When scaling your business, you may hit a certain point where your company needs more financial expertise and guidance than what you or existing employees can provide.
You might wonder if it’s time to establish your C-suite and bring on a full-time chief finance officer (CFO). But, if you’re like many startups and small businesses, you may not have the workload or financial resources to bring on a full-time CFO in-house, leading you to outsource the role to an experienced professional.
Both options provide certain benefits and drawbacks, so you can continue reading below as we discuss the pros and cons of in-house and outsourced CFOs, and how to determine which is best for your business.
A chief financial officer, a CFO, is an executive in charge of overseeing a business’s financial operations. Some of their main responsibilities include:
An outsourced CFO generally has the same experience and education and can handle the same responsibilities as any other type of CFO. As you might be able to gather, the main difference between an in-house and an outsourced CFO is that one is employed full-time by the company, while the other works on a part-time or contract basis.
Because of this, there are clear advantages and drawbacks to both types of employment, as we’ll explore in further detail below.
An in-house CFO is a full-time employee. They are on the company’s payroll, and enjoy benefits, bonuses, and other types of compensation on top of their annual salary.
As a result, the scope of their work is often greater than that of an outsourced CFO, giving them oversight over more of the company’s financial operations. Here is a quick overview of the top pros and cons of hiring an in-house CFO:
On the other hand, companies may decide to outsource the CFO position. In this case, the company will find a firm or independent contractor that offers outsourced or fractional CFO services. Ideally, they’ll find someone with experience in their industry who can handle the specific tasks or responsibilities they need support with.
The pricing structure will vary between providers. Outsourced CFOs commonly charge a flat monthly retainer or an hourly rate for their services.
Given the pros and cons of hiring an in-house CFO, this type of engagement is better suited to companies in certain scenarios and financial objectives. So, how do you know if it’s better to hire an in-house CFO rather than outsource the role?
Generally, internal CFOs may be needed by companies that are well into their growth phase, and have highly complex financial management needs. In this case, it may be better to have a full-time CFO that is fully integrated into the business, and can devote all their working hours to strategizing and supporting financial operations.
Hiring an outsourced CFO is often a logical choice for growing businesses or those in the earlier stages of development. For starters, it’s often a more cost-effective option. Especially for companies that might have limited financial resources, outsourced CFOs give them access to expert financial guidance and resources without the long-term commitment of paying an executive salary and benefits.
Plus, outsourced CFOs can deliver support on an as-needed basis. So, they don’t have to go through the resource-intensive and time-consuming process to recruit, hire, and train an on-house CFO if they only need support on a certain project or financial task. In this way, outsourced CFOs offer flexible and adaptable support, giving companies of all sizes and needs access to expert financial support.
If you want to know where to find expert outsourced CFO services, consider us at Bob’s Bookkeepers. Our fractional CFO services are designed to give you the expert financial guidance you need to optimize and grow operations without the cost or commitment of a full-time CFO.
Contact us today to learn more about our custom fractional CFO services.
