What are CFO Outsourcing Services?
The Difference Between Full-Time, Part-Time, Fractional and Interim CFOs and CFO Outsourcing Services
CFO Outsourcing Services Outlined
A Chief Financial Officer (CFO) is one of the crucial resources that every competitive firm needs in order to reach the next level in its development. The multi-faceted, well-experienced and highly competent finance and accounting head is responsible for among other things:
- Building sustainable corporate finance, accounting and operations
- Identifying and securing capital needs
- Coaching executive performance for defined targets and metrics
- Contributing to the development and execution of long-term strategy
- Identifying, diagnosing, and integrating mergers and acquisitions
- Building sustainable, growth-oriented organizations and cultures
- Ensuring technology advancement and utilization
- Facilitating audit and compensations committees needs
- Developing and implementing corporate change leadership initiatives
- Guiding continual enterprise risk management
- Overseeing international governance and expansion
- Developing and implementing aligned executive compensation
More specific to the finance and accounting function, a CFO will oversee treasury and cash management, financial modeling, options and compensation plans, business performance and cash flow, partner/vendor management, Board of Directors management, investor communications, payroll, accounts payable and accounts receivable functions, and any activities tied to turnaround, restructurings and divestitures.
Due to the vast experience and skill-set CFOs bring to the table, the cost of hiring a full-time CFO is very high (see table below), but considering the advantages a strong CFO can offer to an organization, it is essential. However, businesses can now escape the heavy cost of hiring a full-time CFO, and indeed an entire finance and accounting staff, by opting for an interim, fractional or part-time resource.
While all offer similar cost-saving benefits, part-time, interim and fractional CFOs aren’t exactly interchangeable terms. They are all different models for employing a CFO and having to pay them based on the amount of efforts they put in.
Finance and Accounting Compensation by Job TitleSource: AFP Compensation Survey Report (AFPonline.org). A Part-Time CFO and Controller salary is typically 50-75% less than a fully loaded executive.
|2017 BASE||2017 BONUS||2017 TOTAL||218 BASE||% BASE SALARY INCREASE|
|VP OF FINANCE||$189,395||$63,389||$242,877||$198,072||4.6%|
|DIRECTOR OF TREASURY / FINANCE||$146,428||$34,975||$175,199||$151,879||3.7%|
Finance & Accounting Base Salaries for Select Job Titles by Geographic RegionSource: AFP Compensation Survey Report. Geography defined by U.S. Census Bureau. A Part-Time CFO and Controller salary is typically 50-75% less than a fully loaded executive.
|VP OF FINANCE||$212,612||$198,098||$184,197||$170,096|
Finance and Accounting Base Salaries by IndustrySource: AFP Compensation Survey Report | AFPOnline.org. A part-time TechCXO CFO, Controller or other finance executive's compensation is typically 50-75% less than a full-time loaded salary for an in-house executive.
|TECHNOLOGY SERVICES||ENERGY / UTILITY||MANUFACTURING / CONSTRUCTION||BUSINESS SERVICES||GENERAL SERVICES||RETAIL / DISTRIBUTION / TRANSPORTATION||GOVERNMENT / NON PROFIT|
|VP OF FINANCE||$202,958||$224,600||$192,232||$178,554||$201,105||$186,485||$156,623|
Fractional Chief Financial Officer Roles, Responsibilities and Experiences
It takes years of experience and a boatload of enthusiasm to face each day as a blank slate, with endless possibilities and room for improvement. Finding the best path to take, even in impossible situations, is something that requires, not only the right intellect but a great attitude too.
What are a Fractional CFO’s roles and responsibilities?
A Fractional CFO first and foremost, needs to understand the workings of your company. They have to be in harmony with the company’s vision, mission, objectives, and long-term goals for there to be a productive business relationship.
With capital needs, strategic objectives and financial and performance metrics constantly changing, a fractional CFO needs a steady hand, sound experience while balancing an eye on the future.
An open and realistic mind is invaluable as well. It is important to find a balance between a business’ necessities and luxuries they can do without. Minimizing cost while maximizing profits is every business’ mantra.
With a business’ objectives as a guiding map, and personal experience, insight and relevant technology as a shining light, navigating through challenges becomes much easier and manageable.
Other responsibilities a Fractional CFO, include:
- Prompt accounting and finance staff management
- Taking part in developing executive decisions on leadership and management
- Researching and evaluating relevant technology of importance to the business.
- Spearheading and implementing business objectives, missions and visions.
- Development and management of key functions, software, and their methodologies.
- Defining a business’ Key Performance Metrics (KPMs)
- Understanding the level of scalability and resilience of various technologies
- Technology maintenance assessment and planning
- Board management
- Financial reporting
- M&A transaction support
- Reviewing and negotiating business contracts
These are just a handful of the responsibilities a part-time CFO is faced with. These responsibilities will vary depending on the type of business.
When do you Require a Fractional CFO?
So when exactly would you require the services and expertise only a fractional CIO can lend?
Companies that reach an inflection point in their growth usually do so for one of the following reasons:
- increasing number of transactions, such as more customers, more employees, more vendors n increasing complexity in the business that requires more experienced leadership and better
- planning to develop policies and procedures
- an inexperienced controller or other finance staff member who may simply need a mentor
- the company has raised or intends to raise significant ($1 million or more) funds from outside investors
- a merger or acquisition of a line of business that requires acquisition accounting and reconciliation between multiple systems.
Often a company will require specialized skills to address a very particular problem. audit firms are increasingly unwilling to risk compromising their audit function by providing in-house consulting services and will instead refer the company to a project-based cFo. some common projects that might require outsourcing include:
- Issues with revenue recognition, international expansion or sales tax cleanup or strategy
- Sarbanes-Oxley compliance
- M&A activity where the company is either the buyer or the seller and needs help either evaluating the target company or properly packaging the company for sale
- Pre-audit cleanup work to get the company’s financial statements in shape to actually begin an audit
- Equity issues such as 409a valuations or 123R calculations.
In these cases, a company has no CFO in place and wishes to find an immediate resource to fill the gap until they can hire a permanent CFO. This is usually a role for an interim CFO who will commit substantially all of his/ her time to a company for a limited period.
Unlike part-time or project CFOs who generally make a living by working on an outsourced basis with a number of different companies, interim CFO are often finance professionals who are dedicated to one client.
How can an experienced, Fractional CFO help a CEO, Board and Senior Management Team?
With an experienced CFO, a CEO gets:
- Increased credibility with Board, prospects, partners and suppliers.
- Attention/attraction of equity investors.
- Better cash management.
- Upgrade from general bookkeeping to build a real finance and accounting department. n improved negotiation of contracts and agreements, as well as improved audits.
- Collaboration of senior team for the c-suite to become more effective. n optimized profits and improved working capital.