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What Is an Outsourced CFO & How Can One Help Your Business?

Should small businesses fill the finance seat with an outsourced CFO?

When you think of outsourcing your business tasks, the first areas on your mind might be payroll, accounting, HR, and other similar tasks. You might not think that you can outsource roles at the C-level, but in fact, these duties are just as ripe for outsourcing.

What Is an Outsourced CFO?

Your Chief Financial Officer (CFO) manages every aspect of your company’s financial planning, from top-level strategy to cash flow analyses to investment planning. They’re also responsible for keeping your company compliant with Generally Accepted Accounting Principles (GAAP) set forth by the Securities and Exchange Commission (SEC). It’s the highest ranked financial position in your business, meaning that whoever fills the role will have a lot of responsibility on his/her shoulders.

With that in mind, it might sound strange that companies would choose to outsource such an essential business role, but as a rule of thumb, any business role involving finances, accounting, or business tax planning is perfect for outsourcing. The CFO position is no exception.

Much as the name suggests, outsourced CFOs are financial experts who lend their services to outside companies. These hired guns are also known as fractional executives, usually working for agencies that offer executive-as-a-service hiring.

How Can Outsourced CFO Services Help My Company?

Outsourced CFOs, like any outsourcing professional, typically have diverse experiences, work histories, and skill sets that can benefit your business in different ways. Below, we’ll review the advantages of going outside your firm to leverage outsourced CFO services.

Quick Onboarding

Outsourced CFOs can be integrated into the team far more quickly than a fresh hire. They typically don’t need extensive onboarding or training, aside from a basic introduction to your company. Their experience pays dividends, here. Outsourcing offers a quick path to results free of many administrative headaches that come with a full-time hire (which we’ll dig into in just a moment).

Broad Experience

A CFO brought in through your recruitment pipeline might have long-term experience with several companies, but outsourced CFOs offer a different approach: broader experience across a wide range of companies. Outsourced CFOs bring their skills to work in whatever companies need their help, exposing them to different strategies, investment approaches, and technology tools. This breadth of knowledge can be great for inexperienced business owners and small businesses unfamiliar with the market.

Industry Freshness

The outsourced CFO’s ongoing engagement with the market provides another advantage: industry freshness. These workers are more plugged in to relevant industry trends by nature of their work. Outdated strategies don’t cut it—every client they work for needs a forward-thinking and current approach.

Compare this with a traditionally-hired CFO, who may have spent years in his/her previous role. This specialization can be great—but it can also be detrimental, depending on your goals. Many companies find that consultants with a wider experiential range suit their companies better.

Objective Insight

This is a lesser-discussed benefit of outsourcing that you just can’t find through an in-house hire. Outsourced employees are objective. They come into your company with no knowledge of past decisions, ongoing debates, or company politics. As in-house workers gain experience, these issues inevitably bleed into their decision-making. But outsourced workers maintain a necessary layer of separation from their client companies, giving them a more unbiased perspective on strategy.

Hiring Flexibility

Sometimes, employees just don’t fit well in a company. Turnover is unavoidable in any industry, but at the C-level, it becomes even more time consuming and costly to fill empty seats. This is another advantage of outsourcing the CFO role. If your hired executive doesn’t perform, you can work with the agency to discuss the issues, come up with solutions, and if necessary, get a replacement.

It’s hard to overstate the importance of this flexibility, particularly when you start adding up the administrative costs of hiring.

Reduced Administrative Costs

Onboarding new employees at any level is an investment. Aside from the hours you invest in their training, you’ll have to worry about setting them up in payroll, allocating benefits, insurance, and all of the accompanying tax concerns. It takes some time—and should the employee be a poor fit, most of the time you spend on these tasks is wasted.

On the other hand, outsourced CFOs are employees of their hiring agencies—not your company. This means you get all of the benefits of their experience without the administrative hassle of hiring new workers.

The Value of Outsourcing the CFO Seat

In short, outsourcing your CFO role might just be more feasible than you think! The benefits of outsourcing apply as much to these high-level roles as your back office tasks, and when you have the right partner in your corner, you’ll be surprised at how quickly your business will take off.

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