What is an Outsourced CFO? (And Why Businesses Use Them)

Written by Cameron McCool    |    Published: May 7, 2024

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What is an Outsourced CFO?

What is an outsourced CFO and what do they do, exactly? If you’re asking these questions, congrats—it means your business has reached the point where it could use expert leadership and strategic financial guidance.

In this guide, we’ll explore what an outsourced CFO does, the unique benefits they can bring to a business, and why many companies turn to the outsourced CFO model to steer their financial strategy.

If you’re looking to hire an outsourced CFO, connect with a Hiline advisor and find out how our CFO services can help your business.

What is an Outsourced CFO?

An outsourced CFO or “Chief Financial Officer” is a financial professional who provides strategic decision-making and financial services to businesses as an external contractor. Unlike a full-time executive or in-house CFO, outsourced CFOs offer their specialized knowledge on an as-needed basis that can be adapted to the company’s changing needs.

The responsibilities of an outsourced CFO are broad. They include cash flow management, financial forecasting, strategic planning (including tax planning) and financial analysis. They can also help you define key performance indicators (KPIs) that align your financial goals with the overall business strategy.

Working on an hourly, part-time, or contractual basis, outsourced CFOs seamlessly integrate with in-house teams to lead the finance department, offering their insights on pivotal financial decisions. Opting for outsourced CFO services can also accelerate future growth by optimizing business models and monitoring customer acquisition costs for better financial performance

What does an Outsourced CFO Do?

Here are the most common activities an outsourced CFO will do for a business.

Budgeting

A CFO can create a spending plan for your business based on income and expenses. They will identify the available capital, estimate your spending, and predict revenue. This will help you plan business activities and serve as the foundation for setting up financial goals.

Strategic Financial Guidance

A CFO pays close attention to your business’s short- and long-term financial strategy and will uncover what’s needed to propel your business to the next level.

Short and Long-Term Forecasting

A significant part of outsourced CFOs’ value to your business is their ability to forecast potential short-and long-term outcomes accurately. This includes financial forecasting and modeling based on your business’s past performance, as well as external and internal factors that may influence expense and revenue. The CFO will interpret different departmental level predictions to create profit projections for the CEO and shareholders. Forecasting helps you foresee changing market trends and stay ahead of the curve.  

Financial System Strategy and Design

A CFO will implement processes to track your company’s financial activities. They’ll ensure that your accounting measures, wages, revenue and expense schedules, balance sheet verification, etc., are in order. This not only helps in financial planning and funds allocation but also in acquiring and managing funds. Most importantly, financial systems provide insights for critical financial decisions. 

Raising Capital

The CFO will take charge of raising money to help your business get off the ground, expand, or change in any way. Raising capital needs considerable preparation and planning, and a CFO can assist with all of this.

Cost Cutting

Hiring an in-house team can be costly, especially considering that you have to pay them for time off and other benefits. Onboarding is also expensive. But that’s not the case for an outsourced CFO. Outsourced CFOs come with broad experience from different companies in your industry and are often more objective, offering an outside perspective and the ability to make decisions based on a wide array of experience and data.

Facilitating M&A

A CFO provides services like stabilizing financial functions, preliminary analysis and reporting, forecasting, preparing relevant documents, and advising key team members during the sales process. All these are critical during mergers and acquisition transactions.

Equity/Cap Table Accounting

A CFO can create and maintain a capitalization table. This table shows the equity capitalization of your company and breaks down the shareholders’ equity.

Banking Relationship Oversight

An outsourced CFO can establish rapport with the bank, thereby helping streamline how you do business regarding business transactions, special requests, and loans.

Unit Economics Analysis

The CFO can analyze unit profitability and other financial aspects of the business, including gross margin, payback period, or ROI of sales and marketing efforts. This will provide insights into unit profitability, helping you make informed decisions.

Investment Opportunities

A CFO can identify investment opportunities, helping your business grow and remain competitive in the market.

Working With Investors

Only some outsourced CFO service provides monthly strategic planning and advisory meetings. For example, a Hiline Outsourced CFO can attend monthly strategy meetings with your team and work directly with your company’s investors. Regular meetings with an outsourced CFO mean you get to experience the benefits of ongoing financial guidance, without the permanent commitment of managing a full-time employee.

 

Benefits of Hiring an Outsourced CFO

There are plenty of benefits to hiring an outsourced CFO, but they tend to differ for each company based on business size, need, and goals. 

Reduced Costs for Small and Medium-sized Businesses

For growing and medium-sized businesses focused on their financial bottom line, outsourced CFO services offer cost-effective solutions. Instead of paying a full-time CFO‘s hefty salary and benefits for their financial planning skills, you can outsource this specialized knowledge and get practically all the same benefits at a significantly lower cost. Some outsourced CFO services like Hiline even offer flat monthly fees, providing budget-conscious businesses with predictability and freedom from rising hourly costs.

