5 Questions to Ask Before You Outsource CFO Services

August 10, 2023

Outsourcing CFO services (also called Fractional CFO services) has become increasingly popular. In fact, recent surveys report 70% of business owners have switched to outsourcing as a way to access financial expertise without the commitment or cost of a full-time employee. However, it's important to consider a few questions internally to ensure hiring a Fractional Chief Financial Officer is the best business move. 

Why Outsource CFO Services?

First and foremost, determine the reason for outsourcing CFO services. Most companies bring a Fractional CFO on board when there's a gap in financial expertise or oversight. This could mean a lack of resources or time to manage finances or the need for objective financial guidance to scale operations.

Reasons for hiring an outsourced CFO will vary for each company, but this decision should factor in financial needs. Some part-time CFOs manage day-to-day finances, while others are hired for a special project or task, such as raising capital, negotiating a merger, or evaluating financial reports.

What Are Your Financial Goals for an Outsourced CFO?

When considering outsourced CFO services, it's important to understand your company's financial goals. These business goals will help guide the outsourced CFO in providing the necessary expertise and strategic insight to drive your business forward. Here are some key financial goals to consider: 

  • Accurate Financial Reporting: An outsourced CFO can ensure that financial statements are timely and accurate to provide a clear picture of financial performance.
  • Strategic Financial Planning: An outsourced CFO can provide insights into how to optimize financial resources and maximize profitability.
  • Cash Flow Management: An outsourced CFO can analyze cash flow patterns and identify potential cost overruns to improve cash flow management.
  • Financial Forecasting: An outsourced CFO can create forecasting reports for future cash flow, revenue, and expenses to support long-term business growth.
  • Cost Cutting: An outsourced CFO can identify areas where costs can be reduced and implement a financial strategy to save money and allocate funds efficiently.
  • Financial Guidance: An outsourced CFO can evaluate investment opportunities, negotiate mergers or acquisitions, and develop strategies for business expansion.

What is Your Budget for Outsourced CFO Services?

Another essential question to ask is how much you're willing (or can) pay for a Fractional CFO. The cost of outsourced CFO services can vary based on a number of factors, including the services, expertise, and hours required for a project or part-time basis.

That said, outsourced CFO services don't require the additional costs of full-time CFO salaries, benefits, and taxes. As a result, contracting a Fractional or part-time CFO can translate to savings of up to 50% in overhead costs. You can often negotiate a fixed project or hourly rate that fits within your budget.

When Should You Hire an Outsourced CFO?

Timing is crucial when it comes to outsourcing CFO services. Consider your company's current financial situation and growth stage. This will help determine the urgency and level of expertise required from a Fractional CFO. Here are some signs that it might be time to outsource CFO services:

  • Limited resources for revenue-generating activities
  • Limited expertise in navigating cash flow issues
  • Limited insights from financial reports
  • Limited experience in raising capital
  • Limited oversight of daily accounting activities

A good rule of thumb for knowing when to outsource CFO services is if you're running low on time, resources, or expertise to manage business finances. Fractional CFOs have the industry knowledge and experience to handle financial hurdles, freeing up time to focus on other aspects of your business. 

Is Your Business Prepared for Outsourced CFO Services?

Outsourcing CFO services requires a certain level of internal organization to maximize the benefits of this strategic financial partnership. Before taking the leap, there are a few steps involved to adequately prepare for this transition: 

  • Assess financial processes, systems, and reporting
  • Ensure all financial documents are easily accessible
  • Update all accountant-prepared financial statements
  • Provide visibility into bank accounts, loans, and contracts 

Creating an organizational chart is another useful tool for the onboarding process. This chart helps the new outsourced CFO understand the company's structure and roles. It promotes clear communication and ensures that the outsourced CFO can easily identify who to report to.

How to Find Outsourced CFO Services

When it comes to finding outsourced CFO services, consider key factors such as expertise, industry experience, and reputation. These qualifications should align with your business needs and goals. For example, startups will likely benefit from a Fractional CFO with experience in financial projections, raising capital, and investor relations.

For assistance with hiring a Fractional CFO, book a free consultation with one of our finance experts. 

Alyssa Huizenga
Director, Business Development
[email protected]

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