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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.

What Is A CFO Service? How To Know if You Need One

what is a cfo service

One of the top issues keeping your business from growing the way you would like is its financial management. That is, you just can't get the numbers together to tell you where your biggest risks and opportunities are going forward, let alone the roadmap to growth and sound financial health.

Your bookkeeping staff is doing a bang-up job keeping up with tax and compliance issues, but just lacks the experience and knowledge to generate the kinds of reports and numbers you need to push your business to the next level and the level after that.

You're even debating whether it's time to hire a chief financial officer with experience in your industry who can start providing you and your board of directors the kind of valuable information to feed the next growth cycle. But an experienced CFO won't come cheap, and that's a big financial commitment for a small and growing company.

What if you knew there was an alternative that can bring to the table a team of finance experts with experience in your industry for about half the cost of hiring a full-time CFO? Intrigued? So what is a CFO service, after all? In contracting with an outsourced CFO service, you'll gain all the expertise you need and avoid the search and training time needed to bring on that one perfect CFO for your business.

Where Are You Struggling?

Before we jump headlong into a solution, let's take a few minutes to evaluate the issues you feel are holding your company back. Generally, the frustrations CEOs and boards feel about the financial structure of their companies fall into these broad categories:

NOTE: Let's face it, small businesses often have a controller or a CFO, not both. As a result, the finance responsibilities - beyond the bookkeeper’s - are sometimes bundled and carried out by a single person. Some of the struggles listed below involve controller AND CFO tasks. For example, key performance indicator (KPI) selection and more sophisticated report/dashboard design are CFO tasks while ongoing report production would be a controller task. Often a small business CFO fills the void when there's no controller. But we'd caution you from expecting a controller to be able to effectively play the CFO role.

Reporting: This is a biggie as your company is looking to grow or expand. You feel like you are constantly making decisions in the dark because you lack a true financial picture.

In the best case, you're getting incomplete information that doesn't allow you to track each aspect of your operation. The spreadsheets coming from your finance department don't have the right KPIs for your industry/growth stage, don't properly account for the nuances of offerings or projects that span months or quarters, or fail to assign overhead vs. cost of goods sold correctly. In the worst case, the spreadsheets are rendered useless by inaccuracies as a result of faulty data entry and classification.

Wherever your company falls in this spectrum, you cannot be expected to make the best decisions about the direction your company moves when you don't have the data to back up those decisions.

Accountability: As your business has grown, so has the complexity of the financial situation and sheer volume and types of transactions. Do you have adequate financial information security, division of responsibilities, job performance standards? Early on, a bookkeeper may have handled all of the bookkeeping and accounting duties (maybe even you and/or your spouse). But as your business grows and staff expands, the challenge becomes to create a system of checks and balances to ensure, first, that tasks are accurately completed in a timely, lawful manner and, second, that no one person has too much control, opening your company up to risk of fraud. A controller might be responsible for the day-to-day operations, but the CFO owns the design and ultimate performance of the accounting process, systems and controls and systems.

Management: Chances are pretty good you didn't start your company or get involved in a small business because you love to crunch numbers. This can put you at a disadvantage when managing your bookkeeping and financial staff purely because you're a little intimidated by what they do all day. But you also know that your business will not survive and thrive if invoices are not sent on time, payments are not received and processed on time, bills are not paid on time. And someone needs to guide your team so they're continuously arming you with financial and operating insights required to fuel your decisions en route to hitting your growth and performance objectives.

Strategy: Accurate and timely financial information - along with practical interpretation and guidance on how best to leverage it - is invaluable in driving strategy formulation and evolution. Without it, you're shooting from the hip. You have too much riding on your strategy to not inform its development with sound data. You can't know where you are going without knowing where you have been. And knowing where you have been and how you got to where you are now, also creates a guidepost for how you can get to where you want to go next. In other words, your financials and financial leadership should tell you - on a segmented basis - what has succeeded, what has failed and also help you use that information to develop and refine your strategy.

Raising Capital: Even if your company can limp along operating with incomplete financial information, banks and investors are only going to come on board if you can present a compelling, substantive financial picture. Having complete and accurate financial history and projections - coupled with a credible financial story - is vital to secure capital your business needs to grow.

