What Does an Outsourced CFO Do?

An outsourced CFO is an independent consultant who offers financial and managerial advice to a business organization on a short-term, on-demand, or on-call basis. They provide a consultant-level full-time CFO service without having to employ a full time CFO. Outsourced CFOs are typically acquired by small- or medium-sized firms that cannot or will not hire a full-time financial officer but require help in reporting, cash management, financing, budgeting, and strategic financial planning.

Financial Reporting

For an outsourced CFO, one of the responsibilities is to prepare and present the company’s financial statements.

This includes activities like:

– Preparation of monthly, quarterly, and annual accounts

– Examination of the financial ratios in order to determine the possibility of increasing efficiency

– Offering management reporting and measurement to identify the financial impact on the company

– Confirmation that the financial statements have been prepared in accordance with the accounting standards and set regulations

– Annual auditing and contact with the external auditors

In the financial reporting, the outsourced CFO ensures that the managers are given the latest information for decision making. They also help the company in the compliance of its tax and legal requirements.

The general strategy is to provide the most extensive cash flow forecasting and control.

Outsourced CFOs may also participate in the process of budgeting and budgetary control, as well as the control of cash flow in an organization. They prepare cash flow forecasts and requirements for future periods. This makes it easy for the company to source the required capital without falling into the trap of shortage of such capital.

The CFO may also oversee cash management activities like:

– Reviewing client accounts and the balances that are still to be reconciled

– Applying controls over expenses

– Transferring of money from one account to another to earn the highest interest

– Focusing on creditors and attempting to improve the credit terms

These strategies ensure that enough cash is availed to cater to the company’s operating expenses.

Budgeting

Another common task of an outsourced CFO is to create budget and financial plans. This involves consulting the managers to develop realistic organizational budgets for the strategies in place. The budgets represent the quantity of resources required in an organization to achieve organizational goals.

The CFO also controls and monitors the organization’s spending by establishing a budget and reviewing variance reports. They may modify budgets whenever they perceive conditions have changed, or they have altered goals. It is the continual control of expenditure that guarantees that departments need resources while at the same time saving for crucial projects.

Securing Financing

Employment of outsourced CFOs also helps companies search for new sources of financing.

The CFO can scout financing options best-suited to the company’s needs, including:

– Bank loans

– Angel investments

– Venture capital funding

– Government grants and loans

– Crowdfunding platforms

The financial specialist outsourced as a CFO completes all the paperwork, economic models, and other documents needed to secure funding. It means that their knowledge of finance and their credibility can persuade lenders and investors to finance promising businesses.

Financial Modeling and Valuation

Outsourced CFOs create financial models to address strategic business issues such as assessing potential expansion, significant capital expenditures, acquisition or merger, and so on.

The CFO may also use business or asset valuation to compare the value of possible sales and divestitures or set a fair pricing point for investors. Their appraisal addresses issues like assets, patents, earning capacity, etc.

Financial Analysis and Reporting

The outsourced CFO uses statements of financial position, income statements, balance sheets, budgets, forecasts, and other relevant data to determine the performance and economic condition of the company. They reveal advantages, limitations, possible developments, and problems that should be solved by the management.

The CFO also presents his/her conclusion in reports, briefs, and regular meetings with owners and managers. They answer financial questions and advise management on increasing profitability, liquidity, stability, and growth.

Advising on Tax Planning

Outsourced CFOs assist firms in claiming tax exemptions and making necessary adjustments to cut on their tax liabilities.

For example, the CFO might coordinate:

– A tax policy identifying tax credits and incentives

– Depreciation schedules to reduce the amount of taxable income

– Retirement plan contributions

– Tax deferred investments

Preventative tax management is better for the company because the company can keep more money it has earned.

Assessing and Improving Controls

An outsourced CFO may also assess financial and accounting processes to determine areas of strength and areas of concern. They provide recommendations on possible changes to the segregation of duties, protection of assets, and increasing the reliability of reports prepared. Stringent measures lower the possibility of future mistakes, embezzlement, and losses.

The CFO can also help write or revisit the accounting and finance policies and procedures manuals to enhance internal controls and reflect best practices.

Staff Management and Development

Outsourced CFOs may sometimes act as managers of the finance team and supervise the staff during their working tenure. This has a training effect on junior accounting employees and consistency in leadership when the top job in finance is not filled.

CFOs may train personnel to enhance financial competency and mobilize performance. Additionally, the CFO may evaluate the human resources requirements and recommend changes to staffing levels that the firm may require in terms of additional staffing or restructuring of staff positions.

Special Projects

Besides routine duties, companies often leverage outsourced CFOs for special projects requiring financial expertise:

– Supervising new software applications

– Expanding into new product categories or markets

– Overseeing mergers, acquisitions, or divestitures

– Securing a line of credit

– Managing crises and change

Due to their previous engagement in such projects in other organizations, they are suitable for short-term tenures during organizational transformation.

Conclusion

Outsourced CFOs serve as interim financial directors for clients; they also manage cash, preparation of reports, budgeting, economic analysis, taxes, internal controls, and projects. They provide mature financial advice and experience without needing a long-term commitment. Because most growing businesses can afford flexible contracts, any growing business can harness the advantages of an outsourced CFO. Their expertise and neutral stance provide insights on profitability influencers, allowing managers to make informed fiscal decisions on priorities that foster growth and stability.