What Are Outsourced CFOs?
The immense move of systems and data to the cloud has enabled small and medium enterprises and non-profits to thrive more in business whilst outsourcing management functions. Due to the flexibility of businesses and the availability of a skilled workforce, most organizations are looking for third parties to carry out traditionally in-house activities. It is very important to hire an Outsourced CFO for your business
. This massive move from in-house services to hiring third parties has created a brand-new service industry. Today as we speak, thousands of major enterprises leverage outsourced Chief Financial Officer services. These small businesses now have various choices for both low-level and high-level roles in management purely based on merit. There is no barrier anymore, such as the physical proximity of the business. Many will agree that what derails many businesses and could even cause their downfall is financial management. Your staff may be performing a diligent job with the tax and compliance matters but do they have the requisite knowledge and experience to curate reports that will push the business forward and influence major decisions? Certainly not in most cases, which is why you need to outsource a CFO to help you out. Outsourced CFOs are the chief financial officers who are third parties to a business and will be hired to come and apply their expertise to propel the business forward. They are responsible for managing the books of accounts to develop reliable data and interpret the outcome. Take the CFO like a coach who will come and, based on your financial situation, will advise on what to do and what is expected in the business. You are advised to look for a veteran when looking for a CFO, not just anyone to fill the position. They should be someone you trust with the information they are going to give. An outsourced CFO can be summoned for different things such as digital CFO, online CFO, virtual CFO, and remote CFO.
What Do Outsourced CFO Services Provide For Your Business?
- An outsourced CFO will provide essential services to your business to help you grow. Among the crucial tasks, they will perform is the business growth plan. The CFO will develop a strategic business plan that will take your business to the next level. They will provide objective analysis and insights to the business that will propel the firm.
- To formulate a strategic and powerful plan, the CFO will ensure capital allocation is strictly to the right initiatives. Only the departments that need funds and are crucial to the business’s daily activities will receive the cash.
They will also challenge the general assumptions and priorities in the company. The outsourced CFO will assess what to prioritize in the organization.
- Risk management is another factor the chief financial officer will look into as part of the strategic business plan. An outsourced CFO services CFO will keenly scrutinize the Decision-making process and the entire leadership role as they create an irresistible business plan.
- A budget is like a roadmap that ensures you are on the right track and you are sending the business resources to the right departments that actually need them. The budget is there to set some organizational goals and measure the company’s growth progress.
- An experienced CFO will help curate the perfect budget for your company. The CFO will categorically be clear in communication and map out the budget according to the company vision. They also know what will work perfectly for the business and what will not, which is why it is a good idea to outsource a fully qualified and competent CFO.
They will ensure the budget is favorable to the business and aligns with the business objectives by first considering the most crucial things. Core functions of the business will be addressed first and allocated the right amount of cash then the rest will also have their share. The CFO will prioritize the most important functions for the growth of the business.
- An outsourced CFO is convenient in payroll matters. They should treat payroll as a crucial function of the company. Payroll records ought to be 100% correct to boost employees’ morale. Controls and accuracy in this area are critical due to the high employee taxes and salaries. To a CFO, more pressing functions and strategic priorities have to be taken seriously. Payroll clerks – the CFOs – employ a lot of competence following the laid-out regulations and rules.
CFOs use the company data on payrolls to help with budget forecasting and the company’s current financial status. This information could also help them grab more business insights, such as whether a company can expand to a new territory. The payroll 101 information could give insights on current employee expenditure, which helps predict how the employee would do in the new environment.
- CFO is very effective in tax planning. Tax issues are never an easy issue for any business. Some tax functions are so complex yet relevant to the well-being of the business. Since it is obvious your business has to embrace tax compliance, looking for outsourced CFO services is the way to go. These are experts who will answer all your small business tax questions.
They will also help you with all the tax and business solutions. A certified financial officer will assess the tax benefits on any purchased equipment, assess the net operating loss, develop strategies, and facilitate upgrades. These are some of the vital activities the CFO will conduct for your business and create outstanding business tax solutions for your firm.
- Financial Planning. Many businesses fail just because of one reason. Lack of proper financial management. This is one reason that has brought down a lot of businesses. Some firms do not have the in-house talent to manage their finances efficiently, so the best solution is outsourcing for a competent and remarkable CFO. They are articulate financial planners who will get you CPA-prepared financial statements.
Demands on finance teams are relatively high as stakeholders, and everyone involved relies on the financial information to make decisions and come up with strategic plans. CFOs ensure the financial information is as accurate as possible, including comprehensive incomes and bank reconciliation statements. They will also help in removing duplicative efforts in the organization.
- Retirement Planning. Certified financial officers come in handy during retirement income planning. Most companies do not have well-experienced personnel to handle retirement planning for their employees or even the business owners. CFOs know how to curate a tax-advantaged retirement plan. A retirement plan is not a one-time achievement.
