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Could Your Company Benefit By Hiring An Outsourced CFO?

Hiring a full-time CFO can be costly for companies that can’t afford to hire a CFO until they are bigger. Read the benefits of outsourcing in this post.

It’s not unusual for growing businesses to reach a point where they need a higher level of strategic financial expertise to reach the next level — the kind of expertise offered by a Chief Financial Officer (CFO). But hiring a full-time CFO represents a big financial commitment since he or she will probably command a six-figure compensation package.
 
This can put small and mid-sized businesses in a Catch-22: They need the knowledge and experience of a CFO in order to continue to grow, but they can’t afford to hire a CFO until they are bigger.
 

“Renting” a CFO

One solution is to hire an outsourced CFO services provider on a part-time or as-needed basis. Also sometimes referred to as a “CFO for rent,” an outsourced CFO enables growing firms to tap into the expertise of a high-level financial professional without taking on the financial commitment of hiring a C-suite executive.

“Hiring an outsourced CFO is a strategy that’s being used by more and more small and mid-sized firms today,” says Cadence Bank Middle-Market Commercial Banker Maurice Champion. “It enables them to reap the benefits of having a CFO on staff without taking on the risk of hiring a full-time CFO before they’re ready to support this position.”
 
A CFO for rent will bring a significantly higher strategic and analytical skill set to the table than a bookkeeper, accountant, CPA or even a controller. He or she will be able to go beyond the compilation of day-to-day financial management data to provide big-picture financial planning and analysis. This includes detailed interpretation of financial data that will lead to better financial and operational decision making.
 
In most scenarios, the outsourced CFO and CEO will work together closely on high-level financial analysis and strategy. This includes implementing and executing plans and initiatives that will increase growth and profits while lowering costs and boosting shareholder return. “The outsourced CFO can also serve as the primary point person between a business and its bank,” says Champion.

 

Typical CFO Responsibilities

Among the tasks and responsibilities typically assumed by an outsourced CFO are the following:
 

 

  • Ensuring that sufficient internal controls have been implemented to safeguard the business from fraud and embezzlement.
  •  Helping analyze the company’s overall level of financial risk management.
  •  Providing input on and analysis of the company’s big-picture strategic plans
  •  Helping analyze potential M&A deals and performing due diligence on merger and acquisition candidates.
  • Conducting ratio analysis and comparing key performance indicators (KPIs) to industry benchmarks.
  • Suggesting strategies for reducing tax liabilities, increasing cash flow and improving overall cash management.

In some instances, a CFO for rent can also provide oversight of a business’ financial and accounting departments, including directly supervising these employees. Whether or not this is feasible given the part-time nature of an outsourced CFO’s role depends on the size of the staff and the complexity of the company’s financial situation.

 

 

Vetting CFO Candidates

There is a growing number of financial firms and professionals today that provide outsourced CFO services and call themselves ‘CFOs for rent.’ “But before you hire the first one that pops up in a Google search, do a little homework to make sure you hire the right outsourced CFO for your company’s needs,” says Champion.
 
Specifically, you should look for a professional who has experience as a formerly seated CFO. There’s simply no substitute for real-world, hands-on experience when it comes to the responsibilities and expectations of an outsourced CFO. Also try to find an individual who has experience in your particular industry or field so he or she can bring a wide range of industry best practices into your business.
 
Perhaps most importantly, an outsourced CFO should be able to bring a fresh and objective perspective to the financial and growth challenges your company is facing and offer objective and thoughtful solutions. It’s a bonus if an outsourced CFO has experience on both the financial and operational sides of business so he or he can bring a holistic approach to problem solving.
 
“If your company is at the crossroads where you need the strategic expertise of a CFO but you’re not quite big enough to hire one full time, then hiring a CFO for rent could be the right solution,” says Champion.
 
The financial expertise an outsourced CFO brings to the table can be particularly valuable when your company is applying for a bank loan or line of credit.
 
Please contact Cadence Bank to learn more about our business credit options.
 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

 

 



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