We’ve seen a proliferation of CFO outsourcing solutions pop up in the last 2 or 3 years. They all have one thing in common: they each claim with great passion to be different.
In our company, we are fortunate to meet a range of people interested in improving businesses. In any one day, we may speak with anyone from the CEO of a small business or not-for-profit, through to the bookkeeper, the business advisor, the lender or the accountant in practice. It’s a wonderful opportunity to have discussions on business improvement and growth and understand how industries design their strategy and manage decisions.
Each of these people in these roles has a passion for success, but rarely do these customers have access to a full-time CFO. Changes to compliance, competition and demand for information and reporting capability have made outsourced CFOs an attractive investment.
Let’s assume the primary client of CFO outsourcing is a small business for whom it doesn’t make sense to hire a full-time CFO. What’s on offer for a small business? It’s not easy to quickly answer this because there’s a mismatch in the market when it comes to demand versus offering and it can be confusing.
While our team meets a gamut of people in roles related to business improvement and growth, we also regularly meet people who are involved in CFO outsourcing solutions. Usually, the latter are accountants or finance professional who are starting their own consulting business after a career in an accounting or advisory firm. Our experience is that most of them are savvy, proactive and experienced. The romance of owning your own business might call them or it could actually be an altruistic desire to improve the lot of small business. I always hope it’s the latter.
Either way, outsourced CFOs see a demand in the small business market and they build their business around trying to meet that need. They’ll offer services such as monthly reporting, assistance in obtaining finance, budget development and sometimes a sub-service in bookkeeping. Some offer a cacophony of software solutions they’ve gathered to recommend, which occasionally doesn’t make sense and it raises the question of when did the outsourced CFOs suddenly become expert in software advisory.
We’ve seen a lot of success in this market and, unfortunately, some failure. Meanwhile, it’s the small business which suffers, either directly through poor service or advice, or indirectly, by not knowing what they don’t know. It’s important to also note the effect on software solution providers in these scenarios. If a customer is introduced to software by a third party consultant who is not au fait with the software and matching it to the particular needs of the customer, there is an obvious high risk of failure and disappointment. However, if an outsourced CFO knows the software suites they are touting and can recommend software with integrity and deep understanding of the customer’s need, you have a potential miracle.
Satisfaction and growth may exist in this market if outsourced CFOs can offer a cost-effective solution to small business by way of providing services that the small business needs in a timely and professional manner. At this stage, it’s important to consider where the outsourced CFO is positioned in the small business. For high-growth businesses, CFOs should be shoulder-to-shoulder with the CEO and the COO making decisions, solving problems, crafting strategy and company culture. In her article for the Denver Business Journal (3 May 2016), Monica Mendoza reports the role of the CFO is not what it used to be, rather it’s about “… building a company, one that always has exit strategy on its mind, is about employees and defining work culture”. Certainly there are still metrics and numbers to be managed, but it’s strategy, planning and future that CFOs should be focussed on.
Nirvana and growth in the market may then be possible if the outsourced CFO can offer the necessary service ‘plus one’. Not only would the outsourced CFO be creating raving fans out of their clients, they would be leaving the world a better place by educating customer teams as well as contributing to the growth and sustainability of the small business sector.