Outsourcing the position of chief financial officer is a tremendous cost saver for the small business owner, since a six figure salary for a full-time CFO is standard these days. However, perhaps the greatest benefit of hiring these professionals on a part-time basis is the breadth of knowledge and experience they deliver to a company, since they usually handle multiple clients in various industries. They are not long-time company staffers who are happy with the status quo, but independent individuals who, if they are worth their salt, can help business owners with growth strategies.
“The way I look at it, we bring our experience and knowledge from all of our clients to each of our clients, whereas if you have an in-house CFO, that person kind of works in a silo and is not exposed to different situations or challenges happening in the world,” says Cheryl Mucha, founder of Pompton Plains-based CFO Your Way.
Mucha, a certified public accountant with more than 25 years of experience, started CFO Your Way in 2012. She says the impact she has been able to make on her client’s lives – her niche is helping people in the real estate and service industries – has been “a wonderful experience.”
“In most cases, my clients are business owners who wear all the hats, but they don’t realize that wearing many hats takes away from business growth. They get stuck in all the muck that needs to be taken care of, but when they find a trusted advisor to help them, their business usually flourishes,” she says.
Service, Skills and Experience
An outsourced CFO delivers the same services as his or her full-time equivalent at another company. This includes cash flow projections, budget planning, break even analyses, profitability analyses and operational reporting – to name a few high-end services.
More importantly, Paula Ferreira of the Entrepreneurial Services Group at Mazars USA, says, “You want someone who is more than an accountant because a lot of business growth strategies are not numerical or accounting in nature. You want someone who is well rounded, someone who is not going to come in and start pointing at numbers.”
Ferreira says, “Look for someone who is a good communicator, a problem solver who is proactive, who is looking to improve the business and not stick to the status quo. The person should also have a good list of contacts in order to bring in the right business partners and professionals.”
Maria T. Rollins, managing partner at KRS CPA, LLC, Paramus, advises the business owner to find out what size companies the prospective outsourced CFO has worked with. What were the budgets? What were the management structures like? How many employees did those companies have? Did the person handle acquisitions? Did he or she prepare a business for sale? You want to dive into their experiences,” she says.
Mucha stresses that if the company seeking to hire an outsourced CFO is a small family business, look for someone experienced in working in that environment. She adds, “The most important thing is to have the person come to you through a referral. If they do not, then find out who their existing or past clients are and talk to those business owners about the services they have been receiving.”
Time Well Spent
Once the business owner conducts the due diligence research on the outsourced CFO candidates and makes a final selection, it is the chosen CFO’s turn to conduct more in depth research about the company’s finances, history and culture before he or she begins advising. Rollins says it usually takes three months before a game plan is implemented. “By that time, we understand what our expectations are for each other, we are delivering results and we are operating as a very well-oiled machine,” she says.
Martin Hoffman, a CPA based in West Orange who had been a CFO at various manufacturing companies for more than 12 years before starting his accounting practice (he recently obtained his first outsourced CFO assignment for a printing and packaging company), comments that the outsourced CFO should meet with the client at least once a month to have a strategic conversation about what “the numbers” look like and where the owner wants to be in terms of forecasts and budgets.
On the other hand, Mucha likes to talk to clients at least once a week and meet face to face every other week because “there are so many moving parts that we don’t want to lose sight of them.”
Hoffman says the pay for a full-time CFO varies based on the size of the company, but can range between $150,000 and $250,000. “If the position is at a publicly-held company, the person is also receiving stock options and other benefits which makes compensation much higher. The hourly rate for an outsourced CFO can range from $75 to $300 an hour,” he says.
Too Many Clients? Too Little Attention?
Though the outsourced CFO can bring a broad range of experience to the table from handling a broad range of clients, how does the business owner know that person is not handling too many clients and not paying enough attention to his or her company?
Rollins answers that one must set expectations up front. “We stress a very detailed engagement letter so that our clients know what to expect from us and what we expect from them because, quite often, we leave them with homework based on achieving their goals,” she says.
Ferreira concurs, “If you manage the expectations initially and set your goals and objectives for what the engagements are, if you are bringing valuable expertise to the table – that you are providing things they haven’t seen before – then you are doing everything right.”
For CFO Your Way, Mucha explains that the engagement letter is an evergreen document that outlines the scope of services and fees with a termination clause.
She refers to a recent client who terminated a contract with CFO Your Way this past December 31 as a positive event because, under the assistance of Mucha’s services, the business increased revenues by more than 20 percent and was successful enough to hire a full-time CFO.
Trends and Technology
Many of the experts interviewed for this article say that accountants have been providing outsourced CFO services for decades. Yet, others say the service offering has boomed in the aftermath of the Great Recession of 2007-2009.
“The recession was the start of it,” Mucha says. “When a recession hits, the highly paid employees are the first to go, but companies still need CFO expertise, so they bring in someone with the same level of expertise at a lower cost.”
Ferreira comments that Mazars’ Entrepreneurial Services Group has been in existence for many years, but there has been an uptick in the consulting and advisory side of the business. “Business owners are more cost conscious. They are trying to improve their businesses while keeping costs low. … It’s a win-win situation,” she says.
As software applications become Cloud based, outsourced CFOs can respond to client needs immediately. “A lot of what we do is online,” Mucha explains. “If a client calls with a question, and it’s in between visits, we can access their financial information and be able to provide an answer immediately.”
“Remote access is very important in this role,” Rollins adds. “Dashboards are big and if you can link a dashboard with a company’s financial software package and have real-time operating results, that is helpful. You want to be able to pull key information quickly for the business owner and department heads.”
It All Starts with Accurate Books
The role of the outsourced CFO is that of strategic advisor to the business owner. Usually, that person does not handle the day-to-day bookkeeping duties. However, Mucha explains that everything starts with accurate books and records because “that is what everything is based on. If you don’t have financial statements that are meaningful, then everything that comes afterwards is not going to be helpful.
“The next big thing we do is sit down with clients and go over financial statements. Then comes cash flow projections; they want to know that the cash will be coming in and that they will be able to pay their bills on time. Then it’s budget and forecasts – what is the business going to look like next year based on our goals?,” she says.
For all of this, one needs an experienced CFO, someone who sees the big picture and has an independent view of the business, and who, according to Rollins, “is not detailed in the everyday mud.”