Difference between an Outsourced CFO and Full-Time CFO?
If you manage a business, you know that the role of Chief Financial Officer (CFO) is one of the most crucial and necessary roles of every successful company. A CFO is required, or will be in the future, to rise to the next level of success. Some may wonder, what exactly does a CFO do? CFOs most important duties include tracking cash flow, financial reporting, and audit preparation. CFOs are solely in charge of the finance and accounting departments. They are there to optimize the financial performance of a company. Many do not know that they have the option to outsource, rather than hire a full-time CFO. They are also unaware of the many benefits that come from outsourcing a CFO.
Experience and Objectivity
While managing a business, you have the option to outsource your CFO or hire someone full-time. Outsourced CFOs come with a substantial background in high-level accounting and financial services. Their background also comes with working in a variety of different industries. Less than 20% of sitting full-time CFOs have prior CFO experience at another company. An outsourced CFO brings extensive experience that has been gained from other companies. They can provide a valuable outside perspective on systems and procedures. In addition to this, an in-house CFO may not be able to bring an objective point of view like an outsourced CFO would because they are often too close and have ties to the company.
While the average tenure of a full-time CFO is about 5 years, outsourced CFOs have 20 plus previous employers on average that they have worked with. This gives them the opportunity to work with multiple companies over a period to gain additional experience in various industries.
Growth
One of the most important aspects of hiring an outsourced CFO is the ability to grow the company. They are able to spend more of their time on growth strategies rather than spending time on administration and overhead. Outsourced CFOs are hired at a higher rate for strategic growth initiatives, such as M&A, IPO, and investments. This is in comparison to full-time CFOs spending over 50% of their time on operations with the CEOs having the expectation to be far less than that. Almost one in three CEOs worry that their CFO is not prepared for the challenges ahead. Typically, outsourced CFOs have experience fixing major problems within a company, as they are often brought in on a project and need related basis.
Visibility
A strong attribute that an outsourced CFO brings to the table is visibility. Outsourced CFOs are required to provide a daily breakdown of all tasks performed. This is required for their record and the company’s, therefore giving great understanding as to what is being done for the company. An outsourced CFO wants to make sure that they give full disclosure and that they are aware of every step that is being taken in their duties. The outsourced CFO wants to make sure that there is confidence and trust in the work being done, so full insight is provided.
Cost
Potentially the biggest disadvantage of hiring a full-time CFO is the expense. The average salary of a CFO is $200,000+ annually. This is not including healthcare and other benefit costs. In addition, you typically are paying out bonuses, commissions, or a sort of profit sharing. An outsourced CFO saves you all of these costs as an hourly employee. There will be a fixed rate that is negotiated in the initial contract. Thus, you will not be paying the outsourced CFO anywhere near what you would a full-time position. There is also the ability of having flexibility with increasing or decreasing the outsourced CFOs hours as needed. By hiring a CFO for the interim, an hourly basis, or on a project-related basis, on average you will have a 60% annual cost savings by outsourcing your Chief Financial Officer.
| OUTSOURCED CFO | VS. | FULL-TIME CFO | ||
|---|---|---|---|---|
| WINNER | OUTSOURCED CONTROLLER | |||
| Benefits (cost) | N/A | $15,000 annual average | ||
| Minimum Required Hours | Based on Need | 40 hrs. a Week | ||
| Types of Employment | Hourly / Interim / Fractional / Full-time / Consulting |
Full-time | ||
| Avg. Experience in CFO Role | Minimum of 10 Years | Minimum of 10 Years | ||
| Employee Interaction | On-site / Virtual | On-site / Virtual | ||
| Avg. Prior Experience (As a CFO) |
100% of outsourced CFOs have prior CFO experience |
Less than 20% of full-time CFOs have prior CFO experience |
||
| Experience and Insight Gained from other companies and industries |
20+ Companies Avg. number of companies an Outsourced CFO has worked for |
3 Companies Avg. number of companies a full-time CFO has worked for |
||
| Ability to Grow Company Time spent on growth strategies vs. time spent on administration and overhead |
100% of an Outsourced CFOs time is spent on the strategy you need |
Over 50% of full-time CFOs are spending their time on operations while the expectation is 22% |
||
| Visibility Document processes, provide day to day insight on what services and activities they’re doing |
Full Visibility Outsourced CFOs are required to provide a daily breakdown of all tasks performed |
Limited Visibility Full-time CFOs provide limited accountability of daily tasks performed |
With a finance and accounting expert from an outsourced accounting firm, you will save valuable time and resources. Whether you are experiencing problems hiring a full-time individual or you simply cannot afford it, outsourcing a CFO has more benefits than one. Gaining essential financial insight without paying the price of a full-time CFO is the simple answer as to why it is the best option for your company.
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