Why Your Small Business Should Rent a CFO Instead of Hiring One

 In Business Strategy, rent a CFO

 

cfo consultantYour San Diego startup or medium sized business may have an accountant, but you may be wondering if it is finally time to hire a full time controller or CFO to oversee business’s finances and operations?  Maybe you have heard that you can rent a CFO consultant instead of bringing a permanent one onto your payroll.  Here are 6 questions to ask to further figure out if you need to finally hire some kind of a CFO;

  • Are you experiencing rapid growth that seems out of control?
  • Is your company positioning itself for a merger, acquisition or IPO?
  • Is your company in financial rough waters, and struggling to stay profitable?
  • Do you want to personally exit your company, but don’t know what to do to get ready?
  • Are you concerned about what you don’t know about your firm’s financial health?
  • Do you want more or different insight and strategy than you are getting from your in-house resources

If you have said yes to any of these questions, then it’s now time to compare the differences between renting vs buying a chief financial officer.  Ok, so you may be the founder and owner of your company, and maybe you are considered an expert in your industry, but unless you have an MBA in finance you may need to hire a professional help with planning, forecasting and making strategic business decisions.  Understanding finance is essential both to avoiding financial disasters and to growing a profitable business.

Outsourcing VS Hiring

So now we are living in an on-demand economy, where outsourcing or renting this type of c-suite level service by the hour or month can be an attractive option, which can allow growing companies to acquire the financial oversight, expertise it needs, while not getting locked into paying out an expensive- multi-faceted executive compensation package.   This level of expertise is often vital for businesses who are competing in fast paced markets against much larger competitors.     

Added Benefits with Less Risk

When a business reaches the stage of doing over a million a year in revenue, they now require much more sophisticated and strategic guidance than a typical CPA or controller can provide.  A CFO can be instrumental in controlling costs, planning, forecasting, investment structuring and advising many other business decisions. Which for many companies, the decisions that get made can either make or break them in terms ever getting to the next level of revenue growth. Another skill or benefit that a CFO can bring to an organization is providing a macro view of the market and the company, which can help the CEO because most don’t have the time or knowledge of this perspective.  

Growing a business often reaches a point where you need on demand professional financial advice, financial data, and financial analysis, but can’t afford a full-time CFO or controller – Thomas Huckabee of Thomas Huckabee CPA

cfo-guidanceSo now these are all compelling reasons to consider hiring a CFO. Except the cost of a conventional full time positioned employee hire. (According sites like Glassdoor or Robert Half International Inc) can run a salary in the U.S., of over $160,000.  For small to medium sized businesses, even though an experienced CFO bring a huge value to the table, at this stage it may not be totally necessary to bring on a full-time hire.  In situations like this, contracting or renting an outsourced CFO consulting firm on an on-demand basis can be more much efficient and will save a ton of money in terms of salary, equity compensation benefits and additional overhead expenses.  By renting one, which can range from a few hours a week or more, can provide flexibility, in which you are not locked into a salaried hire, if CFO you try the first time is not the perfect fit, there is less risk involved selecting a different consultant.     

An outsourced or interim CFO can work very closely with your management team on your company’s financial strategy and conduct an analysis of your current operations financial processes. And when an owner or CEO collaborates with a financial expert at this level, you can work together to implement initiatives designed to increase profits and reduce costs for both the long and short term. One of the strengths of a good CFO is that they pinpoint and explore the value drivers of the business.   And once these value driver opportunities have been identified, they now can become measurable, and what a CEO does not need to have the value of their business increased. Especially using a CFO consultant on an outsourced basis, the benefits usually far out way costs.

What exactly could a “ rented or outsourced CFO ” really do for your company?

There are a number of specific duties that a San Diego CFO can perform and do for a company:

  • Identifying strategic goals to drive profits and other strategic initiatives  
  • Oversee financial and accounting functions and train staff on accounting best practices and technologies.   
  • Assist with taxes and adhering to IRS rules to minimize overall tax liability as well as potential fines and penalties  
  • Evaluate your cost and pricing structure to strengthen gross margins
  • Upgrade your financial reporting system, including re-designing reports for clarity
  • Preparing financial information used in internal or external reporting, including collaborating with the company’s existing accountant  
  • Assessing financial consequences of proposed transactions  
  • Evaluate the internal controls and help initiate protocols to reduce the risk of theft and fraud  
  • Setting up the appropriate infrastructure for financial metrics, which can be crucial for the management in order for them to make the best decisions for the company moving forward
  • Help to lower labor costs while providing expert strategic financial direction.
  • Can also serve as the business liaison with potential lenders, investors and other outside financing sources
  • Preparing and monitoring budgets and forecasts, including cash forecasting
  • Assessing profit margins lining up with industry expectations
  • Evaluating and developing inventory tracking systems
  • Assessing IT and HR needs  
  • Develop cash improvement programs   
  • Developing compensation plans for key employees
  • Evaluating internal accounting controls   

3 Types of CFO Consulting Engagement Models

taxesYou can hire a CFO consultant in a few different ways, it can be part time, on an hourly contractor for a specific transaction or project basis.   In this third model, the outsourced CFO is brought to advise and consult to work and help complete a short term project.  This is a very popular option for companies that need revenue recognition or financial modeling, or are about to undergo a merger & acquisition or major integration.     

In addition to standard chief financial officer duties, they are also well versed in handling many outsourced accounting functions such as payroll, technology training, general ledger maintenance, accounts payable and receivable are in the scope most CFO consulting firm’s services, which may be useful for your small business to explore some these additional options.

Ok, so while many successful companies certainly have to employ a full-time CFO, there are times when some of these businesses may occasionally seek outsourced assistance on an interim basis.  This model usually happens when a CFO has left the company, and they hire a temporary one to fill during the transition phase of recruiting another.  Your consultant may even be able to add value by helping your management in the recruiting and hiring process, by recommending possible candidates, sitting in during interviews and providing feedback. 

Conclusion

An experienced and qualified CFO who not only understands the dynamics of owner managed companies and has worked in their industry before can provide invaluable financial advice and assistance they need to make the business more successful.     

And if the time comes to an in-house permanent financial offer, your part time CFO consultant can train and smoothly pass the reins to the new full time hire.  Here are 7 traits you look for when deciding to hire a CFO consultant.       

If you are ready to consider an hiring an interim or part-time CFO, or have a project to discuss, Thomas Huckabee CPA can show you what the ROI looks like for your company.

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