July 2019 — By Michelle McCullough
I am a CFO.
If you were to ask me if I would outsource my financial services. Absolutely.
Here is why.
For years, we watched our clients struggle to run their businesses because they lacked financial expertise and guidance and could not afford a full-time CFO. As a leader in finance and operations for both a fast-growing startup and a large corporation, I have witnessed firsthand the impact that sound financial intelligence makes for organizations to realize their visions.
Because if you are a CFO, you focus on ROI and your goals for a company are financially driven and protective. The heartbeat of any company is financial stability and visibility. It is the catalyst to growth, people, M&A strategies, innovation, etc.
Yet the true costs of in-house accounting can be expensive. According to a recent GrowthForce report the estimated total of just a modest 3-person team can average $300,000/year. For a fraction of that cost you can have all of the financial expertise and intelligence at any level or stage of your business lifecycle.
If you are a business leader or decision maker, consider outsourcing these financial functions just like delegating tasks to a knowledgeable resource with the result of saving you time and money.
Here are some additional benefits to outsourcing your CFO services:
In my work with clients, I find sometimes you need a player and other times you need a coach. Players understand and execute the foundational tasks that keep your business running, while the coach sets the strategy.
With outsourced financial operations and intelligence, you can get both. For example, we recently had a client that had some significant turnover in their bookkeeper position. In the meantime, they were having a cash management crisis and had taken on debt as a stopgap measure. The first steps we took to help them were very operational—we identified which systems they needed to manage their finances better and we automated as many processes as possible.
Then we got more strategic, developing a cash forecast to help them understand how they could get out of their cash crunch. We eventually negotiated with some of their lenders for improved terms and recommended a new incentive structure for their partners, which better aligns with the business goals. We utilized our entire team for this client, drawing on varied experiences and levels of expertise. It would have been difficult to replicate the service and results via a single hire.
As you undoubtedly already know, hiring top finance talent is an expensive endeavor. Experienced CFOs usually command a large salary, along with benefits and an incentive plan. A C-level hire can provide that strategic direction, but your business may still need to hire finance support roles as well.
In addition to salaries, consider the ancillary costs of managing more people, especially for resource-strapped teams. One oft-cited MIT study estimated that employees cost employers 1.25 to 1.4 times their salary once benefits and overhead are included. There is also the mindshare element: managing people requires attention and time, a resource many business owners have in limited supply.
Hiring a competent financial intelligence and support firm should cost less than the full-time salary of a CFO. Perhaps just as important, it reduces the management burden and overhead requirements on your existing staff.
Finance work is often nicely predictable…until it isn’t. There are normal variations such as seasonal considerations, fiscal year end, the beginning of a budget cycle and annual tax preparation. At these times, the workload increases significantly. Consider that the median time it takes to create a budget, from establishing objectives to delivering a ready-to-use document, can take 30-40 days.
Then there are the surprises. For example, we serve several nonprofits, and it’s not uncommon for an organization to have a good year of charitable gifts and grants, followed by a much leaner year. With outsourced financial services, our clients can staff up and down as their business demands, without having to rapidly hire or layoff critical employees.
The same goes for fast-growing companies that may be fueled by investment. They need financial support and guidance but aren’t ready to make significant hires. Outsourced services can help startups efficiently scale up as they grow and prepare them up for whatever comes next.
One-third of business leaders report that fraud and corruption are their predominant organizational risks. One in ten leaders say they have experienced fraud in their organization within the last two years. The threat of fraudulent activity is all too real for every business owner. We have seen far too many instances where we begin to put financial controls in place only to discover someone on the existing team has not been truthful about what the company owes to vendors, off balance sheet promises or the expenses that they are tracking.
While the instinct for business owners is often to keep finance in-house as a protective measure, we have seen that the opposite is more effective. Outsourced financial operations come with an objective agenda—typically to organize and streamline your finance workload. Their own business is rooted in their trustworthiness, and there exists little incentive to commit fraud. At the same time, as an outsourced financial services firm improves your financial controls and reporting quality, they end up enhancing compliance efforts in the process.
The ultimate goal is to free up your time so that you can potentially make more money, and dually make certain the daily information provides the insights for the bigger decisions.
As an example, an area of enormous challenge for some business leaders is to envision their ultimate exit and devise the path to optimize the valuation and terms. The most common mistake we see is the lack of planning for an exit, in a near term horizon, say 2-5 years and not take the proper steps to exit on their best terms.
By adding finance services to your team, you gain the ability to analyze current financials and project and model future scenarios in ways that sync with the business aims. Doing so will save you the money and heartache required to course correct later down the road.
In conclusion, visibility into your financial future—as well as control of your financial present—is more than just good business. It is the difference between companies that are primed to make smart business decisions and take on appropriate risks and those that are effectively flying blind.
Again, I am a CFO. I have spent many years working with companies and guiding them through their investments. I can say confidently, that an investment in outsourced CFO Services can be one of the best financial decisions that you can make towards growing your bottom line and with less financial risk.
To learn more about how outsourcing your financial expertise and intelligence can help grow your business, connect with me at mmccullough@hvadvisors.com.
