Guide to CFO Outsourcing for Small Business Owners

Sep 28, 2023CFO

Running a small business or start-up comes with its fair share of challenges. In particular, being able to manage finances effectively is crucial to long-term success. A CFO, or Chief Financial Officer, is the person who navigates the financial aspects of running a business or organization. However, many small businesses are not ready to spend their limited resources on hiring a full-time CFO. This is where CFO outsourcing comes in.

What is CFO Outsourcing?

An outsourced CFO is precisely what it sounds like. Also known as a fractional CFO, an outsourced CFO takes care of the finances of a business. However, instead of being an in-house hire, the CFO role is outsourced to a third-party service provider. The position can be an actual person who plays the role of your CFO or a business that provides CFO services.

Why would you want to outsource your CFO? There are many reasons for outsourcing your CFO. If you’re a small business owner, you’re already busy running the day-to-day operations, and you don’t have the time and energy for the finance and bookkeeping aspects of your business. Not to mention, these areas may not lie within your areas of expertise.

For example, if your strength lies in creating new designs for your clothing business, why give yourself a hard time by forcing yourself to learn bookkeeping when you can outsource this to an expert?

You’ll also save yourself time and money. Hiring an in-house CFO means additional money spent on salary, benefits, extra office equipment, taxes, and more. Aside from this, outsourcing CFO services means you can try out working with a firm or person without hiring anyone full-time.

Outsourcing CFO duties is similar to outsourcing other skills or departments, such as human resources or marketing. Basically, it means handing over your CFO role to someone outside your organization who is an expert in the field.

Emerald Expectations Accounting is a fractional CFO that provides outsourced CFO services to small businesses. We specialize in working with small businesses, helping them focus on the big picture and long-term goals while we take care of Finance, HR, Payroll, and Bookkeeping needs.

Table of contents:

What are the benefits of hiring an outside, outsourced CFO?

As mentioned earlier in the article, there are numerous benefits to hiring an outsourced CFO.

Here are a few of the key benefits:

  • Flexibility: An outsourced CFO means you can scale up and down quickly, depending on the needs of the business. A business needs time to grow and during this period, you can free up crucial resources by outsourcing some aspects of your back-end, including the role of a CFO. When you do this, your business and capital are not tied to a single person attached to the CFO role long-term. It is easier to move from working with an outsourced CFO to hiring one full-time instead of the other way around.
  • Cost-effective: Hiring a full-time CFO can be costly for small businesses and startups. Outsourcing your CFO gives you access to financial talent without having to pay for the high salary, benefits, additional taxes, and overhead costs associated with a full-time finance executive. An in-house full-time CFO’s salary is about $200,000 a year in the United States. Many small businesses cannot afford to pay that amount for one role. On the other hand, an outsourced CFO typically charges a flat rate or an affordable monthly rate that is lower than paying for an in-house full-time CFO.
  • Access to financial expertise: Outsourcing your CFO means you and your business will benefit from easy access to financial expertise even without hiring a full-time CFO. Most outsourced CFOs are certified tax consultants, bookkeepers, or accountants. These are specialized areas that a CFO must have experience in. Working with an outsourced CFO gives you access to all those crucial financial skills. So, you can gain all the positive aspects of working with a CFO without the possible negatives, such as additional overhead expenses or a CFO suddenly resigning or leaving your business.
  • Access to extensive experience and expertise: Start-ups and small businesses gain access to extensive experience and expertise working with an outsourced CFO. A fractional CFO can have just as much knowledge and experience as an in-house CFO, sometimes even more. Some outsourced CFOs are firms or small businesses themselves, not just one person. So, you get the benefit of several people’s experience and insights instead of just one person’s perspective.
  • Peace of mind: You also gain peace of mind with this easy access to experience and expertise. Your outsourced CFO has all the skills and knowledge required to guarantee compliance with legal requirements. A fractional CFO can also guide you with risk assessment, forecasting, and tax planning. The peace of mind you gain from these is invaluable.
  • Better business growth: Better financial planning means better business growth. An outsourced CFO can help you with preparing financial statements, financial projections, cash flow management, and other aspects of finance that help you grow your business.
  • Allows the business owner to focus on other aspects of the business: While most small business owners wear many hats, sometimes one or two hats just won’t fit. For example, if you own a small graphic design business and hate numbers, doing anything related to finance and accounting might ruin your day. However, these tasks are part and parcel of running your firm. With an outsourced CFO, you can have someone else handle the parts you dislike and focus on the areas you enjoy (like designing logos) which results in valuable time savings as well.

