What to Expect From an Outsourced CFO’s Strategies
Written by Amanda Bower | Published: April 7, 2023
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Today’s CFO is not the CFO of yesteryear. While this position was traditionally known for financial reporting, preparing for audits, controlling the accounting departments, and overseeing compliance elements, today, the role has transitioned to include all those duties, as well as portfolio management, capital allocation, investor relations, and performance management.
Yet, even though companies know how all of these tasks are critical for the overall success of a business, finding a CFO to handle all these duties is challenging and, for many, too expensive. That is why many businesses, especially smaller companies and startups, turn to outsourced CFOs for the help they need regarding these CFO tasks.
How Will a CFO Impact Your Growing Team?
While handling the finance and accounting departments is a critical task of a CFO, this position can be split even further into an operational CFO and a strategic CFO.
An operational CFO refers to someone with a deep understanding of the company’s systems and processes, which gives them a better grasp of what cash flow means for the company. They also have a solid understanding of financial reporting, operational risks, and other accounting functions. As a result, operational CFOs are usually known to help a company with its long-term success.
In comparison, a strategic CEO also understands a business’s financial operation. Still, where an operational CFO is interested in past and present financial analysis, a strategic CFO is usually progressive and focuses on providing valuable insights to help establish beneficial organizational changes.
Yet, while the advantages of hiring either of these CFOs are clear, hiring this position may be out of budget for some companies. Fortunately, outsourcing this role is a great way to help scale your business while still getting the benefits of an operational and strategic CFO all rolled into one.
Are They Really Necessary?
The insight a CFO can provide a company is essential to its overall growth, profitability, scalability, and even succession and exit planning. If companies are ready to take their finance and strategy to that next left, then a CFO should be a part of that plan for success.
How Does a CFO Start Building Their Strategy?
When it comes to building their strategy, a CFO will usually begin by looking into the company’s profit trends and determining how these figures will impact the company’s future.
From there, these professionals will:
- Figure out which areas the business should cut or expand on to see growth in the future
- Provide analysis of their strategic decisions
- Review the benefits and the disadvantages of other models or distribution channels
- Create predictions for the company’s future growth and determine the best way to allocate resources
- Facilitate merger and acquisition transactions
- Raise capital and drive growth initiatives
- Manage a company’s overall risk
- Oversee the organization’s liquidity
- Mentor leadership
8 Ways an Outsourced CFO Builds a Strategy
Outsourced CFOs provide businesses with critical services that can help them grow. Or more specifically, these individuals offer objective analysis and insight into the company that can help take the business to the next level.
While there are various tactics an outsourced CFO uses to build strategies, in general, these CFOs are known for handling the following tasks.
1. Strategic Analysis
An outsourced CFO will not only keep track of past and present financial records, but they will also focus on the short-and long-term strategy of the organization. Basically, these outsourced CFOs can figure out what is needed to take your company from where it is now to where you want it to be. These outsourced CFOs can also resolve cash flow issues, solve tight margins, raise capital, and implement better systems to prepare the company for growth.
2. Tax Planning
While accountants in a company ensure that the organization’s taxes are compliant, an outsourced CFO is responsible for managing all the company’s financial activities and ensuring the business is adhering to generally accepted accounting principles (GAAP). These CFOs usually oversee taxation issues while providing tax planning insight and execution that looks into your company’s future and where it can go.
3. Forecasting and Budgeting
Forecasting is often used in relation to fundraising, determining the health of a company, restructuring, projecting future growth, and budgeting. This detailed financial and operational roadmap provides the company with a thorough guide from where they are now to where they want to go. These reports require strategy, analysis, practicality, and a complete understanding of the competitive landscape within the industry.
Fortunately, when you work with an outsourced CFO, these professionals can create this step-by-step guide for you while also preparing a budget that can help the company’s financial decisions while ensuring it’s on track to meet its goals.
4. Diversifying Investments
Businesses need to understand that companies cannot rely on just one source of investment. That is why CFOs review their source of investments and consider a range of other financial assets to support the underlying operations of a business. When an outsourced CFO handles these tasks, these professionals can identify opportunities to diversify investments and determine whether these investments are suitable for the company.
5. Building Out Priorities
An outsourced CFO can not only help you with the financials and accounting of a company, but they can also build out the company’s priorities. For instance, an outsourced CFO can help prioritize cultural innovations, ensuring they work on creating a trust culture that can help employees and the company thrive. They can also advocate for technology that enables the business to grow while adding value.
6. Investor Reporting
Communicating effectively with investors is a key task for a CFO, especially to ensure the company’s future success. That is why outsourced CFOs have a duty to share key quantitative and qualitative data with financial investors to show how the company is doing. This data includes information about the company’s revenue, profitability, expenses, debt, and ability to meet short- and long-term financial goals.
7. Providing Advice and Mentoring
If a company is going through a period of growth because they are expanding into new markets or adding products, an outsourced CFO can provide the company with advice regarding this transition. These professionals can also offer insight into the industry, advise on strategy, and assist with maximizing margins, analyzing risk, and assisting with cost management.
Outsourced CFOs come in when a company is in some transition, in the process of hiring an in-house CFO, or facing some kind of challenge. This is because these outsourced CFOs can help support the company during this transition and provide services that can help the business grow, such as offering strategies to improve how the company operates.
8. Making Recommendations for Improvement
Outsourced CFOs often evaluate financial data and reporting systems and recommend improvements. For instance, these CFOs will usually take a deep look into the company’s financials to figure out how to maximize the bottom line, such as by:
- Restructuring or renegotiating contracts
- Verifying that pricing aligns with industry trends and the company
- Managing the supply chain
These outsourced CFOs can also make better strategic cuts than in-house teams since they generally have extensive experience with various businesses in the industry, allowing them to better understand benchmarks to which they can compare costs. They are also more objective and make their decisions based on data and experience rather than the relationships they have within the company.
Determine if an Outsourced CFO Can Help Your Company Grow
An outsourced CFO enhances a team’s financial department by offering new strategies to take them to the next level. These CFOs understand how to protect a company’s future and can provide services that can improve profitability right now.
However, finding the right small business CFO services for your company is not always easy or as straightforward as one may think.
At hiline, we work with companies of all sizes to provide services that can help them grow and thrive, no matter their situation.
We also offer bookkeeping and accounting services designed to grow as your business does.
For more information about outsourced CFOs or other services we provide, check out our accounting services today.
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