive working relationship.

8. Plan a Successful Transition

Always be transparent with your employees about how outsourcing affects them. Keep your communication lines open, reassure your workers that their jobs are safe, and tell them why you are outsourcing the CFO role. Finally, give them some time to make adjustments.

9. Involve Your Leadership and Stakeholders

Involve your leadership with the transition details to give them a greater sense of ownership. Then introduce your new outsourced CFO to critical stakeholders such as your leadership team, remote CPA, bookkeeper, and bank manager. It helps them appreciate how the business works and who is responsible for what.

Hire the Right CFO With the Right Partner

Working with an outsourced CFO is a great way to achieve financial success for your business. Outsourcing the senior C-Suite role allows you to partner with a financial expert at a fraction of the cost of hiring a full-time CFO.

Before asking how to outsource a CFO, it’s essential to identify when and why you should. Some reasons and scenarios include entrepreneurs looking to expand their businesses, startups and small- to mid-sized companies looking to grow, founders looking to expand operations, and underperforming businesses looking for financial expertise.

Have a detailed plan to outsource a CFO. First, determine your need, then identify your vision and goals and create a plan. You also need to establish the CFO criteria, determine how the partnership will work, and involve your leadership and stakeholders in the transition.

Hiring an outsourced CFO is a straightforward process with the right partner. At hiline, we offer accounting resources and business growth tips. Whether it’s guiding you through financial reporting analysis or fundraising, we’ve got you covered.

Get started with our accounting service plans for every business size.