These are the main benefits you get from outsourcing your CFO. Simply put, working with an outsourced CFO has numerous advantages that will help lead your business to success.

What types of businesses most benefit from outsourcing their CFO responsibilities?

You might be a business owner interested in retaining an outsourced CFO, but you’re wondering if there’s a good fit. Is there a type of business that will benefit the most from outsourcing their CFO needs? The answer is most businesses will benefit from outsourcing their CFO responsibilities. No matter the industry and the size of the company, any business can benefit from outsourcing a CFO.

However, a small business or start-up will reap the most benefits from having an outsourced CFO. First, doing this immediately lessens their expenses, which is crucial for a smaller company just starting out. For this business size, every penny counts.

Next, smaller businesses can make decisions faster than large businesses or organizations. A big company often has a board whose members must agree before making any major decision. This would make it hard to entrust all financial decisions to a third party. The board would have to keep meeting to agree or disagree with the outsourced CFO’s recommendations, which would be inconvenient for all parties involved.

In summary, while all businesses can benefit from working with an outsourced CFO, a small business will reap the most benefits because of the savings they’ll gain in both time and money.

What types of services can an outsourced CFO offer businesses?

An outsourced CFO can provide several valuable services to a small business. While the specific services can vary, here’s a list of some common services a fractional CFO provides:

  • Help you create a financial roadmap that will help you meet your business goals
  • Create and meet your profit and cash flow targets
  • Prepare your financial statements and help you understand these financials
  • Assess your business goals monthly
  • Process your payroll
  • Assistance with filing taxes
  • Employee onboarding
  • Employee benefit management
  • Implement meaningful key performance indicators (KPIs) so you can understand your business better

The list of services an outsourced CFO offers can vary depending on your agreement with them. Others, like Emerald Expectations Accounting, offer more comprehensive packages which include HR, Payroll, Bookkeeper, and CFO services to its clients. So, whatever your needs are, Emerald Expectations Accounting can meet them.

How to make the most out of CFO outsourcing

To make the most out of working with an outsourced CFO, keep the following tips in mind.

  • Set clear objectives. Ensure that your fractional CFO understands your business goals and objectives.
  • Maintain open communication. Whether you decide on meeting weekly, bi-weekly, or monthly, you should maintain open and regular communication with your outsourced CFO. They should be integrated into your decision-making process and be ready for consultation as needed.
  • Work collaboratively. Have a collaborative approach when it comes to working with your outsourced CFO. Work with them to develop and implement financial strategies that will help your business meet its goals.
  • Evaluate performance. Just like working with any third-party supplier, regularly assess the performance of your CFO. Are they helping you achieve your business goals? Are they providing valuable insights and guidance? How else can you improve your working relationship?

These are some of the steps you should take to ensure you are making the most out of your outsourced CFO. While there is often a set agreement on an outsourced CFO’s deliverables, you should also do your part in ensuring the professional relationship is a success. Be proactive and keep track working with your chosen outsourced CFO is bringing you closer to meeting your business goals.

Work with an outsourced CFO today

CFO outsourcing is a valuable resource for small business owners looking to improve and enhance their financial management capabilities. If you’re not yet ready to hire a full-time CFO, outsourcing your CFO is the next best thing.

When you leverage the expertise of an outsourced CFO, you can make informed finance-related decisions, achieve financial stability, and drive business growth while maintaining cost-effectiveness. These are all keys to your success.

To make the most out of an outsourced CFO, it’s crucial to maintain open communication, set clear goals, and collaborate closely with your outsourced financial expert. Doing this ensures business growth and will give you the best results for your business.

So, when you see the need to distribute some of the hats you’re wearing as a small business owner, don’t be afraid to give some of those roles away! There are skilled people out there who are more than willing to help you out. Don’t wait until some aspects of your business begin to suffer.

Fortunately, Emerald Expectations can help you. We offer you HR, Bookkeeper, Payroll and CFO services all in one. If you are looking for a comprehensive, yet simple, system that will help you grow your business and reach financial success, you’ve come to the right place. Contact us today to learn more about how we can help you with your financial needs.

Hi, I’m Kimberly.

Thanks for stopping by. At Emerald Expectations, we love making a big impact on small businesses like yours by educating, growing profits, increasing cash flow, and reducing your tax liability.

If you’re always worrying that something important is falling through the cracks or you feel like your current tax or financial strategy is lacking, we can help you offload that stress so you can feel at peace knowing everything is being taken care of.

Click the link below to take our Fit Quiz and find out which of our packages is right for you.

Let's Chat!

We’d love to meet you!

(We’re really friendly. And we love getting to know new people.)

Use the calendar below to pick a time that works for you.