Access to Expert Financial Knowledge and Guidance

Businesses usually work with limited resources, but outsourced CFOs can provide a wide range of expertise to boost their operations. Not only do CFOs excel in accounting, financial strategy, budgeting, and reporting—they can offer deeper insights than in-house teams with less experience

In fact, a recent survey by McKinsey found that in the face of economic uncertainty and digitization, the CFO’s role is expanding, taking on more responsibility and influencing a broader range of business functions within organizations.

An outsourced CFO can play a key role in steering your business towards success. They tailor to the unique needs of each business, providing both tactical and strategic financial expertise to navigate new market conditions. Using an outsourced CFO service that understands the technology landscape will keep your company on the cutting edge.

Flexibility and Scalability

Outsourced CFO services provide flexibility, allowing your business to adjust your financial management strategies and expenses as needed. This is especially important for emerging businesses who don’t know what kind of financial services they’ll need in six months or next year. Outsourcing lets you focus on your company’s top financial priorities now, and add or remove tasks whenever you need to.

At the same time, if business is booming, a good outsourced CFO service can handle new workload requests easily. You get all the benefits of an integrated team overseeing your financial management, without the headaches of hiring in-house.

Objective and Unbiased Financial Advice

While outsourced CFOs provide short-term value like cost savings—their financial guidance has the long-term benefit of pairing their specialized knowledge with unbiased advice.

Their impartial advice, based on data, industry expertise, and strategic analysis, rather than internal politics, allows you to improve your company’s financial planning. By serving as an independent voice in financial matters, outsourced CFOs can help companies identify potential risk and make objective decisions. 

When to Consider Hiring an Outsourced CFO

Bringing in an outsourced CFO is a big decision that should support the current needs of your business. Take a look at your business as a whole. If you find yourself in one of the following scenarios, the strategic support and expertise of a CFO may be the right move.

When Facing Financial Challenges

In a tough business environment, good financial management can be the difference between success and failure, especially for startups and small enterprises lacking in-house financial expertise. Outsourced CFOs offer sophisticated data interpretation and strategic direction—transforming your financial disarray into structured strategies. With refined financial planning and analysis, an outsourced CFO offers realistic advice and guide you back onto the path of fiscal sustainability and growth.

When Internal Resources Need a Boost

Small businesses often face limitations in internal resources and access to financial expertise, hindering growth opportunities. Outsourced CFOs fill these internal knowledge gaps. By introducing sophisticated financial analysis tools and software, they empower businesses to thrive with expert precision in financial management.

When Navigating Rapid Growth and Expansion

During periods of rapid growth, your business may require more support in budgeting, planning, and management. An outsourced CFO offers executive-level financial expertise to oversee and stabilize operations during this transformative phase. If your company’s internal finance team feels swamped or can’t handle increased financial pressures, an outsourced CFO can offer the expertise and financial guidance to navigate through the transition smoothly.

When You Need Strategic Planning Expertise

When you outsource a CFO, you’re not just getting someone to crunch numbers; you’re gaining a strategic partner who can help shape the future of your business. With their expertise in strategic decision-making and planning, an outsourced CFO can provide valuable insights and guidance to steer your company towards its goals. Whether it’s refining business models, developing effective growth strategies, or establishing resilient risk management frameworks, their strategic planning is instrumental in driving your business’s success.

Choosing the Right Outsourced CFO Provider

The market has no shortage of outsourced CFO providers. To find the right outsourced CFO services for your company, look for providers with a proven track record of delivering financial leadership and results with other companies in your niche. 

Here are a few questions to ask to ensure you settle for the right CFO provider.

Do you have experience working in my industry?

CFOs handle a variety of tasks across different industries. However, it is beneficial if the prospective CFO has worked with companies in the same industry as you, as this means they have the experience to handle your type of problem.

Can I see samples of customized reports?

The last thing you want is to work with a CFO who takes a one-size-fits-all approach. Find a CFO who adjusts to different types of business and can customize reports as per the information you process.

Which reports do the board and investors want to see?

Your investors and board of directors will need to communicate with your CFO at some point. Therefore, the CFO should understand the perspective of investors or boards and communicate the information they want to see.

Are you certified and licensed?

Your CFO should be certified and licensed to work. This will give you the confidence that you’re working with a qualified company or individual. Licensing also provides peace of mind that the relevant bodies approve the CFO to carry out their duties.

Can you provide relevant references?

Don’t just take their word for it. Ask for references to call and inquire about their experience working with the outsourced CFO. This way, you can make an informed decision.

How an experienced Hiline CFO can help

Finding an outsourced CFO can be a drain on your current business resources. Hiline’s team of seasoned financial experts can deliver all of the financial operations tasks and CFO services your business needs to thrive.

From detailed financial planning and analysis to monthly advisory calls, Hiline takes the hassle out of financial management so you can focus on growing your business.

We also provide your startup with a dedicated team of financial experts to handle essential tasks like tax planning, bookkeeping, and payroll. Talk to a Hiline advisor to find out how our accounting and CFO services can help your business.

Further Reading

CFO Resources for Small Business Owners
CFO Resources for Startups
Outsourced vs Fractional vs CFO: Understanding the Difference

 

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