Top Reasons a Business Owner Needs an Outsourced CFO

Top Reasons a Small Business Owner May Need CFO Consulting Services

While a CFO may provide bookkeeping and accounting services, they are usually hired to provide valuable insights and analysis to help your business grow from a start-up to a key player in your industry. As your company grows and financial reporting and decision making becomes complex, it may be time to outsource CFO responsibilities. Let's have a look at how a CFO can be essential to the success of your organization.

Assessing Risk

With the fallout of the global financial crisis, risk management has now become a high priority for organizations. If risks are not analyzed and assessed your company can be in danger of not complying with regulatory requirements, being under-insured or vulnerable to employee misconduct. Cash flow management is also critical for identifying risk.

Data, equipment and intellectual property needs to be safeguarded, and a CFO will ensure procedures and policies are in place to mitigate that risk. They can determine the likelihood of risks occurring and create reporting mechanisms for management to be proactive in these instances.

CFOs can help to instill a culture of risk awareness in your company, so you and your teams can be proactive instead of reactive and embrace risk to identify new business opportunities. Many companies have created an intranet within their organization so employees can easily report and share possible risks with colleagues anywhere in the organization.

Cash Flow Management

Executive management relies heavily on cash flow management and forecasting for important decisions regarding funding, working capital and investment returns. If projected cash flows are inaccurate, it can have a detrimental effect on the cost of funding, or if cash flows are too high, it can have a negative effect on investment returns.

Management also relies on key performance indicators to obtain financing, so it's critical for you to have access to accurate and timely forecasts. A CFO has reporting authority over treasury, accounting and other departments and they can ensure that data, which is sometimes stored in different systems and different formats is made readily available for timely forecasting.

Real-Time Decision Making

It's critical for the success of your business to be able to make timely decisions for long-term growth, and a skilled CFO can ensure you have access to that information. They can perform analysis on different scenarios and provide unbiased assessments on how you can exploit market opportunities to gain a competitive advantage. It's imperative for your organization to allow a CFO to analyze data so they can provide real-time insights across many departments including inventory management, pricing and forecasting.

Implementing Accounting Systems

A CFO can take on different roles when implementing an accounting system. They can be a consultant on design issues, migrating risk and removing roadblocks or they can perform as a lead in making design decisions or lastly, they can take part in requirement sessions and act as coach to the implementation team to resolve issues and encourage their own decisions. This last approach will leave time for the CFO to focus on other key areas where consulting services are needed. In some cases, the outsourced CFO may be required to take on all or part of the three roles mentioned above. It really depends on the size and internal dynamics of your organization.

Conclusion

A full-time CFO is not cheap, but by outsourcing your needs, you can realize the benefits at a fraction of the cost when you only need part time services. Once policies and procedures are put in place, your reliance on a CFO can be reduced on an as-needed basis.

 

As always, please let me know if you have any comments or questions. brent@brentmcclure.com