Outsourcing a CFO: benefits at a glance

One question startups often ask is when should they hire a CFO. Every company is different, of course, but for many of our start-up customers, the answer is the same: If you're not planning on going public in the next 1-2 years, you should consider working with an outsourced CFO.

What are outsourced CFO services?

First, let's take a step back and talk about what a CFO does.

The Chief Financial Officer is responsible for everything that has to do with a company's finances. From a management perspective, the CFO usually oversees teams responsible for tactical issues, such as keeping books correctly and timely and correctly meeting tax obligations. From a strategic perspective, your CFO keeps an eye on the company's well-being and advises on how to achieve financial goals:

• Tracking and regular updating of financial figures
• Review and analysis of KPIs
• Assistance with budget preparation Preparation of budgets
• Create forecasts for financial data
• Planning for future growth
• Review of management documents and preparation of financial slides
• Periodic assessment of financial hygiene and recommendation of best practices

Most outsourced CFO services, also known as fractional CFO or virtual CFO services, are available at hourly rates or by subscription.

Why should I outsource my CFO services?

There is no substitute for a knowledgeable and experienced financial expert to help with business decisions, particularly with start-ups whose founders have no financial background themselves. So why might outsourcing be the right option for your startup or small business?

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Outsourcing saves money

Hiring a full-time CFO is expensive. For many start-ups, such an investment in personnel is simply not feasible. Even if the necessary capital is available, the opportunity costs can be prohibitively high, as the money does not flow to other areas of the company.

In this case, outsourcing is a reasonable option. By paying a fixed number of hours to a part-time CFO, the benefits of working with an experienced finance manager can be reaped at a significantly lower cost than hiring a full-time CFO. Especially for small companies such as start-ups, this can mean that they have access to a resource that would otherwise not be available to them.

Outsourcing saves time

The question is what the company needs. In the early stages, many companies need a CFO who has expertise in specific areas such as forecasting, budgeting, or fundraising. All of these areas can be well covered by using outsourced CFO services. For these companies, hiring a full-time CFO would be overkill.

Benefits of outsourced CFO services

• Affordable growth.
  A full-time CFO is financially unsustainable for many small businesses. With virtual CFO services, a company can benefit from a CFO's expertise and growth strategies at a fraction of the cost.
• Greater flexibility.
  Start-ups develop quickly and what you need today may be irrelevant tomorrow. By using outsourced CFO services, companies can adapt their commitment to the development of their business.
• Perspective from outside.
  An external CFO brings a new perspective. Since he is not involved in your day-to-day business, he can take an unbiased look at your figures and objectively evaluate them against market benchmarks. And because CFOs typically work with a range of clients in their area of expertise, they can also transfer insights from a wider range of experience to your organization.

How to choose the right CFO service provider

When choosing a CFO service provider, it is just as important as hiring an internal CFO that they are a good fit for the company. Here are a few things to consider:

• Relevant experience.
  Different types of companies in different markets and industries may have different priorities and challenges that they need to plan for. It's a good idea to look for a virtual CFO service provider that has experience working with similar companies. For example, if it's a SaaS provider, the part-time CFO should be familiar with SaaS business models and metrics such as ARR. If the company is planning to raise capital in the near future, it should hire an external CFO who has successfully raised capital in the past.
• targets
  CFO service providers typically offer a range of services — for example, our team at Numarics can help with budgeting, preparing forecasts, analyzing performance indicators, advising the board, and more. To make sure everyone gets the best out of their CFO, you should consider which problems you want to solve and what results you expect. This can be so specific that specialized analyses are required, or so general that it simply requires guidance on key benchmarks. Anyone who is clear about their goals before hiring a sub-CFO knows which questions they need to ask and what criteria/experience they should look for.
• Individual consultant vs. service team.
  Virtual CFOs come in various shapes and sizes. Either an independent consultant works individually with a company, or a CFO service team consists of a group of CFOs who work together to achieve the goals. A single consultant can be less expensive, while a group benefits from multiple experts and faster turnaround times

conclusion

Hiring a financial expert doesn't necessarily mean hiring an expensive corporate officer. As a company grows, it should be considered hiring an outsourced CFO to get the advice needed at a price that the company can afford.

Looking for a competent, digital CFO who is specifically tailored to the needs of start-ups?

Then Numarics is just the thing for you!

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