If you see your company with any or all of these issues, you know it's time to take action to get your financial house in order. You not only won't be able to grow your company without addressing these issues, but you could actually slide backward and ultimately fail as a business.

Life with a CFO Service

Thinking back over these issues that have brought you to this point, hiring a CFO service offers you the best opportunity to achieve your growth goals, and to do so quickly and more economically. Consider:

  • A CFO service will generate monthly, or even weekly, reports that are specific to your business and your current needs. The CFO service will understand your business and your industry and help design the reports so they are easy to digest for you and your board of directors, giving you the opportunity to fully understand where your business stands and where it is headed.
  • A CFO service will oversee your current bookkeeping and controller staff to ensure all procedures have a series of checks and balances to strengthen security and present accurate financials. The CFO service also will ensure you are using the correct and most up-to-date financial software to best operate your business. While a CFO service will not directly oversee your IT department, it certainly will work with that function to put in place proper safeguards and meet equipment and software needs for your staff. The CFO service also will make sure your company is in compliance with all financial regulations.
  • A CFO service will generate a budget and financial projections to give you and your board the best financial information possible to make strategic decisions about your company's future as well as the toolset to hold your team accountable for hitting your goals. These projections can also include "what if" scenarios so you can truly be a future-driven CEO and quantifiably compare the potential impact of key decisions before taking a leap on that next investment. 
  • You may opt to have your CFO service prepare you for board meetings. Regardless of whether your CFO is physically present at your board meetings, the service will help create the type of relevant financial package that will give your directors a true picture of the company. The service can also coach you, as CEO, on how to most-effectively present the information to your board.
  • A CFO service generally may or may not provide direct investor relations, but it will certainly provide the financial reports and can coach the CEO on an effective approach to presenting that information to the investor community as well.

The Faces of a CFO Service

CFO services come in a variety of styles, so it's important to find one that is familiar with and suitable for your business. These are some of the kinds of CFO services you can explore:

  • Consultants: These normally are experienced CFOs who will provide short-term work with your company to set up certain procedures and reporting. They also may serve as an interim CFO for a certain project or while you are going through a transition.
  • Virtual CFOs: These agencies offer a more long-term solution to your financial management needs, where the agency oversees your financial staff but is not on-location nor involved in the day-to-day corporate management of your company.
  • Single Source CFOs: This is a one-person operation who provides CFO services for multiple clients. You would want to make sure this individual is familiar with your specific industry and has the capacity to meet your needs if you (or another client) has an urgent, all-in project.
  • Staffing Firms: These more general companies will provide you with whomever they have available, which may not be the best fit for your particular industry. 
  • CFO Consortiums: These are networks that provide CFO consultation services on a regional or nationwide basis.

Advantages of a cfo service over a full-time cfo

Compared to a full-time CFO, a CFO service offers numerous advantages. Specifically:

  • You can Act Now: Gain strategic perspective/input and world class reporting before you can afford a CFO on a full-time basis.
  • Expertise Expands with Your Needs: Expand the scope and level of sophistication only as you need it while maintaining the continuity that comes with working with trusted resources over the long-term.
  • All Skills & Experience Covered: No single person will have every skill or experience you will require over time. With a service, you benefit beyond the experience of a single person as a service can tap others in their organization to compensate for skill or experience deficiencies. 
  • No Geographic Limitations: You won't experience the geographical limitations of finding someone in your area or someone willing to locate to your area as you can engage a service outside your region. 
  • Save Big-Time Cash: Prolong the need to hire a full-time in-house CFO as long as possible, saving cash along the way without compromising on financial leadership.
  • Much More: Eliminate all of struggles listed earlier, along with your list of pain points that are currently gnawing at you.

What Will a CFO Service Cost?

While CFO services should be be customized to your needs and your business, here's an article on their actual cost. But they generally cost about half what you would expect to spend hiring a full-time CFO when you factor in salary, benefits, retirement, taxes, etc.

Is Your Financial Picture "Cloudy" at Best?

If you are ready to move your company into its next growth stage, but lack the confidence that your finance team can help you get there, we hope you've found value in understanding the nuances of CFO services. 

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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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