There is no doubt that hiring a full time Chief Financial Officer (CFO) makes complete sense when a business reaches a certain size or an advanced level of complexity in structure. There is also no question that a CFO occupies a crucial role in growing a business’ profitability, especially in the longer term. The decision facing business owners, is when is the right time to bring on a full-time CFO or whether there are benefits to having a part-time or outsourced CFO until a full-time CFO role stacks up financially.
There are differences between hiring a full-time in-house CFO and a part-time or outsourced CFO. There is the cost, the difference in industry experience, the level of team support they offer, the standardisation of reporting, how they fit in to the business, network access, their credibility (internal and external) and their ability to quickly ascend the learning curve of joining a new business.
The first thing to consider is the cost. A good CFO does not come cheap! Average salary cost for a CFO in Australia, is between $200,000 and $350,000 per annum, based on level of experience. And that is without any benefits, of which any good CFO would expect a decent selection. It is ironic that many small to medium sized business (SMB) will baulk at that kind of financial commitment, but they probably are at the stage when they could do with the direction a CFO can offer. A part-time or outsourced CFO may be the perfect solution as they offer businesses the opportunity to access their experience and expertise, but only when needed.
While an in-house CFO may have significant experience in one or two industries, especially if they have been working for one company for a long time. Narrow industry experience can limit a CFO’s ability to see opportunities and possibilities that other business sector experience may offer.
One of the great advantages of part-time or outsourced CFO is that they often work for more than one organisation at a time and often across different industry sectors. This will expose them to different industries with different working practices, different opportunities, wider networks, more rounded views and a wider vision. This will often result in levels of thinking being introduced into organisations that would simply not have been available with a full-time long-term CFO in the business, specialising in one industry sector.
Along with the potentially limited exposure to other businesses and opportunities for a wide experience to draw on, a full-time CFO is only one person and comes with one view and all the potential prejudices that one view may contain. When a business hires a part-time or outsourced CFO they are benefiting from the expertise and experience of the individual they are hiring and the expertise and experience of the team the outsourced CFO works with and all the companies that team of CFO’s work for.
So, while one CFO is the point of contact for a business, the relationship is with a whole team of CFO’s that work for the outsourcing organisation.
An in-house CFO will often have their own method of reporting that works for them and can be based on using older software and computer systems, as well as non-standard formatting of documents and reports. This usually works perfectly well, but it can take a business further and further away from standard industry reporting, which can become a real problem in the long term.
A part-time or outsourced CFO is much more likely to be using widely accepted and up to date industry reporting standards as they are likely to be working for multiple businesses across different industries. They are also likely to be using latest software and hardware, which offers their clients the benefit of higher levels of automation for fulfilment of the latest tax, legal and compliance requirements.
Employing a senior member of staff is always difficult. They will often want to use their experience to make changes to the business and that can be viewed very negatively by the existing management or the company employees. It is also often difficult for business owners to be comfortable with new senior recruits making significant changes in operational or financial practices in their business.
A major advantage of a part-time or outsourced CFO is that they are used to working with many different individuals and companies, with different cultures and personalities. This have given them significant experience of fitting into a new company with no major disruptions when joining. The fact that they are recognised as outsourced or part-time, often takes the pressure of the ‘fitting in’ process and the expectation is for them to come in and get on with the job.
A full-time CFO will inevitably have their own professional network, but as time goes on that network will shrink and will become older and more than likely stagnant.
Bringing on a part-time or outsourced CFO will be a very different scenario, as they will be working with a network of fellow CFO’s and are likely to be working for multiple companies, so will have a network bursting with current and active contacts, that can bring significant benefits to a business, especially smaller businesses looking to grow, to raise equity and to meet more individuals with a wide range of skills.
It is also useful to have access to a wide network of professionals when businesses are looking to expand into different industry sectors or geographic locations, as well as looking at significant expansion into an existing market area. A wide CFO network will more than likely also have investors in it and that can also be extremely important for a business looking to expand and raise funds.
It is always a risk recruiting a senior full-time employee and a CFO is no exception. It is possible to see the impact that they have had in their career on what will likely be a relatively small number of businesses that they have worked for. It is also possible to see how their decision making has impacted the likely, relatively few businesses that they have been involved with, but it is a limited snapshot and therefore can make the recruitment decision a risk. This isn’t always the case, but it is hard to know how well a CFO will perform for a business in a new environment.
However, with a part-time or outsourced CFO, the chances are that they will have worked for multiple companies and so it is much easier to build a picture of their performance and track record, which will inspire far more confidence in the individual for a business, as well as providing more evidence that their skills and experience will match the business’ needs more closely. It therefore becomes a far less risky process than recruiting a full time CFO, who might not have the personality, skill set or experience the business and its’ management or owner needs.
The general view is that a senior employee can take between six months and a year to settle in and get up to speed in a new role with a new organisation. This is a long time for somebody who will be guiding the organisation’s finances from day one!
A part-time or outsourced CFO will have significant experience of hitting the ground running in any organisation they work for, whatever situation or circumstances the organisation finds itself in. A part-time or outsourced CFO will be able to assess the position a business is in and start taking actions and putting steps in place from day one, to ensure the organisation achieves its goals.
There are clearly many advantages to hiring a part-time or an outsourced CFO. A business won’t have to pay a large salary with multiple extras and have the financial commitments that are part of employing a senior full-time member of staff.
By hiring a part-time or outsourced CFO, the business will however, still get all the benefits of expert advice, skills and leadership and have somebody who can get up to speed very quickly and who is accustomed to working in all kinds of different businesses and brings a wealth of knowledge, contacts and the experience of all their CFO colleagues as well. Get in touch.
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I used CFO Australia extensively in my role as CEO of the Australian arm of a major international media company. The speed at which CFO Australia learnt my business, grasped the nuances of the company culture and started to add significant value to all the financial aspects of the business was nothing short of staggering. I would recommend them to any company, large of small, that needs expert financial management, a high level of financial support and advice and all the expertise of a team of some of Australia’s best CFO’s. Outsourcing the financial management of our business was a difficult decision, but choosing Australian CFO was one of the best decsions we made as a business. I cannot praise them enough for the value they brought to the company, the senior management team and our parent company in Europe, who relied on them for compliance advice and delivery, local expertise and knowledge and outstanding financial management.”