Five Ways Outsourced CFO Services Can Benefit Your Business Clients
When asked what outsourced CFO services are, the answer invariably includes a story about Joe, an engineer experiencing significant financial challenges. With his technical background, he had built a growing international telecommunications network — but company growth had stalled. Although Joe had 15 employees, financial operations were delegated to an office manager. To relieve his frustration, Joe hired an outsourced CFO who began digging through his company’s available financial data. After several days of analysis and interviews, the CFO presented a solution: a new profit and loss statement segmented by satellite. Joe immediately recognized the source of his challenges and canceled unused satellites and renegotiated rates on less profitable satellites. The changes increased profitability, leading to an increase in available cash which he used to expand profitable satellites. The ultimate result was a return to growth.
You can easily replace Joe with any of your clients. For-profit businesses share at least two common goals: improving profitability and increasing shareholder value. In Joe’s case, he received information he needed to make critical decisions about profitability. This did not require a full-time solution. Instead, an outsourced CFO delivered high-level financial expertise. Joe utilized the flexibility that comes with hiring an outside consultant — for a fraction of the cost of an employee — and he still received the strategic financial guidance he required.
As intelligent as your clients may be, at some point they could benefit from knowing someone with more extensive financial expertise and experience.
Here are five occasions your business clients could benefit from outsourced CFO services:
- Loss of a CFO. This can be devastating to a growing company. Outsourced CFO services can seamlessly integrate an experienced professional to assist business managers who need additional expertise. The void created by the full-time CFO is filled — temporarily — by the outsourced professional.
- Planning a sale or exit. Planning the transfer of a business requires detailed preparation. An experienced, outsourced CFO can help plan for the implications of the decision and assist with the process. An entrepreneur-led company will have greater value, and be easier to sell, if systems, people and processes are in place to ensure that business will continue when the current owner exits.
- The need for better reports. If the company’s systems cannot generate the financial reports required by management, bankers, shareholders and partners, an outsourced CFO can help find the best solution for that problem and set the business on track for the future. Whether it’s a redesign of a current system or a new enterprise resource planning (ERP) system implementation, an outsourced CFO knows what the aforementioned groups expect.
- Geographic expansion. Growth brings challenges, and growth into new geographies makes those challenges even more complex. Whether a business is adding a warehouse or creating a foreign subsidiary, adding a new location affects both systems and processes. An outsourced CFO can help with regulatory compliance, system integration and any financial challenges that may arise.
- New debt or capital funding. A CFO should lead the effort in finding new sources of capital for a business, but in the absence of a full-time CFO, an outsourced CFO can achieve the same results. From understanding the needs and goals of the organization to negotiating with the banks for debt financing, the outsourced CFO ensures that the business isn’t giving up too much in exchange for too little.
In all five of these scenarios, outsourced CFO services can seamlessly integrate an experienced professional into a business whose managers need additional expertise. The engagement can be on a recurring or as-needed basis, which offers smaller companies trying to achieve growth the opportunity to obtain assistance until they can afford a full-time financial executive. An outsourced CFO offers executives and staff more detailed insight into the company’s financials so they can make better business decisions, and the management team can learn about financial issues so they can spend more time on growth and improving enterprise value rather than administration and overhead. And, by taking a proactive approach, together they can identify risks, evaluate options and implement solutions at a cost well below the benefit.
Richard T. Veltre
Richard T. Veltre, CPA, MBA, is the founder and managing member of Harbour Rock LLC, an outsourced CFO firm assisting small and mid-sized business with strategic insight at fractional cost. He is a member of the NJCPA.
This article appeared in the May/June 2017 issue of New Jersey CPA magazine. Read the full issue.