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Blog / Outsourced CFO: Navigating Financial Excellence with Outsourced Expertise

Throughout your business’s growth journey, you’ll face many tough decisions. When and how should you raise funding to invest in growth? What steps can you take to boost margins? What are your long-term resource allocation plans?

All of these questions, and many more, have a clear financial element. To be able to effectively make these kinds of decisions, ones that can make or break your business, you need a firm grasp of the numbers and an appreciation of the second-order impacts of any decisions you make.

In making these calls, it’s extremely beneficial to have the guidance of an experienced financial leader to rely on. In larger businesses, this person is the CFO. But many small to mid-market firms lack the resources and bandwidth to bring in an experienced CFO on a full-time basis. Hiring a CFO is expensive: studies have found the average CFO salary in the U.S. is $393,377, almost eight times that of the average employee.

Instead, many businesses are turning to outsourced CFO services. These services allow businesses to access proven financial leadership on a fractional, as-needed basis, unlocking the strategic insights required to overcome challenges and accelerate growth.

What is an Outsourced CFO?

An outsourced CFO is a service provider that businesses can outsource advanced financial tasks. Businesses commonly work with these service providers on a fractional, part-time basis, and the nature of the relationship often evolves as the business grows.

Outsourced CFO services can be provided by individuals, but are more often provided by CPA firms that are able to offer a wider range of outsourced accounting services, known as Client Advisory and Accounting Services (CAAS). They offer a wide range of solutions, from building the internal financial infrastructure required to scale the business to helping leaders address short-term challenges such as cash flow issues or year-end planning.

What Does an Outsourced CFO Do?

An outsourced CFO can handle any of the tasks that would typically be delegated to a full-time, in-house CFO. Provided they partner with the right vendor, businesses should be granted the freedom to design a bespoke engagement that allows them to direct their outsourced CFO to spend time on the tasks most important to their business’s success.

These tasks might include:

Designing, implementing, and monitoring internal financial infrastructure such as accounting systems, internal controls, and more
Generating and analyzing periodic financial statements and presenting these to business leaders
Creating short, medium, and long-term budgets and financial forecasts
Providing oversight of internal finance and accounting departments
Assisting leaders with strategic financial planning
Assistance in raising debt and/or equity financing
Transaction advisory and valuation services
Any other tasks requested by the client

Outsourced CFO engagements may begin with a relatively limited scope but often broaden over time as businesses experience the benefits that come with improved financial clarity.

How to Know If You Need an Outsourced CFO

All kinds of businesses could benefit from an outsourced CFO, from fledgling startups in emerging industries to well-established businesses aiming to grow. Often, the decision to hire an outsourced CFO stems from an acute financial challenge, but this doesn’t always have to be the case.

Below, we list some common reasons that prompt businesses to consider forming a relationship with an outsourced CFO:

Assistance in Solving Major Business Challenges

No business, no matter how successful, has an entirely smooth journey. The wider economy, and individual industries, are in a constant state of flux. Customer behaviors change. Competitors release new innovations. Change is the only constant.

Challenges don’t define your business: how you react to them does. If you’re facing a challenge that seems insurmountable, it’s likely an experienced outsourced CFO has seen it before and is well-placed to provide helpful guidance. Access to this expertise equips your business with the strategic insights it needs to build and sustain a competitive advantage.

To Improve Financial Performance

Without sufficient financial clarity, it’s difficult for businesses to accurately diagnose their financial issues. It might be easy to see that your business has opportunities to boost margins and improve profitability, but knowing exactly how to do that requires a different approach entirely.

An outsourced CFO has the skills to help business leaders navigate these issues. They can dig deep to determine margins at product and service line levels, identify costs that should be eliminated, and help envision and implement a strategy that delivers sustainable financial results.

Upgrade Accounting Infrastructure

Many businesses adopt a bare-bones approach to accounting. At first, this can work, but once a business reaches a certain point in its growth trajectory, this approach can lead to major issues. Leaders might lack the financial insights required to make effective decisions, experience unexpected cash flow issues that leave them scrambling to meet payroll, or struggle to collect accounts receivable on time.

Outsourced CFOs often have vast experience and will bring proven frameworks and processes to your business, helping you create the foundations for success. By working with an outsourced CFO to invest in best-in-class accounting technology, businesses can benefit from increased access to financial information, leading to improved decision-making at every level of the organization.

To Lay The Groundwork for an Exit

It’s likely the sale of your business is the single biggest transaction of your life. But, perhaps because of the emotions and complexities involved in the process, too many businesses approach these transactions without the appropriate level of preparation.

That’s a mistake that could easily end up costing millions of dollars; an error an outsourced CFO can help you avoid. By partnering with an outsourced CFO ahead of a planned exit, business owners can maximize the value of their business and ensure they achieve the best possible return for their years of hard work. An outsourced CFO will help get your business’s accounts in order, advise you on valuations, and help oversee a successful due diligence process.

LBMC: Outsourced CFO Services

Choosing to partner with an outsourced CFO service is a decision that can elevate your business to new heights. Together, you’ll unlock new opportunities, streamline operations to optimize profitability, and build a solid foundation for the long-term success of your business.

Throughout this process, it’s vital that entrepreneurs have a partner they can trust. An outsourced CFO might become one of your closest business confidants: a strategic advisor that helps you plot the best path forward for your business.

At LBMC, with offices in Tennessee and Kentucky, we’re proud to provide outsourced CFO services to businesses across the U.S. In addition to outsourced CFO services, LBMC offers a wide range of outsourced accounting, including outsourced Controller and outsourced bookkeeping services. Our scalable services give your business the flexibility to adjust financial support as you grow, delivering added benefits like cost savings, strategic alignment, and consistent financial clarity.

Our team of dedicated advisors partners closely with leading businesses in a variety of industries, from construction to professional services. Every engagement is designed based on the unique needs of your business, not a pre-defined checklist.

Interested in learning more about how LBMC’s outsourced CFO services can help your business? Contact us today.