The term “outsource” used to be associated with repetitive, low-skilled tasks. But as new technologies have made remote work possible, an industry of outsourced white-collar professionals has arisen. Now, many larger companies are outsourcing professional services, including executive leadership like CFOs.
There are many reasons a midsized business may want to consider an outsourced CFO. These include a change in corporate structure, merger or acquisition, or busy financial season, to name a few. An outsourced, or freelance CFO, can join an organization on a project basis. They can provide the same experience and qualifications of a full-time CFO with more flexibility and less overhead.
How an outsourced CFO can benefit midsized businesses
Midsized companies often have finance requirements that are beyond the scope of a controller, accountant or small finance team. A freelance CFO, brought on for specific projects or on a fractional basis to augment the existing team, can bring unique value while providing strong financial leadership. Some ideal projects for this situation might include:
- Financial Strategy: Working with an outsourced CFO means you can find the precise industry, market and need-based expertise for your business goals. These expert CFOs can go beyond basic forecasts and create a strategic vision for your business. This can involve creating and implementing a 5-year plan, turnaround strategy or go-to-market strategy.
- Raising Capital: When the need arises to raise capital and build investor relationships to grow, a freelance CFO can offer this specific expertise, and sometimes even a network of financiers, to help it go smoothly.
- Business Operations: Your finance department has many functions that need to align so your business runs smoothly. Leading operations for your finance team, along with managing cross-functional C-Suite relationships, could be the perfect job for an outsourced CFO. This would provide your full-time executives more time to focus on strategy and growth.
Outsourcing a freelance CFO offers more flexibility than hiring a full-time CFO. It negates many hiring and HR costs like providing benefits. Additionally, you can work within your budget to allocate the appropriate projects or hours per month. Finally, outsourced CFOs can quickly add support during busy times for key projects and scale down involvement during slow periods.
Hesitations around outsourcing a CFO: Facts vs. myths
There are many reasons why midsize and larger companies may shy away from outsourcing CFO services. Some are valid, and some should be re-evaluated. Let’s separate the myths from the facts:
An outsourced CFO won’t look good to investors – MYTH
Companies may be wary of hiring a freelance CFO for fear that investors will see this as diminishing the prestige and responsibility of the C-level role. Businesses also worry that investors will see a project-based CFO as a cost-cutting measure, indicating financial stress in the company.
However, in the era of technology and automation, outsourced CFOs are increasingly a sign of a “lean” company. Lean companies focus on maximizing value and eliminating waste, including in hiring practices. In this sense, an outsourced CFO could be seen as an efficient move for a lean, modern company that uses innovative approaches and technologies.
Our full-time CFO and finance team can take on the extra work – MYTH
Larger businesses often have too many financial responsibilities for one full-time CFO to handle. Yet, they won’t add a freelance CFO for fear of giving away too much private company information. Instead, they may try to delegate CFO-level tasks to other team members, or the full-time CFO may take on all the excessive workload.
These approaches tend to burn out the full-time CFO and lead to resentment among employees who end up doing C-level work for less pay. Plus, employees at other levels don’t always have the necessary skills for C-level tasks. It’s worth it to bring in an outside resource to keep your team happy and ensure that important financial tasks are being approached strategically.
An outsourced CFO won’t know my business – SOMETIMES TRUE
It’s true that an outsourced CFO may take more time to get up to speed than a full-time CFO hired from within. It will take time for an outsourced CFO to learn about the business-specific nuances and roadblocks that the finance team faces.
However, a business can solve those issues by working with a freelance CFO who has experience dealing with your specific business challenges. Paro’s CFOs average more than 15 years of experience and have a wide variety of expertise and experience at major organizations. Our proprietary AI technology will match you with the CFO that is best suited to tackle your unique needs.
A freelance CFO won’t see the project to completion – SOMETIMES TRUE
Freelance CFOs aren’t always there to put in place their recommended strategy. Often, they will provide a comprehensive analysis and plan that is up to the internal team to implement.
However, companies can negotiate project implementation into a freelancer’s contract to ensure they will see their strategy to the finish line. Businesses usually pay outsourced CFOs on a deliverable basis. It may be worth it to pay for some extra help to avoid any unnecessary headaches during implementation of their strategy.
Best practices for working with an outsourced CFO
Before outsourcing, organizations must consider how the CFO will integrate into the existing team and executives pool. The existing team may expect different communication styles and cadences than the outsourced CFO is used to. They may also be unclear on the new hire’s role. Be sure to communicate expectations with both parties ahead of time. By explaining the new CFO’s strategic role, you can guide communication to meet everyone’s standards.
It is also important to give the outsourced CFO access to the financial platforms and tools they will need for day-to-day operations. These platforms keep your financial organization integrated and allow teams to engage in effective remote work.
All in all, if clear expectations are set with all parties and the CFO has full access to necessary technology, you will be set up for a positive partnership.
At Paro, we leverage our proprietary AI technology to build flexible, focused teams of remote experts that help companies solve problems and drive growth. Our laser focus on finance allows us to quickly identify experts across the U.S. with the right mix of skills, credentials, and experience to achieve each company’s specific goals. Complete our form to request a consultation and gain the outsourced CFO leadership you need.