An organization’s Chief Financial Officer (CFO) plays an essential part in an organization’s overall long-term success. Regardless of a business’s size, a CFO oversees audit preparation, accounting, reporting and other financial-related business tasks. Should owners use an outsourced CFO or hire an in-house CFO?
To assist in illustrating the pros and cons of both options, let us analyze Company Alpha, who hired a full-time, in-house CFO, and Company Beta, who hired a part-time, outsourced CFO.
Benefits of An Outsourced CFO:
- Monetary SavingsCompany Alpha decided to hire an in-house CFO. In doing so, they failed to anticipate paying benefits and taxes in addition to the CFO’s salary.In contrast, Company Beta chose to outsource their CFO. In doing so, they bypassed having to pay benefits and taxe. Additionally, they only have to pay the outsourced CFO when she actually works.
- Time SavingsCompany Alpha’s full-time CFO often spends time participating in tasks that do not directly relate to the financial goals of the business. This can be problematic if the CFO is not able to focus exclusively on the financial tasks at hand.Company Beta, however, relies on their outsourced CFO to handle only their financial data. Furthermore, since this CFO is not in the office at all times, the risk of being pulled into other tasks and projects is greatly minimized.
- Reduced Fraud Risk, Better Internal ControlsCompany Alpha’s team works together on projects, and assists one another other as needed. Such collaboration, however, can also lead to the free flow of information regarding passwords and data. While arguably positive, this can also lead to unauthorized employees having access to confidential financial data.With an outsourced CFO, Company Beta does not suffer from such financial breaches of privacy. Their CFO is able to delegate access as needed, reducing the possibility of fraud and increasing the security of data.
- Large Projects AssistanceIf Company Alpha ultimately undergoes a merger that requires the analysis of a significant amount of financial data, an in-house CFO might not have the proper experience in handling such a gargantuan project. In contrast, if Company Beta decides to embark on such an enterprise, they are arguably much better prepared. This is because their outsourced CFO has a plethora of knowledge based on their broad financial experiences.
- Varied points of view. Company Apha’s CFO is entrenched in a business’s day to day operations. This can make seeing a company’s larger financial picture challenging. In contrast, company Beta’s outsourced CFO inherently has an external point of view, independent of the company’s day to day operations. As a result, she will consistently have objective opinions as well as viewpoints, keeping the best interests of Company Beta consistently at the forefront.