Whenever it comes to outsourcing critical business functions, organizations often hesitate to treat their third-party partners in the same way they would an internal asset. They often keep this partner somewhat isolated, with a limited set of responsibilities and limited visibility into business operations and initiatives.
While this approach is generally flawed because it prevents your outsourced partner from making the most out of your investment, it is particularly dangerous when it comes to outsourcing your CFO function. An outsourced CFO can be an incredible asset when given the access and responsibilities fit for the role. In this blog, we cover the key responsibilities of a Chief Financial Officer and how they translate into tangible results for your business.
Cash Flow
They say cash is king. Well, the number one responsibility of any CFO, internal or external, is managing cash flow and distributing funds throughout your organization. This is a major responsibility, and choosing the wrong outsourced partner is certainly a risk for this reason, but keeping your outsourced CFO out of the loop won’t result in better outcomes for your business. Ensure your external CFO has all the access and visibility he or she needs to understand revenues, expenses, accounting policies and procedures, credits and collections, and any other pertinent information. The best CFOs have an all-encompassing understanding of your finances that should not waver even on the most intricate of details.
Financial and Data Analysis
One of the chief responsibilities of an outsourced CFO is conducting a thorough analysis of your business’s finances and making recommendations to benefit your bottom line or support aggressive growth goals. This is an area small businesses often struggle with, largely due to a lack of time. Costs start piling up, invoices go unpaid, and there is no one running the back office. It is the duty of an outsourced CFO to go beyond the surface level and deliver compelling, comprehensive recommendations and analyses that are grounded in data and represent the best course of action for your business.
Creating a Strategic Vision
A CFO is not a CEO, and as such should not be responsible for driving the overarching strategic vision for your organization. However, a best-in-class CFO is the CEO’s right-hand person, included in all important strategic conversations and decisions. After all, any growth aspirations need to be guided by the numbers and exist hand-in-hand with financial realities, costs, and investment decisions.
Most small and even mid-sized businesses fail due to their inability to scale efficiently and profitably. An outsourced CFO should provide you with reliable, up-to-date financial forecasting to drive your decision-making. As compared to an internal asset, an external Chief Financial Officer comes with the added benefit of an outside perspective and varied experience across a multitude of companies. This expertise will come in especially handy as you look to grow your business.
Relationships and Managing Capital
Whether internal or external, you should trust your CFO to communicate on your organization’s behalf. This involves managing vendor and other relationships, including banking arrangements, investor relations, and other outsourced partners. In fact, your CFO should spearhead the process of raising and securing capital to support your business growth, including negotiating the procurement of debt and other funding ventures.
* * * *
Outsourcing can be daunting, but it’s important to have a clear set of expectations and responsibilities for your lead financial expert, whether that professional is hired internally or brought in through an outsourcing partner.
finairo offers a wide range of outsourced CFO services and works with small and medium-size businesses to help them increase profit margins and scale. Request a consultation to learn more about how finairo can help empower your business through accurate, timely, and insightful financial practices.