Usually, it is an evolution from the first job and transitions all through your lifetime working experience. CFOs will help you come up with a stringent plan that will help you achieve your retirement goals. To gain financial freedom, one must have straightforward coordination of social security, tax-deferred investment accounts, and living expenses.
What Type Of Businesses Benefits The Most From Hiring An Outsourced CFO?
An outsourced CFO is prudent for any business. Since every business must have the financial aspect, a certified financial officer would be of great help to any. The main reason you want to outsource a CFO rather than use in-house talent is that you will be assured your business is tax compliant. The CFO will successfully create a small business tax planning strategy that suits your business and significantly reduce the tax. With an outsourced CFO, you are sure of a small business retirement plan tax credit. They are the best small business tax organizer personnel. The other major advantage of an outsourced CFO is that your personal tax as the business owner is taken care of. You never have to worry anymore about business taxes vs. personal taxes. Outsourced CFOs are always looking for ways via which the business owner can receive maximum return for their money. They will, therefore, ensure your financial plans as the business owner are addressed as well as the business personal property tax. With an outsourced CFO, you are sure to receive financial reporting at a professional level. The reports will help you a lot in making crucial business decisions. You will also receive paperless tax, which is a big boost in saving your precious time.
Knowing When Your Company Is Ready For Outsourced CFO Services
Do you feel like you are not getting the right financial reporting for your small business? Are you sure you are maximizing all the tax deductions for the business? Several reasons will manifest the need for a CFO in the business. The following are some of the indicators that it is time to outsource a certified financial officer:
Are you maximizing the tax deductions?
You might already be aware that normally there are some tax deductions for businesses. However, many small business owners still ask themselves, “Can a small business get a tax refund?” The answer is yes; a small business can get a refund if you overpaid the required amount as tax. However, you will only identify that you had overpaid through outsourcing a certified financial officer. The CFO will also identify the business loan tax deductible among other deductibles to bring down the tax you pay annually. They are going to come up with an effective tax saver plan for your business.
Are you having problems keeping and maintaining payroll?
We all agree that payroll is a very crucial matter in your business. Errors and mistakes are not acceptable here. This is not where you miss some digits and expect the business to carry on as if nothing happened. In case you are having issues when recording payroll, it is probably time to outsource a CFO. They are experienced and know the loopholes to avoid when recording employee payroll. If you wish to receive a qualified small business payroll tax credit, then outsourcing is your best bet.
Are you struggling to keep the accounts books clean?
Your books of accounting are a vital element in the company. These are the indicators of where you are as a business and the direction you are headed. These are the assets in the business that help in crucial decision-making. That means if the books are not in order or not revealing the true position of the business, then it is bound to collapse. If you are not sure about keeping the books correctly updated and clean with minimal errors, you could always seek the help of a CFO or a CPA for startups. They will help you maintain the books of accounts correctly with no room for errors.
Are you preparing for tax season year-round or just scrambling in the last months?
If you find it difficult to prepare and remit taxes for your business, it is probably time to outsource a CFO. They will be a certified tax planner who will answer all your business tax questions. They will help you file taxes for your business in no time utilizing all the possible tax deductions. Unincorporated business tax should never be a bother to you anymore.
Are you creating the most efficient budget system and using it to create a growth plan?
For business owners having trouble with their budget system, outsourcing a certified financial officer could be the solution. Creating an effective budget system calls for lots of parameters, not just the numbers. You do not want to mess up and allocate more than required to some departments depriving the crucial sections of the necessary resources. Get a CFO who will develop a robust and diversified budget that will significantly spread out the business resources. Every department will get exactly what it needs to be more productive and grow the firm.
If I Hire An Outsourced CFO, Will I Have To Change Any Of My Business Operations?
As a business owner, have in mind that hiring a CFO does not alter your daily business operations. The current operations will remain the same; what a CFO does is enhance the systems and make them more productive. The financial officer will streamline the existing accounting systems and make them more diverse, easy to understand and interpret information. Back then, the CFO had three main tasks: statutory compliance, financial reporting, and records belonging to the business. The decision-making and strategy were left entirely to other stakeholders, with the CFO just overseeing things here. However, things are now different today. Yesterday’s CFO was more of a support strategy than today’s CFO, who is of immense relevance to a firm. Today’s CFO has the key to the success of the organization they are dealing with. Their input is huge and valuable to the business. Inasmuch as the CFO does not change the business’s daily operations, they ought to understand the best practices and be creative. They also have to find solutions to the business tax questions and add more value to the company. The finance department has historically been dealing with financial reporting and books of accounts as the fundamental tasks. These are still the core duties of a CFO, only that they have a bigger impact on the organization. Today’s CFO must use the business’s financial data to influence strategies and decision-making in the business. CFOs today must possess more skills than just CPA strength. In addition to the roles they play, CFOs are also effective chief executive officers. Typically, they are business partners who assist in decision-making using the available financial information. Some of the key skills for today’s CFO include: Operations:
CFO should have a strong understanding of the industry and should be able to challenge the operations teams and use their knowledge to have an independent perspective. They must provide analytics that will be used in decision-making. Leadership:
A remote CPA must have communication and leadership skills. They must be able to counsel and advise while giving reasons for their argument. A CFO must transform programs into working solutions and translate information into concise and clear messaging. Strategy
As much as the CFO does not alter any normal business operations, they must develop a robust strategy and ensure that their strategy is followed. This skillset is beneficial in analyzing macroeconomic trends, building predictive modeling, and even incorporating non-financial information. Controls
The certified financial officer should be responsible for the assessment and risk mitigation in the organization they are working for. They should also ensure that the legal requirements are followed and any other rules.
