August 30, 2023

Alexander Ronzino, MBA

How to choose an Outsourced CFO

How to Choose an Outsourced CFO

In today's business environment, it is more important than ever for businesses to have a strong financial foundation. However, not all businesses have the resources to hire a full-time CFO. This is where outsourced CFOs come in. But how do you select the right one?

Treat the interview process for your outsourced CFO with the same rigor that you would for a full-time employee.

The concept of an outsourced CFO is no longer a novel concept. Many firms have realized there is a market need for the service, and have created factories of consultants. 

There is a downside to this however - large swaths of fractional workers do not have a full work history in the C-Suite. Controllers and other accounting/finance professionals are moving into these roles despite the lack of c-suite experience.

A CFO is supposed to encompass a holistic view of your firm, and an eager finance/accounting professional looking to leapfrog with their career may not be the most appropriate person for your company. Don’t think because you’re paying less that you need to accept less. 

An outsourced CFO is a professional who provides CFO services to businesses on a contract basis. This means that the business does not have to hire a full-time CFO, which can save them money and time. Outsourced CFOs can provide a wide range of services, including:

  • Financial planning and analysis
  • Budgeting and forecasting
  • Financial reporting
  • Tax planning and compliance
  • Risk management
  • Investor relations
  • Mergers and acquisitions

If you are considering outsourcing your CFO, there are a few things you need to do to choose the right one for your business. They should also be equipped to support corporate governance and have a thorough understanding of operations, marketing, and sales. 

1. What are your. outsourced CFO needs?

The first step is to assess your needs. 

What are the specific financial services that you need help with? 

Do you need help with financial planning and analysis? 

Ask yourself how long it takes to generate a spreadsheet to make a decision. If the answer is more than a day, you likely need additional support. 

Budgeting and forecasting? 

Do you have a monthly budget that your team follows? Are your managers budgeting their costs at a vendor level? Do you regularly meet with your team to ensure their meeting the expectations the budget outlined? Do you compare your budget to your actuals? Do you know the difference between your budget, actuals, and forecast? 

What about tax planning and compliance? Once you know your needs, you can start to narrow down your options.

2. Evaluate the Expertise and Experience of the outsourced CFO:

When searching for an outsourced CFO, focus on candidates with a solid track record in your industry. Look for professionals with experience in financial roles that align with your business size, industry, and growth stage. This industry-specific knowledge can significantly impact the CFO's ability to provide relevant insights and guidance. If you’re interested in a free comparison of your financials compared to your industry benchmarks, reach out to us to learn more. 

3. Assess the outsourced CFO's Technical Proficiency:

A competent outsourced CFO should be well-versed in the latest financial technologies and software. Proficiency in financial modeling, forecasting, and data analysis tools is crucial. This technical acumen enables them to efficiently manage your financial data and provide accurate forecasts for informed decision-making.

4. Check for Strategic Insight:

Beyond number crunching, a strategic outsourced CFO should offer insights that drive long-term business growth. During the selection process, gauge their ability to translate financial data into actionable strategies. A strategic CFO can play a pivotal role in guiding your business toward sustainable success.

5. Cultural Alignment:

Cultural fit is often underestimated but essential. Your outsourced CFO will collaborate closely with your internal teams, so ensure their values and working style align with your company's culture. Effective communication and collaboration are critical for a seamless partnership.

6. Track Record of Communication:

Transparent and effective communication is crucial in financial management. Inquire about how potential outsourced CFOs have communicated complex financial matters to non-financial stakeholders in the past. Their ability to convey financial insights clearly is vital for informed decision-making throughout the organization.

7. Client References:

Don't hesitate to ask for references from their previous or current clients. Speaking with those who have worked directly with the outsourced CFO can provide valuable insights into their strengths, areas for improvement, and overall performance.

In conclusion, selecting the right outsourced CFO is a strategic decision that can significantly impact your company's financial health and growth trajectory. By defining your needs, assessing expertise, evaluating technical proficiency, and ensuring cultural alignment, you can find a partner who not only manages your finances but also contributes strategically to your business's success. Effective communication, scalability, and cost-effectiveness further enhance the value of an outsourced CFO arrangement. Through careful consideration of these factors, you can confidently choose an outsourced CFO who becomes an invaluable asset in steering your company toward financial excellence.

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