What To Look for In a CFO Services Firm
As we have been discussing in this series of articles, businesses that lack a high degree of financial sophistication can often improve financial management by engaging an outsourced CFO services firm. The potential benefits of bringing in a CFO services provider are many, including improved profitability, increased shareholder value, and the objective, strategic perspective of an outside financial expert.
But there are lots of companies and consultants out there now offering outsourced CFO services. How do you find the right CFO services firm?
Finding the Right Fit
In order to locate and hire the right CFO services firm, you need to know what are the most important criteria for comparing CFO services providers. Following are some of the most important capabilities that you should look for when hiring an outsourced CFO services provider:
Strong general financial expertise
A CFO services firm should have financial expertise in two primary areas:
1. Corporate financial strategy and planning
This includes growth strategy; performance and profitability strategy; corporate governance; IPO, acquisitions and divestitures; business and banking relationships; and overall financial, tax and risk management strategies.
2. Financial operations design, deployment and management
This includes executive management reporting, accounting system design, internal controls, cash flow assumptions, budgeting, capital requests, and debt management.
Financial expertise in your industry sector and/or related sectors
The CFO services firm should be able to bring industry best practices into your business. Ideally, the CFO assigned to work with you will have real-world experience serving as the CFO of a business (or businesses) similar to yours.
Access to more resources than just the CFO who is working at your business
What kind of team will be supporting the CFO who is assigned to work at your business? How deep is the CFO services firm’s “bench”?
The ability to evaluate your staff
Staff evaluation, training and mentoring are critical roles played by a CFO services firm. The firm should also have strong capabilities and expertise in the areas of:
§ Review of accounting and finance procedures and controls
§ Development and installation of finance and accounting policies and procedures
§ Review of financial and accounting books and records
§ Development of financial reporting methods and key performance indicators (KPIs)
The ability to leverage and connect you with a network of professionals
These professionals include attorneys, commercial bankers, insurance professionals, equity firms and other investors. By connecting you with these kinds of professionals, a CFO services firm can help you start to build relationships with them and get your foot in the door more easily than making cold calls.
Valuable business and industry connections
Similarly, connecting you with others in your industry may open doors of opportunity for new sales and services, or in the case of new vendors, for reducing costs or expanding your options.
Business and operations experience
In addition to accounting and financial expertise, a CFO services firm should bring a holistic approach to your business that will help optimize efficiency in non-accounting areas of your business as well. These areas may include human resources, legal, IT, banking, insurance, real estate and more.
An objective, outside perspective
A CFO services firm should be able to bring a fresh and independent perspective to the financial challenges your business is facing. As a result, it should be able to offer solutions that are free of any bias and are truly in the best interest of your business.
Strong management experience
Often, one of the tasks of a CFO services firm is to help build and strengthen internal department relationships and cooperation. Strong management experience is required in order to work with sales, operations and management/ownership to show how the accounting and finance function can help everyone work together better.
The good news is that more Los Angeles businesses are beginning to realize the benefits of hiring an outsourced CFO services provider. Unfortunately, however, these businesses often don’t perform the right research to make sure that they find the best fit for their needs. If you’re going to commit the time and resources to engaging a CFO services firm, you owe it to yourself to perform the proper due diligence to help ensure that you hire the right firm.
In the fifth article in this series, Identifying Shared Objectives and Focus Areas, we’ll look at the process that goes into creating and drafting a CFO services engagement.