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Outsourcing CFO Services Yields Significant Benefits for Small, Mid-Size Businesses by Debra Sears, CPA

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Posted on October 17, 2023 by Debra Sears

Operating a small business comes with a wealth of opportunities and an equally abundant set of complexities, including tax reporting, regulatory compliance and meticulous financial recordkeeping. For many entrepreneurs, hiring full-time professionals to oversee these functions in-house is simply unaffordable. Instead, a growing number of businesses are turning to outsourced CFO services for on-demand assistance with a myriad of financial budgeting, reporting, planning and fraud-prevention services.

Outsourcing CFO functions to experienced advisors and accountants can help businesses gain the financial and operational expertise they need without having to pay a significant salary and benefits to a full-time, in-house employee. Moreover, by having these services available on a once-per-month, quarterly or as-needed basis, businesses can centralize and expedite their decision-making processes.

While it is not uncommon for small business owners to hire part-time bookkeepers, the extent of these professionals’ expertise is typically limited to the specific tasks they perform. For example, a bookkeeper may be a pro at overseeing payroll and recording financial transactions, but they may not be as adept at analyzing a business’s performance, profitability and cash flow. Without the ability to look beyond the numbers and provide overburdened business owners with the strategic counsel they need, a bookkeeper alone will not be able to support a business’s pursuit of its operational and financial goals, minimize its risks or take advantage of market opportunities.

Following are five benefits business owners can receive when they choose to outsource CFO services.

Financial Reporting Accuracy

Maintaining meticulous financial records is important for a business’s tax reporting, tax compliance and financial analysis. By outsourcing this task to experienced professionals, owners gain a second set of eyes to confirm the accuracy of financial data and the knowledge and expertise needed to understand the data behind those numbers and prepare required financial documents to attract investment dollars or secure loans.

Profitability and Cash Flow Analysis

Because entrepreneurs wear many hats and juggle multiple job responsibilities as they grow their businesses, it is not uncommon for them to overlook potential issues that could turn into very real problems in the future. Or they may not be able to identify an opportunity to improve cash flow just by looking at the financial spreadsheets. Outsourcing CFO service can help business owners gain deeper insight into their business operations, including critical performance metrics and interplay corporate finance, tax efficiency and risk management.

Fraud Detection and Prevention

Both small and large businesses continue to suffer significant losses from occupational fraud committed by their own employees. However, according to the Association of Certified Fraud Examiner’s (ACFE), these losses typically have a far greater impact on smaller organizations that lack sufficient internal controls to prevent and detect fraudulent activities. An outsourced CFO can provide the keen eye and sharp skills required to identify red flags that point to fraud as well as operational weaknesses that can foster and contribute to criminal mischief.

Loan Negotiations

Whether business owners seek a loan or engage in other forms of contractual negotiations, it is imperative they fully understand the terms of the agreement, including their personal responsibilities to fulfill certain conditions. However, loans often contain standard covenants that may be difficult for start-ups or growing businesses with limited resources to satisfy. With the experience of an outsourced CFO, business owners can be assured that they understand the entirety of their contractual obligation and gain the benefit of a qualified and affordable representative to negotiate some of the terms on their behalf up front.

Short-Term Consulting and Long-Term Strategic Planning

The responsibilities of a CFO extend far beyond back-office number crunching and financial transactions. In today’s business environment awash with data, analytic skills can be successfully applied to all facets of an organization, from human resources and operations to sales and technology. Outsourcing these functions on an as-needed basis provides a fresh perspective and high-level analysis of businesses’ financial, operational and tax efficiency at manageable fees. Outsourced CFOs can examine a company’s balance sheet to establish workable budgets and compare them to actual results; identify problem areas; and recommend cost-cutting strategies, new technologies and new processes for improving efficiency. Their level of expertise also ensures immediate feedback to help businesses more quickly and effectively respond to changing market conditions and leverage new opportunities for future growth.

About the Author: Debra Sears, CPA, is an associate director of managed solutions and technology with Berkowitz Pollack Brant Advisors + CPAs, where she helps start-up entrepreneurs, privately owned businesses and nonprofit entities automate accounting functions and gain greater insight into information needed to make mission-critical business decisions. She can be reached at the firm’s Boca Raton, Fla., office at (561) 361-2000 or info@bpbpcpa.com.