It’s often said that 50% of new businesses fail.
While this isn’t necessarily the case, raising a company up from nothing can still be a daunting task. You not only have to develop a product, a business model and hire staff. You also have to keep track of your competitors and keep an eye on stocks and market trends.
If that sounds like a lot, it’s because it is. The CEO of a growing business has a lot on his or her plate, and important details are often overlooked due to the enormous workload. For that reason, hiring outsourced CFOs is often the ideal option for small companies looking to streamline their accounting.
If you’re ready to take your small business to the next level, keep reading to discover our seven reasons why outsourcing a CFO could be the answer you’ve been searching for.
What Is a CFO?
CFO stands for Chief Financial Officer. Essentially, the CFO is in charge of the financial workings.
All accounting, budgets and plans are run through this office, and the CFO regularly reports to the CEO.
Financial Reporting/Risk Management
The CFO is responsible for all financial assets of the company. A CFO needs both the knowledge and instinct to balance the company’s debt, internal financing, and revenue. The CFO must ensure that the company’s financial goals are met, and must account for any risk factors that could hinder overall progress.
CFOs constantly monitor the efficiency of all operations in order to maximize resources and increase revenue. Success is measured by the company’s overall return on investment. This is done by creating budgets, reducing costs, minimizing taxes and tracking Key Performance Indicators (KPI).
The most important role of the CFO is developing a long-term plan for the company’s financial success. The CEO will rely on this expert for leadership and the reassurance that the company’s financial goals are being met.
CEO vs CFO
You’ve certainly heard of the term “CEO” before. CEO stands for Chief Executive Officer, and this position holds absolute power over the entire company. The CEO is in charge of everything from administration and accounting to product development and sales. Senior executive managers from each department report to the CEO for their progress and decisions to be approved.
Rather than focusing on the finer details, the CEO maintains a broad perspective of the company. He or she reports to a board of directors and is held responsible for the company’s overall gains and losses.
The CFO, on the other hand, reports directly to the CEO. As the top financial officer in the company, the CFO is in charge of creating budgets, tracking revenue and expenses, and analyzing financial data. These finds are then reported back to the CEO for approval. The CFO also commonly acts as the company’s mediator for banks, lenders, investors and other financial third parties.
7 Benefits Outsourced CFOs Provide
Every penny matters when you’re trying to grow a small to a medium-sized business. If your company is struggling to make ends meet or is too new to see any sort of profit, outsourcing a CFO might not be the right path.
However, if your business is flourishing, and the financial departments are becoming too big for you to balance with other responsibilities, outsourcing a CFO might be your next step.
Here are seven reasons why outsourcing a CFO could be the best decision you ever made for your company.
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1. Increase Profitability
As an entrepreneur, you created your company because you knew you could make a difference in the lives of your customers. Your passion and vision are priceless assets that keep your company moving and growing. However, if your growing company is taking off, the financial burdens that come with expansions can often interfere with the quality of your work.
Bringing in an outsourced CFO will take that burden off of your shoulders and allow you to focus on product development, advertising and customer service. This expert will handle investors, banking and create budgets for production and administration. With the help of a CFO, you’ll have more time and energy to commit to the reasons you started your company in the first place.
2. Long-Term Benefits
Hiring a CFO to help with your business problems isn’t the same as hiring a plumber or an HVAC technician. A CFO specializes in taking recent data to create long-term budgets and business plans. The business solutions a CFO offers will create a new business model that you’ll use for years into the future.
3. Reduce Costs
As a CEO, you have enough overhead as it is. The cost of supplies, manufacturing, freelancers, retail locations, employee salaries, etc. can add up very quickly. Adding a CFO’s salary to that list can be detrimental to your bottom line.
An employee is only worth the amount of money he or she adds to the company. In the case of the CFO, that’s a lot of money. The CFO for even a smaller business will earn a salary of at least $250,000. It’s the art of supply and demand.
For that reason, outsourcing a CFO can save you a tremendous amount of money over time. You won’t have to worry about a salary or pension, and cherry picking which services you require allows you to control how much you pay. That’s a job well done, and money back in your pocket.
4. Independent Viewpoint
The problem with getting too invested in your own business is that you can’t recognize its flaws. You’ve worked so hard to develop a budget or business plan that you can’t see that it’s costing you precious revenue.
That’s why it often takes an extra set of eyes to double-check your work. Since an outsourced CFO doesn’t have the same attachment to your company as you do, he or she will be able to see flaws in your system that you don’t.
Though it may seem brutal to you at the time, CFOs are passionate and very experienced in accounting. If yours is dismantling and rearranging the financial system you’ve created, it’s for your benefit. After all, it’s what you’re paying for.
5. Better Business Decisions
In terms of making wise financial decisions, CFOs have the advantage over CEOs and other department heads because being well-informed is part of the job. This person will be well-versed in business analytics, banking, accounting and the Stock Market. A CFO will also know the trends and patterns of your industry and will know the best way to handle every situation.
For this reason, this professional will be inherently better than you at making decisions regarding finances and will work at a pace that keeps with the speed of change in your industry. Some business owners have trouble giving outsourced CFOs the amount of control that they need to make their business successful. While this level of cooperation is difficult, it’s necessary to ensure the success of your company.
6. Setting Up Retirement Plans
This might seem like a small detail, but setting up retirement plans for your employees can be very challenging. Worthwhile employees will be more likely to stay at a company that will provide them with long-term compensation.
If you aren’t an expert in finances, market evolution and how much your money can afford to spare for your employees’ futures, your retirement won’t meet the standards of your employees. Giving this task over to a CFO will ensure that your employees’ benefits and retirement plans fit perfectly with the scale of your business.
You have the reassurance and peace of mind knowing that you’re taking care of your loyal employees to the best of your company’s abilities.
The day to day duties of a business owner can often blur together and become mundane. Focusing too hard on the bottom line can make you forget why you were passionate about starting your business in the first place. If hustle and bustle of running a business is rewarding but also tough to keep up with, an outsourced CFO can help.
A CFO will understand your vision and their expertise in finances allows them to handle your accounting and budgeting without losing sight of that vision. Essentially, their job is to make your life easier so that you can focus on the big picture of your brand and its message.
Your Business is Worth It
Entrepreneurs pour everything they have, sometimes their livelihoods, into the success of their businesses. The ones that are successful achieve what they do because they believe in their vision and are willing to work hard for it.
However, if your company is expanding and requires more resources and staff, it can quickly become overwhelming. If you neglect one department of your business to improve another, your entire system will eventually suffer. Hiring outsourced CFOs will allow you to improve the financial well-being of your company without sacrificing the quality of your work.
Scale Factor Can Help
Deciding to give outsourced CFOs a try is a great way to build your business and grow your bottom line. If you want to take the next step to streamline your business, click here to request a free demo from ScaleFactor. We’ll show you the best solutions for your custom dashboards, automated bookkeeping, bill pay and invoicing, and much more.
After all, asking for help when running a growing business isn’t accepting defeat. It’s just good business sense.