Outsourced CFO: Who Can Benefit from Engaging One?
Increasingly mid-sized firms today are bringing in an outsourced CFO to improve financial performance, boost profitability and grow shareholder value. An outsourced CFO provide hands-on support to CEOs and other executives by delivering proven financial leadership and authoritative financial expertise that many mid-sized firms can’t afford to retain on a full-time basis.
Sometimes, however, there can be confusion among business owners and CEOs about exactly who can benefit from engaging an outsourced CFO. Following is a look at the types of executives who can derive the most benefit by working with one.
Business Owners, Presidents & CEOs
The main objective of most owners, presidents and CEOs is to increase the profitability of their company and thus grow shareholder value. But sometimes these executives need high-level financial expertise to deal with situations and resolve challenges that are holding their company back. An outsourced CFO will apply proven financial skills to meet the specific challenges that executives are facing. The result: greater value as defined and measured by the business.
Chief Financial Officers (CFOs)
Many CFOs today are stretched thin as they continue to take on more responsibilities and a more strategic role within their organizations. Seated CFOs with deadline-driven finance challenges and needs for specific kinds of financial expertise for a defined period can bring in an outsourced CFO in the role of a project CFO to work with them and their teams. For example, an outsourced CFO might work with an in-house CFO on a special project, during a period of rapid business expansion, or to provide strategic planning to help meet operational challenges.
Startup firms face numerous sales, operational and financial obstacles — especially when you consider the challenges of raising startup capital and the many demands on startup funds. An outsourced CFO will bring sound financial discipline to a startup venture while also injecting a long-term perspective and view. This high-level financial professional can create custom financial models and presentations to help startup entrepreneurs raise funds while increasing the confidence of all stakeholders, including principles, investors and customers.
Board of Director Members
The success of any middle-market company depends on sound oversight of business finances — especially in the areas of budgeting, reporting and financial controls. Board members typically help companies in these areas, as well as long-term planning, corporate governance and operational excellence to grow shareholder value. An outsourced CFO can help board members in these areas by identifying key performance indicators (KPIs) and building business dashboards to display critical data that’s necessary for financial success.
Investors and entrepreneurs both face challenges during early rounds of funding. For example, investors know that the business valuation could fall before a round of funding is complete, possibly jeopardizing the financing. An outsourced CFO will bring expertise in issuing convertible debt, enabling investors to move from note-holders to shareholders when notes convert to equity shares.
Venture Capitalists & Private Equity
These investors need to see potential ROI in the form of sound investment decisions and successful long-term performance management. This requires timely and accurate financial information presented in financial statements prepared according to generally accepted accounting principles (GAAP). An outsourced CFO will possess the expertise needed to prepare timely and accurate balance sheets, income statements and cash flow statements
Professionals such as attorneys, bankers and CPAs often find that projects with their mid-sized business clients get delayed due to incomplete financial data. This can hinder forward motion and jeopardize transactions, loan covenants and financing. Often, the cause of these delays is a lack of staff expertise or adequate financial controls. An outsourced CFO will bring modern accounting processes to the table in order to generate and compile the complete financial data needed to keep projects moving forward.
More businesses today are bringing in an outsourced CFO to improve financial performance, boost profitability and increase shareholder value. Sometimes, however, there is confusion among business owners and CEOs about exactly who can benefit from engaging one. These services can benefit many types of executives — ranging from business owners, presidents and CEOs to board members, business investors and trusted advisors.
Arthur F. Rothberg, Managing Director, CFO Edge, LLC