Frugal Business Tips: Are Outsourced CFOs Worth the Cost?

are outsourced cfos worth the cost outsource cfo services

Businesses in their early stages repeatedly turn to outsourced CFOs as a source of effectively managing their financial goals and strategies. A CFO, or chief financial officer, keeps a business owner from overextending, growing too fast, or taking unnecessary risk.

In the following article, we'll be looking at some of the pros and cons of hiring an outsourced CFO. As with many business decisions, the question isn't whether a CFO from the outside is a good or bad idea, but when will it most effectively serve your business goals?


Outsourced CFOs Will Not Always Be Instantly Accessible

The first thing to consider when hiring part-time CFO services is how much access you're going to need with them. Most CFOs who work as part-time financial consultants do so on a full-time schedule. That is, they provide their services to a number of companies at once.

Presumably, you won't be working with a CFO who's also working with a major competitor to provide the same types of insights. That would be a pretty massive conflict of interest. 

Even so, you'll need to understand that your CFO isn't working for you only, and that means there could be some limitations on when you get access to them. Do your homework ahead of time so you know when you'll have access to them.  


An Outsourced CFO Can Save You Money

Outsourced CFO rates may seem high compared to other employees. When you consider how many hundreds of thousands of dollars in annual salary and benefits that full-time CFOs command, it becomes less shocking to pay a higher hourly or package rate.

Let's say a full-time CFO costs you a quarter of a million dollars in annual pay and benefits. If you can hire a part-time CFO for a quarter of the price, you end up saving a ton of money while getting the services you need. 


Outside CFOs Provide Unique Industrial Insight

Again, an outsourced CFO with scruples will not be dividing loyalties between your company and a major competitor. That being said, they should have industry experience that's relevant to what you're attempting to do. Otherwise, it would be akin to hiring a divorce lawyer for your tax law case.

You want someone who speaks the language of your business. It's a CFO position, not strictly an accountant. 


Outsourcing CFO Work Keeps Employees from Wearing Too Many Hats

One of the major issues that we've noticed, particularly with startup companies, is that the people involved end up wearing too many hats and doing things they're unqualified for. This may work in the early stages of the business but not if long-term growth is your destination. 

Hiring contract CFO services is an effective and affordable model when gathering momentum for your business. You should do it at once and keep tabs on how much time you're spending on it so you'll know when to make the transition to a full-timer. 


Outsourcing Cuts Back Fraud Risk

Opting for CFOs for hire instead of an individual on the payroll greatly reduces the risk of fraudulent activity. Through this practice, you have a pro who has too much at stake to risk everything on defrauding your company. 

He or she also will be able to take a more impersonal overview of what's going on inside your company. This puts them in a position to root out a suspected fraudulent activity before it becomes a major issue.


Quick Tips for Hiring an Outside CFO

A move toward virtual CFO services may very well be worth your time and attention, particularly if the above benefits sound appealing. As you work to get your business off the ground or scale it to the next level, here are some quick tips to keep in mind in your search. 


Check Their Credentials and Education

This is easy enough to do through a simple background check or a call to their university or college. 

Any part-time CFO worth consideration will make it easy for you to independently check and verify these things. Google or your search engine of choice is also a friend in these preliminary stages of the hiring process. 


Make Sure They Have the Right Kind of Experience

Chief financial officers come in a variety of shapes and sizes, and no, we're not talking about their physical gender or physique. We're talking about background and specialization. 

Do a deep dive into the experience that your part-time CFO brings to the table. Examine the past companies they've worked for, projects they've shepherded, and references they've provided. Getting a good overview of what to expect before you hire them is ideal, and these are the components that can provide that insight.


Be Clear on When to Make the Switch

A part-time CFO is helpful to your small business or startup, but there will come a point where scalability becomes a factor. When you get ready to take your business to the next level, it will come with certain demands that only a full-time CFO can help you through. Know when that point will come. 

Generally speaking, the moment that your CFO is required greater than half the week is the moment a full-time CFO should be considered. Make sure you're logging how many hours you're using them even if you're not paying by the hour.


Hire an Effective Communicator

It's not enough for a chief financial officer to have a strong command of his industry. He also must be able to place his expertise into layman's terms, so there isn't a disconnect between his services and employees' understanding of the mission and where they fit into it.

Great knowledge comes with great responsibility. A part-time CFO gets this and will work to bring others into the fold. Before you hire one, see how well the chief financial officer can communicate their strategies and the thoughts and plan behind them.


Find Outsourced CFOs With Your Best Interests at Heart

So there you have it — everything you'll need to know about considering and hiring outsourced CFOs for your business.

Best of luck in your search for and outsourced CFO. For more financial tips and advice, check out some of our additional financial blog posts! Visit the Finance section of the Bootstrap Business Blog right now!

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