Many growing businesses can benefit from the expertise a chief financial officer can provide, but few can afford to staff the position in house. Hiring a CFO can easily be a six-figure decision, which is hard to justify when their know-how might not be needed on a daily basis. That’s where an outsourced CFO, also known as a fractional CFO, can come in.
You may have heard these terms before but understanding the value an outsourced CFO can bring to your company is probably a different story, says Brad Shaver, XMI’s Director of Outsourced Accounting.
“Even among those businesses that are open to outsourcing in general, they change their tune when it comes to fractional CFO services,” he says. “They either assume it’s too expensive or they worry about how effective an outsourced CFO can really be in a less than full-time capacity.”
The truth is, if yours is a business of a certain size—typically between $1M and $10M in annual revenue—then an outsourced CFO can bring tremendous value to your company’s growth potential.
Shaver recommends being proactive and not waiting until there’s a problem to hire a fractional CFO. “It’s not the easiest thing to jump into, especially under pressure,” he says. “Ideally, we’ll have time to learn the company. And we can provide maximum value when we are not simply jumping in to solve a problem.”
That’s why he encourages companies to secure fractional CFO services on an ongoing, rain-or-shine basis. Here are five ways an outsourced CFO can benefit your business every day:
1. An outsourced CFO can provide sound accounting advice and bring strategic focus to your business.
Some experts might argue that there are some business lessons you just have to learn the hard way. These words are most likely uttered by a business owner who learned something the hard way. But usually these lessons have more to do with knowing when to fire a difficult client or hiring the right fit for your team. Making financial errors rarely makes the list. A fractional CFO can lead your business toward accounting best practices. This not only keeps you from avoiding costly errors but can also open the window into your company’s financials, allowing you to focus on your strategic vision and growth goals.
2. An outsourced CFO can help fine-tune your financial reporting.
Anyone can read a standard monthly financial report. But what is it really saying about your business? Does it provide enough visibility into your various revenue sources, for example? As part of XMI’s outsourced accounting services, companies we partner with benefit from aligned reporting. “It’s part of our fractional CFO services,” he says. “We figure out how to design stage-appropriate reporting packages that reflect what matters most to the client. That’s a much higher-level of sophistication than basic bookkeeping and often gets overlooked simply because clients don’t know it’s possible or that they even need it.”
3. A fractional CFO can provide industry knowledge.
No matter what industry you’re in, benchmarking is a worthy endeavor. The process helps you understand where your business sits in relation to its competitors and can help you uncover best practices to improve your company’s performance. But where does a project like that fit into the day-to-day running of your business? It probably doesn’t, not without a CFO on your side.
“To prepare for our monthly or quarterly client meetings, we’ll do a deep dive in industry benchmarking so that we can first explain the meaning of each benchmark and why it provides useful insights. Then we show the client where their performance compares to the benchmarks followed by having a meaningful conversation about what they could do to either catch up or stay ahead.”
What’s more, a fractional CFO service provider likely has a team of experts well-versed in a variety of industries, on the ready to provide industry-specific knowledge and insights.
4. A fractional CFO doesn’t have to toe the line.
Companies can benefit greatly from the independent viewpoints and candid feedback a fractional CFO provides. “As outside experts, we’re not under pressure to sugarcoat information,” Shaver says. “Because of that separation, we can very objectively tell the client how it is and what our recommendations are.”
5. A fractional CFO can meet you where you are.
If you’re in financial crisis mode, then an outsourced CFO can help you live to see the other side. If you’re facing a major financial event, such as the sale of your business, a valuation or a partner buyout, then an outsourced CFO can help your business put its best financial foot forward. If business is humming along, it’s the perfect time for a fractional CFO to fine-tune the financial reporting or help set growth goals to take the business to the next level.
“Our goal is to deliver fractional CFO services with a sophistication level in line with our clients needs at the moment,” Shaver says. “We want to be impactful but also stage-appropriate.”