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Small Business Finance Blog

Want to gain full control over your firm’s finances but aren’t sure where to start? You’re not alone and you’ve come to the right place. Read on and reach out if we can lend a hand.

5 Greatest Benefits of Outsourced CFO Business Advisory Services

outsourced cfo business advisory services

Sometimes pushing your business into growth mode feels like being stuck in the mud. You think you're gaining traction but suddenly you find yourself sliding right back into the muck.

Oftentimes gears start slipping because you don't have the financial reporting and insights to guide your decisions.

For example, in hindsight, you understand that new product launch didn't provide the boost you were expecting because costs were too high or customer demand was too low. But it's too late when that information comes in hindsight. You needed better financial analysis before you made the decision to launch a new product.

If your financial records are being kept primarily for tax compliance, you're never going to get the type of financial input you need to drive your company ahead. To achieve that aim, you need a finance function with expertise in your industry to mine your financial data, parse out the competition and evaluate the market to help steer you out of the mud and into growth mode.

More and more, small to mid-sized businesses are finding they can shift into growth mode by contracting for CFO services, rather than trying to hire a single person to lead their financial team.

If you're unsure what a CFO service is and whether you need one, you can learn more from this previous post, but if you're feeling frustrated with your financial data, we can guarantee you will benefit from a CFO service.

Without getting better financial information to make decisions, you're burning precious cash and inviting your competitors to gain an edge over your firm.

But you can turn all of that around if you consider the benefits provided by outsourced CFO business advisory services:

1. Strategy: Plan to Compete AND Win

According to Michael Porter, founder of the modern strategy field, "Strategy defines the company's distinctive approach to competing and the competitive advantages on which it will be based. A good competitive strategy is one that creates unique value for a particular set of customers."

On rare occasions, a company can stumble into a truly unique niche and find sudden success. But the vast majority of successful companies have thoughtfully and deliberately crafted their strategy and business model, taking into account competitive positioning, a firm's current and potential resources, industry realities and a detailed financial plan against which progress can be measured. In other words,  steady, substantial, long-term growth doesn't just happen, it's a direct result of developing and then executing against a plan. 

A CFO service fills a critical role in the creation of that competitive strategy by bringing deep industry experience and a broad perspective. A CFO service adds an outsider's view with the ability to do more in-depth internal assessment and help you locate your unique place in the market.

A CFO service team's first concern isn't how your accounting software functions or how you handle data entry (of course, they will get all that straight). Rather, they want to know what are you goals and dreams for your business.

The right CFO then can help you break down your overall goals into quantifiable and measurable goals to lead the company along its strategic path. The team then establishes systems to measure and track the metrics and KPIs toward those goals to ensure you are staying on course. And when you stray, they're there to help you understand the root cause of the deviation and how to correct the course. It's worth noting this approach is a complete flip of the traditional small business accounting process which is primarily built upon recording transactions so you CPA can file your tax return. 

2. Reporting: Your Most Vital Planning Tool

You're beginning to understand that useful financial reporting involves more than reviewing the net profit on your income statement. As an owner, you need to be able to look beyond the bottom line and grasp all the little nuances that got you there.

Let's say you notice Product A is performing significantly better than Product B. But without the numbers to understand why, how can you know if you need to ditch Product B and make more products like Product A... or specifically what needs to change to enhance the performance of Product B?

A CFO service can identify and digest the data, understand the factors affecting both products and provide you with the type of small business financial insight you need to make decisions about where you want your future focus.

Beyond looking just at special situations and one-time decisions, a CFO service also will set up a financial dashboard designed specifically for your company that will continuously present key metrics, for your quick reference.

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3. Oversight: Driving a Well-Oiled Machine

As your business has grown, finances have become more complex and in need of greater security and oversight.

When a CFO service takes over your financial management, they will implement a system of internal controls to ensure compliance, avoid errors and fraud and manage the privacy of information for your staff and customers.

A CFO service also will make sure all the finance work is done in a timely fashion to manage cash flow and optimize reporting processes.

Additionally, some CFO services offer an integrated approach by providing bookkeeping and controller services, in addition to serving as CFO. In other words, these services provide your entire finance department in one package.

4. Cost/Time Savings: One 'Hire' Does It All

By taking advantage of this integrated approach, with one "hire," you cash in on a great savings of time, money and, maybe most importantly, headaches.

You never lose traction if an employee is out sick, on vacation or leaves for another job. There's never a lag time in hiring a replacement and training to get that new hire up to speed. Your CFO service already has back-ups in place for any contingency so you keep a steady flow of data you need for your operations.

You also save money as you're not covering the costs of hiring full time staff, costs such as vacation, benefits, retirement, taxes, etc.

For a very reasonable fixed monthly cost, you have all the financial expertise you need - at the level of your current need - to accelerate your growth.

5. Grows with You: One Less Headache Down the Road

As we mentioned in the previous section, you can hire a CFO service to meet your current needs with the vision of that CFO service scaling up to meet your future needs.

You might not be in a position to buy out a competitor at this point. But if that opportunity arises down the road your CFO service will have you covered. They should have meaningful expertise in mergers and acquisitions, a skill you might not think to look for if you opt to hire a full-time CFO today.

Or maybe you envision a round of fundraising in your future and you need the expertise to build your financial story and to coach you through fundraising process.

Or you hit a rough patch and need a steady hand to guide you through a cash-flow crisis.

A CFO service stands ready to offer expertise and guidance through these scenarios - and hundreds of others - as they've seen small businesses face these challenges before.

Does Your Team Stack Up?

As you kick around these issues, you're going to want to evaluate whether your current team is up to the task. We can even offer you some advice on how to approach the analysis of your controller and bookkeeper.

And ask your senior member of your finance team these three key questions to give you a sense if they truly can help you drive growth:

  • What are the 3 primary KPIs we need to monitor for our next growth stage and why?
  • Can you outline our ideal customer profile and why?
  • What are the top 3 initiatives on your shortlist for driving cash flow growth and what is their projected [quantifiable] impact?

If you feel you get good solid answers to these questions, great! Go forward.

If not, a CFO service could answer the bell. However, not all CFO services are created equally.

Through its integrated approach, Driven Insights provides the traction you need to surge past that stuck-in-the-mud feeling and steer your company onto the highway to success. Take advantage of our sample dashboard offer to gain a better understand of how financial reporting helps you win.

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Dave Robinson

Written by Dave Robinson

Driven Insights founder, author of "Competitive Advantage through Financial Management", writes about informing business decisions.

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