6 Reasons To Outsource Your CFO In 2023

I met these young and vibrant co-founders at a startup event a few years ago. They had just raised $475K in pre-seeding funding, and they're looking to launch their revolutionary software that efficiently measures the carbon emissions of manufacturing companies. They had a mix of excitement, nerves, and anticipation. As a figure-inclined professional, I was more interested in profitability, and each time I raised questions about revenue, expenditure, and profit margin, I sensed their confidence level dropped. "We really don’t have the exact figures offhand,” one of the co-founders managed to say as I watched their initial excitement fade. Perhaps I should have focused more on their cool inventions and the technology behind them. From keeping up with bookkeeping to cash flow management, the financial aspect of a business is always more challenging than many startups and business owners think. In this article, we explore six reasons why an outsourced CFO service might be the best for your business. However, let's answer some critical questions before we dive in.

When is the Right Time to Hire a CFO?

Deciding the best time to hire a CFO is a problem with which many new businesses and startups struggle. If you hire too soon (especially in-house), they may cost you more than the value they can offer. Hiring too late might result in you missing good opportunities to drive business growth at the early stage, as 42% of CFOs serve as their companies' transformation co-leader. Therefore, the best time to bring in a CFO is when your company is experiencing rapid growth and requires more capital and financing.

Should We Hire In-house or Outsource Our Company's CFO?

After concluding it’s time to hire a CFO, you then need to decide whether to hire an in-house or an outsourced CFO firm. Although each option has pros and cons, we highlight six reasons to use CFO outsourcing services rather than hiring in-house.

Reasons to Outsource Your CFO

Here are some benefits of choosing outsourced CFO services.

1. Access to Experienced Financial Expertise

As a startup or fast-growing company, you need every level of expertise at your disposal. By outsourcing your CFO, you'll have access to a team of financial experts with experience working with different companies of diverse sizes and industries. They have walked the path you’re taking and have the skills and expertise to help you navigate the complexities of the finance world. These include bookkeeping, financial modelling, cash flow management, fundraising, and many more. Comparatively, you can only hire one in-house CFO, and no matter how competent they are, they can't have the same level of experience you get from a team of outsourced CFOs.

2. Cost-Effectiveness

The base salary of a Chief Financial Officer is $148,737 on average in the United States. Plus, you need to account for other expenses when hiring, as well as benefits and office space. Your priority as a startup is to keep your expenditure as low as possible, which can make it hard to justify this type of hire. An outsourced CFO, on the other hand, gives you the flexibility to pay for services tailored to your unique needs without the additional overhead.

3. Accelerated Financial Progress

Elevating your company's financial strategy is the biggest value a CFO offers. Due to their experience working with other and perhaps bigger ventures, an outsourced CFO firm can implement better strategies that improve your profit margins, optimize cash flow, reduce COGS, and maximize funding programs. Outsourcing a CFO can also give you a better understanding of your financial position and provide you with data to make informed decisions. Besides, an outsourced CFO company that's fully invested in your business growth will always be on the lookout for investment opportunities for you.

4. Better Time Management

As a startup or business owner, you’re immersed in the day-to-day operation, and every second you can save on unnecessary tasks is a plus. Apart from delivering services such as payroll, bookkeeping, and taxes, an outsourced CFO requires less onboarding time than hiring an in-house CFO. Additionally, most outsourced CFO firms have established tools and tested processes that will save you time compared to hiring an in-house CFO starting from scratch.

5. Honest & Objective Advice

From experience, most full-time employees temper their opinions with their employer somewhat for fear of losing their jobs. As such, an in-house CFO might tell you what you want to hear rather than tell you what's best for your company's growth, whether you like it or not. An outsourced CFO provides standardized reporting and business performance analytics that helps with resource allocation. You can count on CFO outsourcing for unbiased and objective business advice.

6. More Flexibility

With the disruption from AI and other innovative technologies, a time may come when you can fully automate your financial services without needing the services of a CFO at all, regardless of your company's size. As of now, an outsourced CFO service gives you the most flexibility to scale up or down depending on your financial standing and business needs. If you have an in-house CFO tied with a contract, you are much more limited.

Increase Productivity and Save Costs with an Outsourced CFO

Every startup founder and business owner's dream is to optimize efficiency while saving overhead costs. As we've discussed, outsourcing your CFO can deliver these benefits and many more. However, you must pay attention to the CFO outsourcing firm you're working with. Do proper research to handpick those with the right team, experience, and expertise to deliver the exact solutions you need. If you're a startup experiencing exponential growth, it's advisable to hire an outsource CFO company that focuses more on startups. One such company is Rooled, a leading US-based CFO firm. Ready to accelerate your financial growth? Request a free consultation with zero financial commitment on your part.