Are you considering hiring a Chief Financial Officer (CFO)?
Congratulations! That means your business is growing, your revenue is rising, and you are evaluating how to best manage your financial reporting. Hiring a CFO is one of several solutions for a business seeking to upgrade its financial management team. Alternative choices that offer opportunities for growth include outsourced CFO services, Fractional CFO, and CAS providers. How can a business assess which option will best fit its needs?
A CFO is employed full-time as a senior executive. They develop financial strategies, manage cash flow, monitor risk factors, and perform financial forecasting. A CFO’s salary will typically account for 1% to 5% of a company’s revenue. If your business is complex, with multiple revenue streams or many affiliated entities, or has experienced significant and rapid growth, it is likely that you need a CFO on your executive team. The CFO assumes high- level financial responsibilities, such as raising capital, engaging in mergers and acquisitions, and managing compliance requirements. They stand at the forefront of the business’s strategic planning team and ensure the preparation of accurate and detailed financial reporting to serve stakeholders, investors, and banks.
What if your business is not yet ready for the expense of a full time CFO, but still needs upgraded financial support? Most small- to medium-sized companies could benefit from a CFO’s expertise, especially if they have defined growth strategies or are in the process of scaling up. But if the business is experiencing uncertainty or is in middle of a transition, it is usually not the ideal time to take on the added cost or commitment of a full time CFO. Outsourced CFO Services or a Fractional CFO may be a better option.
Professionals in these roles supply part-time or project-based high-level, financial expertise. Outsourced or Fractional CFOs work with multiple clients and will allow your business to access expert guidance on a flexible, as-needed basis. The services are tailored to your business, without making a permanent hire and taking on more overhead.
Client Accounting Services (CAS) firms take over day-to-day accounting tasks like bookkeeping, bill paying, and reconciliations. They can assume responsibility for cash flow management to make sure payments go out on time and that there are enough liquid funds to ensure that all business needs are met. They can work along with Fractional CFOs to handle a business’s financial management, and provide comprehensive support without the added expense of hiring multiple full-time employees.
A CAS team will keep your financial records in order to serve your tax preparation, filing, and regulatory needs and safeguard your business in case of audit. They can also assume high-level executive functions such as generating detailed financial reports, analyzing key performance indicators (KPIs), and providing insights into financial trends to help a business make informed decisions.
It may be time for your business to take a good look in the mirror. If it is facing rapid growth, has a complex financial structure, wants to embark on significant fundraising or M&A activity, is subject to serious regulatory requirements, or desperately needs strategic leadership, it’s high time to hire a competent CFO.
However, depending on your business’s long-term goals and budget, the services of a Fractional CFO supported by a CAS provider can enhance your business’s efficiency, streamline financial processes, and deliver the valuable data that management needs for strategic decision-making – all without adding another senior executive into the mix.
This material has been prepared for informational purposes only and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
