The days of hiring a chief financial officer (CFO) as a full-time employee are long gone. Today, the work can be subcontracted to skilled and experienced financial specialists for a lower cost. This contract job function is taken by a contract CFO, who plays a vital role in assisting firms in better managing their finances. Regardless of the industry or the size of your company, the CFO is critical to its success. Let’s look into what is a contract CFO?
Contract CFO
All of your company’s major financial decisions will be made by a CFO, including financial planning, investing, and saving. A contract CFO regularly functions as the company’s CFO. The contract CFO is common in startups where a full-time employee is not required or if a full-time option is not affordable.
Why Hire a Contract CFO?
One of the most common causes of a company’s downfall is financial mismanagement. According to a study, around 82% of startups and small enterprises fail due to inadequate financial management and a lack of knowledge of cash flow.
Financial management is about more than just gross and net profit margins and ratios. Although these financial pointers are crucial, a thorough grasp of your company’s cash flow statement and the way your decisions affect your cash flow is even more critical. A contract CFO can help in this situation. A CFO will:
- Examine your income statement, cash flow statement, and balance sheet to identify risk and potential areas
- They provide experience and will be well-versed in the financial aspects of your company
- Assist in raising funds required to expand while also ensuring that your revenue is received on schedule
Benefits of Hiring a Contract CFO
Reduce Cost and Increase Profitability
The primary benefit of hiring a contract CFO is the cost savings. For example, let’s say you need a CFO to oversee your ongoing compliances. According to your estimates, this task is expected to take 30 hours per week. The option of paying hourly or monthly pay in preference to a full-time salary is one of the most cost-effective features.
A contract CFO can cost anywhere from $1,000 to $2,500 per day (can only be recruited on a contract basis), but a full-time CFO can cost a minimum of $225,000 annually.
A contract CFO’s ability to collaborate with sales and marketing partners is beneficial. When it comes time to launch your new product, their analytical skills will help you get the highest return on investment.
Data Management
Data is an essential driving engine behind a firm. A contract CFO with experience is expected to be able to evaluate big data and present the CEO with the most critical information.
A CFO can calculate the costs of various initiatives, track the appropriate indicators, and use the information to simplify the business. When the CFO sees the larger picture, they can put your organization on the path to long-term success..
Save Time
Your CFO can manage relationships with partners, shareholders, lenders, and investors since they have extensive knowledge of all things finance and capital. This assistance will free up time on your calendar, allowing you to focus on running your business.
Flexibility
One of the benefits of hiring a contract CFO is that you can hire them to solve specific difficulties inside your firm. You have complete control over what a contract CFO’s job entails. You choose the number of hours, nature of work, required experience, and engagement type. You are also not required to give office space or any further perks. A contract CFO can be employed hourly, daily, or weekly when a more complex company requirement arises.
Wider Perspective
A CFO often has extensive experience in a variety of businesses. This multi-industry perspective can be valuable to your company as you look for new ways to stay current and ready for potential problems.
It’s also beneficial to have a person who isn’t affiliated with the company to provide you with an unbiased opinion on your business actions and prospects. Business founders are frequently too attached to their companies to reason about their judgments based on financial data.
Better Decisions
Contract CFOs are business and financial professionals. They understand how to compile data in a logical manner and use it to create the best possible business suggestions. They are entirely qualified to hold positions of leadership in businesses. A CFO can effectively plan and execute financial decisions as a result of this. This will help forecast your company’s financial metrics, budgets and make better decisions.
Delegation
As the company grows, the founder will be unable to handle all of the tasks alone. Delegating responsibilities is critical to running a successful business. All duties relating to the company’s finances can be readily delegated to the contract CFO. Because contract CFOs work for multiple teams at once, they get along well with new teams.
Since they provide on-demand services, there is no need to spend time acquainting the entire office with them. You can set limits on how much engagement you require based on your needs. Startups and small businesses typically hire contract CFOs. As a result, virtual CFOs are prepared to take on work that a traditional CFO might decline.
Assist Accountants and Bookkeepers
A contract CFO assists your present bookkeeper in avoiding errors by checking the company’s books before submitting the information. A contract CFO might operate as a bookkeeper for a startup, and they can act as a liaison between your accountant and bookkeeper.
Compliance
Companies are responsible for various compliance measures. These are quite technical and necessitate the assistance of a professional. Contract CFOs will handle regulatory compliance and internal filing.
Endnote
Filling the CFO position can be advantageous for a variety of reasons, including assessing and decreasing risk, lowering costs to boost profitability and cash flow, and ensuring your long-term company strategy is performed and results are accomplished.
In today’s fast-paced environment, full-time CFOs are gradually becoming obsolete. A contract CFO is typically cost-effective to ensure sound financial management and long-term corporate success.
