6 Essential Benefits of an Outsourced CFO for Your Small Business

Published by BradyRenner CPAs | September 29, 2019

Small business owners face a near-constant array of demands and priorities every day. Chief among them is the challenge of simultaneously managing all of the tactical demands of the operation while also keeping a sharp eye on strategic priorities and questions essential to growth.

One way to address this gap is to outsource key strategic roles to fractional, part-time experts. This enables small business owners to gain the benefit of highly qualified talent on an as-needed basis and at a much lower overall cost than hiring full-time. One key discipline in which this model can be of outstanding value is in the role of the CFO — a typically high-cost, high-talent role that was historically out-of-reach for any small business.

But once you decide to focus on retaining an outsourced CFO, the question arises: what are some of the benefits that can accrue if my small business retains a fractional CFO? Here are just a few:

Strengthening Your Strategy with What-If Analysis

First and foremost, an outsourced CFO can serve as the strategic sounding board your business never had before — a person with a deep understanding of financials who can advise you as you contemplate strategic decisions for the future of your enterprise. One way an outsourced CFO can do this is with a ‘what-if’ analysis, where he or she will compare the financial impact of various options before you and help you make sound decisions.

For example, does it make more sense to rent or buy your next commercial property? Does leasing or purchasing a new delivery van have a better impact on cash flow? Should you buy out your retiring business partner in an accelerated fashion or negotiate a slower exit in order to protect the business? Will refinancing business debt allow you to free up funds to invest in future growth? All of these questions can be answered through careful what-if analysis exercises led by your outsourced CFO.

Running and Interpreting Key Reports

Let’s face it, running reports is not exactly at the top of the priorities list for most small business owners. And yet, running — and reviewing — those reports can be essential to the health of your business. Not knowing your numbers as a business owner is akin to not being clear on your flight plan as a pilot. In both cases, you’re risking flying in the blind.

Your balance sheet summarizes your total assets, liabilities and shareholder’s equity. The income statement (also known as the profit and loss statement), summarizes the total revenues and expenses incurred, showing the profitability (net income or net loss) over a specified period of time. The cash flow statement presents the inflows and outflows of cash across the business. The Aging Report shows outstanding accounts receivables (money owed) in periods of time, typically 30-day increments. These are just a few of the reports you should be running and examining weekly or monthly. Your outsourced CFO can run them, review them and provide an interpretation to help draw your attention to key priorities or essential questions, not to mention new trends or shifting flows of money.

Interfacing with Your Accountant

Your accountant is one of the most valuable resources available to your business. Here is a person or a team that knows your financials intimately and works every year to prepare and file your taxes as well. Your accountant is filled with knowledge, expertise and ideas that need to be mined and put to use. But as a small business owner, you’re busy racing from priority to priority and likely struggle to find time for a regular meeting with your accountant.

One solution is to retain an outsourced CFO to interface with your accountant (or, if your accountant offers it, retaining your accounting provider to also serve as your outsourced CFO). In this way, you’re establishing the time and commitment necessary to gain the best value out of your accounting relationship, which is great not only for tax planning, but for your bottom line as a whole.

Improving Information Systems

Another area in which an outsourced CFO can dramatically assist your business is with overseeing information technology decisions and initiatives. Perhaps you’ve been using one version of QuickBooks, but it’s long-past time to upgrade and you might benefit from some new functionality. Or maybe you need a retail POS system or a time-and-attendance product that can integrate with your accounting package but you’re not sure how to evaluate which is the best from a finance and accounting point-of-view.

While an outsourced CFO is not an IT expert, chances are they are an excellent resource for understanding two essential aspects of IT strategy: (a) what systems and processes your business relies upon, and (b) what information or financial data needs to flow from one place to the other in order for your business to operate smoothly.

Working with Your Bank, Managing Debt and Saving Money

Finally, your outsourced CFO can help you manage the essential triangle of priorities relating to money management — securing the best financing possible, controlling and effectively managing your debt, and saving the business money.

As a finance and accounting expert, your outsourced CFO is already ideally positioned to interface with your bank and help position your business as a strong player at the banking table. In addition, he or she can review your debt position and identify strategies for reducing debt overall, pursuing effective refinancing or consolidation, improving terms, working to expand your line of credit, and more. Finally, an outsourced CFO can review your purchasing and recurring or overhead expenses and help negotiate better contracts, improved terms, lower costs or other ways to save you money.

As you can see, an outsourced CFO can bring enormous benefits to your small business across a wide range of priorities and opportunities. Overall, the key role of an outsourced CFO is to help protect you and your business by keeping an eye on the numbers that matter, flagging both areas of concern or new opportunities, and assisting you to build a stronger, healthier enterprise for the future.

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