Most CFO consulting services include a one-time engagement. The consultant comes in and looks at a snapshot of your business in its current state.
There can be value here, but there are also drawbacks to hiring someone to stop in for a couple of weeks of advice.
You may need someone who is available to help with the day-to-day processes and adjustments that need to be made because of ongoing changes in the market or your internal systems.
We'll take a look at some of the pros and cons of hiring a CFO consultant for a one-time engagement to help you know if this service will meet your needs.
The Pros of CFO Consulting Services
- Can help stabilize a struggling company. If your company finds itself in a cash crunch, a CFO consultant should be able to step in and help you navigate to safer waters.
- Can bridge the gap. If your company is searching for a permanent in-house or outsourced CFO, a consultant may be able to bridge the gap while you work through the recruitment process. This solution gives you the breathing room to find the right person or outsourced solution for the long-term.
- Some are proficient at establishing and interpreting Key Performance Indicators (KPIs). Many consultants just aren't skilled or experienced enough to align KPIs. Beware of the controller who is now marketing their services as a CFO.
- Can be leveraged for a thorough market analysis. Consultants often step in for a review of your market. Just make sure you understand and can articulate what the practical outcome of this analysis will be before jumping into this examination.
- May provide insight during mergers and acquisitions. Keep in mind that small business M&A is much different than big business M&A. Don't pay a rookie consultant to come in and learn how this works. Look for someone who already has hands-on M&A experience.
The Cons of CFO Consulting Services
- Won’t truly KNOW your business OR industry. It takes time (and first-hand experience in a similar business in a given industry) to thoroughly understand what makes a business and market tick. Don't expect a consultant to step in and unlock the secrets of your niche in a few weeks.
- Can’t fine-tune processes. “No plan survives first contact with the enemy.” Plans are necessary, but they always need to be adjusted after implementation begins. A consultant may deliver a slide deck with a plan and a “good luck” slap on the back, but isn't available to guide the adjustments to that plan as you begin implementation.
- May leave your team frustrated. Consultants aren’t available to answer day-to-day questions and may not appreciate the context, roadblocks, or specific nuances your team faces. They may not be able to frame the tasks/insights in a way that the team understands. At Driven Insights, we’ve seen a bookkeeper repeatedly struggle to work with an outside CFO because she was intimidated and didn’t understand tasks that were assigned. The bookkeeper essentially shut down.
- Can’t provide historical context. One of the benefits of an ongoing engagement is that the person or team knows what decisions were made 18 months ago, why they were made, what the results were, and how that affects strategy for the next six quarters. Relationships and trust don't happen overnight.
- You may need help in more than just CFO-level insight. Are you 100 percent sure that your bookkeeper and controller are delivering a competitive advantage? Some outsourced solutions include assistance in these areas along with CFO services.
Alternatives To CFO Consulting Services
If the cons in this list cause you to hesitate before going further in your consultant search, you may want to consider an alternative.
You may have considered an out-of-office solution for a consultation only, but many small businesses are running more lean organizations by outsourcing c-level positions. These businesses contract for virtual CFO services on a long-term basis.
The needs of your business in its current state are likely different from the needs of the business six months ago. And you'll probably have different questions six months from now, such as:
- When can I afford that next hire or growth investment?
- How would I pursue an acquisition of a competitor whose owner is approaching retirement?
- Is that new offering contributing sufficient profit or do we need to revisit the pricing?
By contracting for ongoing CFO services, you won't have to get another consultant to come in and start from scratch to help you answer those questions.
With outsourced CFO services, you don't have to deal with the hassle of a lengthy recruiting process or the stress of employing a high-level team member, but you can retain the confidence that you're getting the best insight possible into your finances and the direction of your business.
In fact, by outsourcing the CFO position on an on-going basis, you are often able to leverage the experience, knowledge, and processes of an entire team of seasoned professionals, instead of just a single CFO.
If your finance department is struggling with technology issues or having difficulty moving past bottlenecks or hangups in their processes, it is often helpful to have a team with experience with the ways that other organizations have solved similar problems come in and deploy those solutions in your business.
Some of the ongoing deliverables which you could expect from this alternative are:
Weekly or Monthly Deliverables
The virtual CFO often has a monthly scheduled meeting with your company to review and discuss the financial reporting package. The CFO should also be available at other times as questions come up or when information is needed by either party.
CFO Insights and Communication
The right virtual CFO service will be delivering not only detailed and comprehensive financial reporting but also scheduled meetings to provide context, prioritized recommendations, and expert guidance on how to execute those recommendations.
Do you need an outsourced finance department?
It is possible that your needs run deeper than just CFO-level insight. If you are not 100 percent confident that your finance department is providing your organization with a competitive advantage in your industry, you may want to consider a more comprehensive solution.
Some companies group CFO responsibilities with bookkeeping and controller services. These companies provide a turnkey solution to organizations which are in a position to outsource day-to-day tasks as well as the larger decision-making responsibilities.
These providers are often specially equipped to provide you with confidence that the following tasks are completed with efficiency and accuracy.
- Optimized workflow
- Transaction entry & classification (recall the adage: garbage-in, garbage-out)
- Accounts receivable
- Accounts payable
- Bank account reconciliation
- CPA support for year-end tax and audit
- Financial control implementation and oversight
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