Outsourcing Is Smart Business

Provided By: Charlie Miracle, CPA at Cordell, Neher & Company, PLLC

Have you ever stopped to think about the scope of the finance functions of your business?  If you do, you will probably be surprised at the many activities they encompass and how vital they are to the success of your company. Your business thrives when these activities are in working order. When faced with the options, a business owner quickly realizes that either they will need to manage their organization’s finances or hire someone else to do it.

Financial planning, financial risk assessment, record-keeping, and financial reporting are critical and time-consuming activities that are best managed by someone who has the right qualifications. But the fact of the matter is, CFOs cost money, and most small businesses do not have forty hours of work for a qualified individual. Rightly dividing resources within an organization is a critical matter, which is why outsourcing CFO services makes a lot of sense.

An Outsourced CFO is a valuable partner that can provide budget guidance, prepare and analyze financial statements, forecast cash flow, provide strategic financial planning and advisement, evaluate current bookkeeping systems, and act as a negotiator. Beyond these vital finance utilities, an Outsourced CFO can deliver expert “back office” support to business owners so they can focus on important job of growing their business. The finance function can be broken up into three main activities, each with a series of sub-functions.

1. Transaction processing – accounts receivable, customer billing, credit and collections, accounts payable, general accounting, payroll, tax accounting, cost accounting, fixed asset accounting, benefits administration, and internal and external reporting
2. Control and risk management – budgeting, cash flow management, insurance risk management, forecasting, tax planning, performance reporting, treasury management, and internal and external audit
3. Decision support – business performance analyses (ratio analysis, cost analysis, pricing analysis), business planning support, and finance function management

The Decision to Outsource

Determining whether to outsource requires a focused and deliberate approach.  Below are six advantages that will help you decide whether outsourcing financial management would benefit your organization:

• Lower Operating Costs - Any change that will reduce costs without otherwise endangering operations will generally be positive. Many businesses are just too small to justify hiring a full-time, in-house CFO.
• Increased Efficiency - Inefficient operations harm your organization. A real advantage of outsourcing is that behind your outsourced financial planning expert stands an entire team of accountants, partners, consultants, and bookkeepers. When financial activities are outsourced and analyzed by an independent party specializing in that activity, efficiencies will result.
• More Flexibility - When a business owner wears too many hats, one is bound to fall off. Outsourcing CFO functions will allow your organization to become more flexible in its ability to deal with its environment and core activities.  Changes that make an organization more agile will make it better able to excel.
• Reduced Risk - Outsourcing a function may reduce the risk an organization faces. Outsourcing payroll, for example, is likely to reduce risk, as experts will now do the job.
• New Ideas – Outsourcing CFO duties will bring new ideas to the table. Small businesses need to recognize that outsourcing an expert will give them a clear advantage with complex financial activities.
• High Growth Potential - Many organizations are limited in their ability to take on more activities because their current staff is spread too thin. Outsourcing financial activities can allow business owners and other staff to engage in better-targeted tasks.

Before determining whether to outsource financial management functions, there are many factors to consider including the size of your business, industry, number of employees, volume of transactions, and skill sets. As a business owner, you will also need to do a gut check. Accepting the “virtual” reality of outsourcing means adjusting your expectations. In this environment, you will not be your CFOs only client, but you will have access to exceptional quality. If you are involved in the authorization process and can extend trust beyond your four walls, then you will truly benefit from this arrangement. However, if you are hung up on signing checks and are not able to hand over responsibilities, you will hinder the process and negate the experience.

Outsourcing services from your organization may enable you to operate more effectively.  With our requisite knowledge of different types of organizational structures, we can help you create innovative changes in your organization.  If you would like to learn more, please call our office to speak with Charlie or Diane and learn how a partnership with us can enhance the success of your business.

Charlie Miracle: charlie@cnccpa.com

Diane Forhan: diane@cnccpa.com