Is An Outsourced CFO All I Need For A Financially Sound Business?
You need to outsource a CFO since this is one person who comes as a package. A competent and fully qualified CFO is a controller and CPA merged. That is not all; as discussed above, the CFO is also a leader. The CFO works in hand with the management and other stakeholders such as the employees, investors, etc. After analyzing the financial information, the CFO judgment has a tremendous impact on how the business is doing and decisions made. Without outsourced CFO services, you might miss some crucial points in the financial information and make wrong decisions. CFOs have an eye for every detail, which means working with one will guarantee the right decisions for the firm’s growth. The CFO will also work on the financial plans and personal tax of the small business owner. This is another fantastic advantage of the outsourced CFO services. They are going to help the business owner with their business personal property tax. Your personal tax preparations should not be a bother anymore. Once you outsource a qualified CFO, they will handle that and ensure your business goals are met at the same time. The other major advantage of outsourcing is that it saves time and money. By having a ‘one hire’ CFO, you are bound to save yourself a lot of time. In case an employee never shows up for work, you will not lose any traction. No time is wasted trying to hire someone to fill up that position and train them on what to do. The CFO is equipped with backup to ensure nothing halts no matter what. You will also be saved costs such as hiring full-time employees. Hiring full-time staff will also come with extra costs such as taxes, vacation, retirement, among other benefits. All these advantages show why a CFO is necessary for your business. Outsource a competent CFO, and all your business tax planning issues will be solved.
What Are The Common Rates For An Outsourced CFO?
Outsourced CFO services are very flexible compared to in-house and full-time CFO. An outsourced CFO can offer their services per day, per hour, per month, or even per year. Why you need their services will dictate for how long you are going to hire them. It will also dictate the frequency of their services in the organization. Generally, your requirements will call for their services. For example, do you need your books of accounts cleaned up or require year-round support from the CFO? You need them to come with diverse rates depending on what the outsourced officer will be doing. With a third-party CFO, you have to clarify to them what specifically you want them to help you with. Below are some of the estimates:
- Per month $3,000 – $10,000
- Day Expenses $1,200 – $1,500
- hourly rate $175 – $300
- Most common $5,000 – $7,000 per month
A full-time CFO can be really expensive, and most of these small businesses run on tight budgets. The CFO could be taking home over $350,000 annually, which is quite a significant amount. Some CFOs offer part-time packages to small businesses and these include:
- Financial reporting/basic plans $250 – $300 for every session
- Benchmark reporting $1000+ (this will depend on the size of the firm)
- Monthly packages $300 – $800
Due to financial constraints in small businesses, CFOs have narrowed down their services and are now offering packages as indicated above. The rates will also vary depending on several other parameters, such as the covered work’s analysis depth and breadth. However, if you observe keenly, there is no likelihood of advertised package deals from any CFO. The reason is that outsourced CFO services are almost fully customized. Before the CFO creates a customized and unique plan for your business, they must come to terms with your business goals and needs. Here are few elements the financial officer considers before creating a strategy for the business:
- Duties of current personnel
- Type of systems used in the company
- If there is a full-time bookkeeper
- Type of sales channel and how many are used by the firm
- The volatility of the market and its size
Additional CFO costs
Depending on your specific needs, location, and even the financial officer’s availability, there may be extra charges for the service. Some officers will even have their room and travel expenses catered for by the client in case of any training, integration, and meetings. The interaction could also bring about extra expenses in purchasing of QuickBooks software.
