advantages of using a contract CFO
Accounting Small Business

What are the Advantages of Using a Contract CFO?

Many companies have started using the services of a contract CFO, an option that is increasingly attractive considering everything currently going on. Here we detail what a contract CFO is as well as several advantages of using one.

Gone are the days when a Chief Financial Officer (CFO) had to be a full-time employee. We now live in a world where the CFO function can be outsourced to highly experienced and qualified financial professionals for a fraction of the cost of a full-time CFO. A contract CFO assumes this outsourced job function and plays a significant role in helping organizations better manage their finances.

Not convinced? We’ll discuss five advantages of hiring a contract CFO in this article so that you can determine whether this option is right for you. However, we’re going to dive a bit deeper into what a contract CFO does before discussing these advantages.

What is the Role of a Contract CFO?

Financial mismanagement is often one of the main reasons for a business’s demise. To be even more specific, poor understanding of cash flow and how it impacts a business often leads to business closure. Recent research done by Jessie Hagen at U.S. Bank reveals that at least 82 percent of small businesses fail because of either poor cash flow management or a poor understanding of cash flow.

You see, financial management is more than focusing on net profit margins, gross profit margins and debt to asset ratios. These financial indicators are important but what matters more is an in-depth understanding of your company’s cash flow statement and how your company’s cash balance is being impacted by your decisions. 

This is where a contract CFO comes in handy. A contract CFO will analyze your cash flow statement, balance sheet and income statement to determine areas of greatest risk and opportunity. Additionally, this experienced financial professional will:

  1. Generate weekly or monthly financial reports uniquely suited for your business.
  2. Prepare a budget and financial projections.
  3. Work with your bookkeeper and/or financial controller to keep accurate financial records.

5 Advantages of a Contract CFO

Pay As You Go

Cost-saving is one of the main advantages of using a contract CFO. One of the greatest cost-saving benefits is the option to pay monthly or hourly retainers rather than a full-time salary. A contract CFO can cost between $1,200 to $2,500 per day (and would only be hired on an as-needed basis) while a full-time CFO would generally cost at least $225,000 per year. 

Only Hire a Contract CFO When Needed

You can probably get by on your own with some basic accounting knowledge. When there is a more complex business need, a contract CFO can be hired on an hourly, daily, or weekly basis. This gives you the flexibility to hire a contract CFO to address specific challenges within your organization and is one of the advantages of using a contract CFO.

However, this doesn’t mean that you should wait until there is a problem within your organization to act. You can, therefore, have a contract CFO on retainer who will proactively work towards keeping your organization in good financial health.

Brings An Outside Perspective

A contract CFO typically has a vast range of experience across industries. This cross-industry perspective can be particularly beneficial to your organization as you search for innovative ways to keep your company relevant and prepared for possible challenges. 

It also helps to have someone who isn’t close to the company provide an unbiased perspective about your business decisions and future prospects. Business owners are often too close to their businesses to think objectively about their decisions based on what the company’s financials are saying.

Offers a Unique Set of Skills and Experience

Like the other experts you need to manage your small business, the most experienced contract CFOs have a broad range of experience that spans various sectors and business units. Therefore, this CFO will have a good grasp of how to get the best bang for your buck in areas such as supply chain management and logistics. Ultimately, the aim is to help your business have a strong cash position to support growth and continued success.

The diverse background and unique skill set is definitely one of the advantages of using a contract CFO.

Helps You Make Better Business Decisions

Business decisions should be based on solid data and research. A contract CFO knows how to collate data in a way that makes sense and use this data to provide the best possible recommendations for business success.

Advantages of Using a Contract CFO – Final Thoughts

Full-time CFOs are quickly becoming a thing of the past in this rapidly changing world. A contract CFO is often a budget-friendly solution for astute financial management that leads to long-term business success. 

Hopefully this article detailing what exactly a contract CFO is as well as the advantages of using a contract CFO was useful and insightful.

Questions? Feel free to post a comment below or reach out to Scott, the author of this article. Scott can be reached at scott@sackermanconsulting.com and https://www.sackermanconsulting.com.

Scott Ackerman is a fractional CFO specializing in finance and strategy consulting for start-ups and small businesses. Scott brings extensive international finance and operations experience in the consumer products, food and beverage, and luxury brands industries. His career has included numerous financial leadership and business partnering roles across the Americas Region at large, multi-national companies including M&M/Mars and Heineken. After working on several M&A deals as part of large, global organizations, Scott took his love for solving problems and building things to the startup world. In the last few years, Scott has successfully brought 2 startups to market: GenuineOrigin.com (B2B green coffee e-commerce) and Troverie.com (D2C luxury watch e-commerce/omnichannel). He led the NetSuite ERP implementation at both. His experience working for international businesses has made him adept at leading and developing remote teams. Scott studied Economics as an undergraduate at Northwestern University and has an MBA in Corporate Finance from the University of Wisconsin-Madison School of Business. He is a Certified Management Accountant and QuickBooks Online Advanced Certified. Scott can be reached at scott@sackermanconsulting.com and https://www.sackermanconsulting.com.

0 comments on “What are the Advantages of Using a Contract CFO?

Leave a Reply

Welcome to The Daily CPA! Enter your email to subscribe to our monthly newsletter.

Thank you - you have successfully subscribed to the newsletter.

There was an error while trying to send your request. Please try again.

The Daily CPA will use the information you provide on this form to be in touch with you and to provide updates and marketing.
%d bloggers like this: