Hiring a full time CFO can be expensive for your small business, however, did you know that outsourcing this can be effective and cost saving too?
What is outsourced CFO services?
Outsourced or Virtual CFO services is a relatively new concept. It’s a way for small businesses to get CFO support that they wouldn’t have been able to afford previously.
Small businesses that hire an outsourced CFO get access to an experienced financial professional at a fraction of the cost of a full-time CFO. The services will differ by accounting firm, but usually an outsourced CFO will:
- Handle all the duties of a traditional CFO but work remotely and on a part-time basis.
- Monitor the financial health and well-being of the business, usually with cloud technology.
- Offer financial insight and guidance on all company decisions and issues.
- Provide back-office functions such as managing accounts ledgers, depending on your needs.
An outsourced CFO can also play a governance role if your small business has a board of directors by providing independence advice on finance, risk and strategy to the board of directors.
Other key small business milestones such as acquisitions, funding, exit strategies and expansion plans would also be areas where an outsourced CFO would provide expert and value adding services.
Advantages for small businesses
Having access to a Virtual CFO can be a big benefit for a small business. Most of them can’t afford an experienced, knowledgeable CFO on a full-time basis and may never consider hiring one.
That’s a problem, because many small businesses fail within the first three years. Reasons include failure to set themselves apart from the competition, and an inability to find a profitable business model. With an accounting professional acting as their Virtual CFO, they could keep their financial goals and realities clearly in sight.
A Virtual CFO is an affordable alternative to hiring a full-time CFO and can make a big difference to a small business, by:
- Creating budgets and forecasts.
- Pinpointing problem spending by highlighting trends in the market.
- Validating or discouraging business decisions with financial well-being in mind.
- Reviewing and highlighting risk
- Assistance in creating efficiencies within operations
- Optimising cashflow
These are abilities that the vast majority of business owners don’t possess – but they often need them in order to succeed.
With a combination of practice knowledge, cloud-based accounting software, mobile technology and modern data analytics, your Virtual CFO will be of great benefit to your business.
Introducing CFO services into your small business
CFO services are normally outsourced to an accounting firm which provide such service. These range from single-employee bookkeeping firms to larger practices with outsourced accounting divisions.
Many small businesses don’t even know that their accountant or bookkeeper can do much more than just compliance and tax work. Therefore, it is important to find out if your current bookkeeper / auditor can also provide this service for a reasonable fee.
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This article is an extract from the Xero website and is written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of its contents.