Demand for interim CFOs was up 103% year-over-year in April 2023, as more owners want to hire these C-suite executives to fill their ranks. When the time comes to hire a CFO, you’ll need to consider if you want to hire an:
- In-house CFO
- Outsourced CFO
Both positions will fill the role, but there are advantages and disadvantages to both, which you need to weigh to find the right fit for your company.
In-House CFO vs. Outsourced CFO
A Chief Financial Officer is crucial in helping companies make important financial decisions with data-backed forecasts and models that they provide to other key stakeholders. You can hire in-house or outsource the position, and while extremely similar, the two roles are also different:
Responsibilities
In-house positions can handle it all. You can rely on these executives to assist with:
- Financial statement analysis
- Financial models
- Building out your budget model
- Forecasting
- Account reconciliation
- So much more
Since the in-house CFO is full-time, they can help in all aspects of your business’s finances. In some cases, the CFO may even be responsible for lower-level tasks to help the company succeed financially, such as basic bookkeeping.
An outsourced CFO can complete all of the same tasks as their in-house counterparts, but they’re not full-time.
You likely won’t find an outsourced CFO handling the tasks that any accountant could because they’re hired to help your business reach very specific goals. In the ideal world, these outsourced professionals will work on only high-level tasks, which is why you hired them in the first place.
Costs
Salary.com states that the average CFO in the United States earns $439.956, but you’ll find salary ranges from $333,000 – $564,000. Businesses need to justify the need and benefit of a CFO to take on these costs annually.
If you can’t fit an in-house executive into your budget, that doesn’t mean that you can’t leverage the skills and expertise that they offer.
Outsourced CFOs fill these roles perfectly because you don’t need to commit to a full-time employee and can hire someone on a:
- Short-term basis
- Per-project basis
- Monthly basis
If you only need a CFO for 10 or 20 hours a month, it’s more cost-effective to work with someone who is an outsourced CFO because they’re not full-time employees.
You also don’t need to worry about other costs, such as benefits and office space. Many outsourced CFOs will work virtually, but there are some who will come into your office and work with you face-to-face.
Small businesses that can benefit from the expertise of a CFO but cannot take on the commitment of a full-time CFO just yet often find that the outsourced CFO will fit their needs better.
Responsiveness
Dedicated CFOs are with your company day in and day out. If you have a question or concern, you have a point of contact that you can reach out to at any given moment. In terms of responsiveness, it doesn’t get much easier than knocking on an office door.
But that doesn’t mean that an outsourced CFO is not responsive.
You can still ask the outsourced CFO questions and expect a timely answer, but they may be slower to reply if they’re working with other clients.
Experience and Expertise
In-house and outsourced CFOs both bring experience and expertise to the table. However, outsourced CFOs work with a variety of companies. Their well-rounded experience means that they bring in a lot of perspectives to help your business grow, overcome challenges and take advantage of opportunities.
Risk of Fraud
According to the 2022 Report to the Nations Global Study on Fraud and Abuse, U.S. businesses will lose an average of 5% of gross revenues to fraud.
Often, fraud is an inside job. In fact, the U.S. Department of Justice says internal theft occurs at a rate that’s 15 times higher than external losses.
When hiring an in-house CFO, the risk of fraud is always there. Of course, there will always be a risk of fraud because there’s no surefire way to prevent it. However, when you work with an outsourced CFO, you add an extra layer of security because accounting duties are segregated and more eyes will be on your finances.
Resources
Outsourced CFOs have valuable connections and a vast network of people that can help support your business. They can connect you with:
- Accounting firms
- Financing sources
- Insurance agents
- IT consultants
- Financial advisors
- Mentors
- Lawyers
- Marketing & sales consultants
These connections can prove to be invaluable when you need their services.
An in-house CFO, on the other hand, may or may not have a network of connections that can help your business.
When is the Right Time to Hire a CFO?
Knowing when to hire a CFO can be tricky. Hire too early and you risk not having the funds to support this new role. Hire too late and you may miss valuable growth opportunities.
Typically, businesses won’t hire a full-time, in-house CFO until they’re generating at least $50 million in revenue. So if your business is bringing in less revenue than this, it likely does not make sense to have a full-time CFO.
An outsourced CFO, on the other hand, can be brought in early on. It may be time to consider an outsourced CFO if:
- You don’t have the time or expertise to create financial strategies, projections or investor reports.
- You need a real person to give you financial advice, like whether it’s the right time to scale or the best way to do so.
- You’re constantly running into cash flow issues, or you’re not sure how to put a cash surplus to work for you.
- You’re experiencing rapid growth and can’t keep up.
- You want to reach new heights in your business and would like support when doing so.
As your business and its revenues grow, financial management, planning and reporting become increasingly more complex. A CFO will serve as your strategic partner, helping ensure you’re making sound financial decisions and taking advantage of growth opportunities at the right time.
To learn more about our outsourced CFO services or to schedule an appointment, click here.