Difference between an Outsourced CFO vs 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 that every successful company requires, or will in the future, to rise to the next level of growth. 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 and are constantly working on optimizing the financial performance of a company. When managing a business, some are not aware that you have the option of an outsourced CFO rather than hiring a Full-time CFO.
Experience and Objectivity
Outsourced CFOs come with a substantial background in high-level accounting and financial services along with experience working in a variety of 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 providing 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 with the company.
Growth
One of the most important aspects of hiring an outsourced CFO is the ability to grow the company. This is because 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 potential of 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 CFO’s are required to provide a daily breakdown of all tasks performed, for their record and the company’s. This allows great insight 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 within their duties.
Outsourced CFOs can provide strategic and competitive insight into the company in a number of ways. One way could be implementing new and improved reporting systems, identifying issues within the current financial strategy, and correct these issues to ensure that the business and financial goals are reached.
Cost
Potentially the biggest disadvantage of hiring a full-time CFO is the expense. The average salary of a CFO is $175,000+ annually, not including healthcare and other benefits. In addition, you will not be paying bonuses, commissions, or any sort of profit sharing. With a fixed rate that is negotiated in the contract, you will not be paying the outsourced CFO anywhere near what you would a full-time position. An outsourced CFO allows flexibility for the company by making it easy to increase or decrease the outsourced CFOs hours as needed.
A lot of start-ups or small to medium sized businesses will go with the outsource route as they experience swift growth and realize that they need an executive’s financial direction. Money is typically tight for these businesses, and outsourcing can help them out in this phase. 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 a CFO.
| OUTSOURCED CFO | VS. | FULL-TIME CFO | ||
|---|---|---|---|---|
| WINNER | OUTSOURCED CFO |  |
||
| 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 valuable 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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