Full-Time Vs. Virtual CFO Rates
Should you consider employing a full-time financial officer or hire hourly or monthly CFO services? Here is a practical scenario to answer that question. Supposing you need specific projects handled by an outsourced financial officer and at the end of the year they have spent 80 hours at your organization. That means every hour will be $300 making the total $24,000. If probably you need the CFO more frequently to check your books of accounts and help with profitable decision-making, like say once every month where they spend the entire day, that would be $1,500 with a total of $18,000 annual fee. Supposing you are undergoing an acquisition and require the services of an experienced CFO for several months. That would cost around $15,000 – $30,000. All these scenarios show how cheap it would be to hire the services of an outsourced CFO rather than having a full-time expert. The full-time financial officer demands an annual salary of not less than $300,000 plus benefits allowed to the employees. Consider hiring the services of a third-party financial officer for all your business tax planning needs.
What Expectations Should You Have For Your Outsourced CFO Services?
A certified financial officer is not competent enough if he does not have the majority of qualities, as discussed below. These are the traits that make them suitable for the many functions they are supposed to play in an organization. Without these personality traits, the CFO cannot deliver up to the standards required of them.
Total awareness of what someone is doing is very key to their success. That does not only apply to the finance world only but cuts across almost every other aspect. Your ideal CFO must fully understand the business world and more so the finance department. With that, they will be able to determine where problems arise and what can be done.
Dependable and timely
As you know, the financial officer’s judgment and input significantly impact the business’s decisions. Since the CFO will assess the books of accounts and help pay the taxes, they must be dependable. They are expected to work in a timely fashion. You do not want penalties due to the late submission of taxes.
The financial officer has to gain everyone’s trust in the organization. They should give the true position of the company as things stand. If there seems to be something off with the books of accounts, they should not cover up for anyone but rather speak out. They should answer all your business tax questions truthfully to help the business.
The ideal CFO ought to be patient. Giving out information that influences major decisions in an organization is very crucial. They should have thought it repeatedly, scrutinized every other receipt and book of accounts, scrutinized some employees in the finance department, etc. An effective tax saver plan takes time and precision meaning the CFO should be a patient person.
For the CFO to come up with business tax solutions, they must adapt to change. Technology is changing very fast, and so should the financial officers. Their role is to help the organization also adapt to these changes. Today, CEOs see CFO as strategic partners who offer crucial information and advice to the business. Being volatile means, they will also pass on the trait to the business.
An ideal CFO must possess leadership skills. That will enable them to oversee and delegate financial operations in the firm efficiently. Some of the qualities that show they have leadership skills include empathy, social skills, self-regulation, self-awareness, and motivation.
A perfect financial officer should possess the ability to set measurable, relevant, achievable, and specific goals for an organization. Such goals are very crucial in the decision-making process for the CEOs. Other company stakeholders will use the CFO strategies and goals, such as the investors, employees, and directors’ board.
Financial and accounting competence
Another crucial character trait of a great CFO is financial competence. You do not want to hire a financial officer who cannot develop CPA-prepared financial statements. Ensure they are certified with the right accreditation bodies to prove their competence.
Foresight and vision
The CFO should be able to assess the market in the coming days. They should understand where the market is heading and what the business can do to leverage that before the time comes. They should be able to have the big picture in mind of the firm’s future.
Communicating effectively with other stakeholders, executives, employees, and external partners are among the top skills a CFO should have. They need to constantly communicate and give information to the right people so that they can react accordingly. That means they should be excellent in written and oral communication.
How To Find The Best-Outsourced CFO For Your Business
While starting a small business, you can be handling all the finances and financial plans. But as time goes by, the business grows, and the revenue quadruples. At such a point, a tax services business plan is crucial. That is where you need to seek the services of a business tax advisor. You will have to outsource a competent financial officer to cover all your small business tax planning initiatives. Outsourcing a CFO is basically cheaper than employing a full-time CFO. They are much more expensive. But the question is, how do you land this ideal CFO that will propel your business to greater heights? Here are some insights on what to do:
- Ask for referrals. A better way to tax plan is to find a fully qualified financial officer, and you can find them by asking for referrals. Talk to your advisors, fellow founders, and other service providers to see if they know a competent chief financial officer.
- Look for the best fit. It is not advisable to outsource the first financial officer you meet. Take your time and scrutinize them first. Go through their credentials, check their skill sets and background experience. You want to outsource a CFO who will understand your business needs and work diligently to achieve your business goals.
- Assess the client list. Ask for the client names with the services offered. If you find certain companies that have worked with clients that have businesses such as yours, then probably they are a good fit for your business. They already have the required expertise and experience to grow and expand your business.
After finding the CFO who seems competent, how do you prove they can do the job? It is only by interviewing them that you will learn of their experience and level of competence. Outsourced CFO services are more than just the numbers. These experts are already beyond financial plans, budgets, financial forecasts, pricing, cash management, monthly reports, and even the cash-burn analysis. They help the business in strategic planning and investor relations. That is one huge reason for striving to find the right financial officer for your firm. Here are some critical questions to ask the CFO to ensure you have the right person:
- What experience do you have working with small startups?