Top 10 Key Benefits of Hiring an Outsourced CFO in an SME

8 min read

August 15th, 2024

Over the past few years, there has been a major shakeup in the C-suite, as businesses have increasingly replaced their in-house chief financial officers (CFOs) with outsourced CFO services (also called fractional CFO, interim CFO, virtual CFO, or vCFO services). Between 2021 and 2022 Google searches for "fractional CFO" grew by 535%. In 2023, the demand for fractional CFOs increased by 103% year-over-year. 

While the growth in this sector and the changing formation of the traditional C-suite is significant, it isn't all that surprising because outsourced CFO services offer major advantages, and businesses that leverage these benefits stand to save money, improve operations, and increase profits. 

What Are vCFO Support Services?

Virtual CFO (vCFO) support services are provided by an outsourced chief financial officer (also called a fractional CFO or virtual CFO). CFO outsourcing services are designed to support the financial strategy and business plan of a business with a variety of financial consulting, management, oversight, and advisory services for businesses. 

10 Key Benefits of Outsourced CFO Services for SMEs

1. Cost Savings

One of the biggest advantages - not including the unquantifiable aspects of the ROI of outsourced CFO services - is the savings. Outsourced CFO services cost significantly less than hiring an in-house CFO. 

While vCFO support services cost an average of $5,000 to $12,000 monthly, the average base salary of an in-house CFO rings in at $441,105 per year - and that figure doesn't include benefits or overhead employee expenses. So, choosing virtual CFO services instead of hiring an in-house CFO could save your business hundreds of thousands annually just considering the upfront costs associated with each option. 

Read More: How Much Can Your Company Save With vCFO Services?

2. Scalability and Flexibility

CFO support services are designed to work with an SME's existing back-office department, employees, and infrastructure. This means that the services are flexible, customizable, and scalable. As a result, virtual CFO services can be designed to meet and accommodate the needs of any size or type of SME. For example, full-service outsourced accounting and CFO services can be designed to benefit an SME with an in-house back office that is virtually nonexistent or limited CFO consulting services can be provided to an SME with a fully staffed and operational in-house back office. 

Additionally, these services can be readily modified as the business's circumstances, needs, goals, size, or transaction volume changes. There's no need to worry about hiring additional employees, letting someone go, or dealing with turnover costs associated with in-house employees. 

3. Improved Compliance and Reduced Risk

The professionals providing outsourced CFO services include the top talent in the financial management industry, and it is their duty and responsibility to stay up-to-date with the latest rules and regulations to which their clients are subject. 

Outsourced CFO services reduce the time you have to spend researching and understanding financial regulations. Additionally, an outsourced CFO service provider will help to ensure that your back-office systems and procedures are designed in a way that automatically achieves compliance. 

Plus, a virtual CFO will help you establish policies and procedures that are less vulnerable to internal fraud, helping to mitigate your overall risk. 

Read More: Major Failure in the C-Suite: CEOs Need to Take More Caution In Cybersecurity

4. Better Financial Planning and Strategy

Outsourced CFO services fulfill the duties of an in-house CFO, including the future-oriented, strategic portion of the leadership position. A virtual CFO will work with you to develop a sound financial strategy to support your busienss plan. This includes better budgeting, cash flow management, forecasting, and reinvestment insights to fuel a more successful future. 

Read More: Unlocking the Power of Client-Centric CFO Services for Mid-Market Companies

5. Maximized Profits

Virtual CFO services help clients maximize their profits. Increased profits can be achieved through several strategies such as identifying new ways to reduce costs, optimize prices, increase efficiency and productivity, and by focusing on the business's most profitable revenue streams. 

6. Improved Infrastructure for Financial Management

Virtual CFOs have tried and tested myriad accounting software solutions, platforms, financial management tools, and enterprise resource planning (ERP) integrations. As a result, they know which tools and technology work best for businesses of different sizes and structures with various regulatory compliance requirements. CFO support services help businesses improve their financial management infrastructures by recommending and implementing these kinds of tools to facilitate better automation, data collection, reporting, security, and compliance.

For SMEs, for example, Sage Intacct accounting software is highly recommended because it offers powerful automation, dynamic reporting capabilities, customizable dashboards, and thousands of powerful third-party integrations that can be used to expand the software from a bookkeeping and accounting tool to an organization-wide data collection and management ERP system. 

7. Greater Credibility and Better Investor Relationships

High-quality financial leadership in a business helps to increase the company's credibility, improve investor relationships, and attract new funding sources. Empowered by an experienced and qualified CFO, a business's CEO can more confidently and comfortably discuss the business's financial health and strategy for executing the business plan to achieve growth and generate substantial profits. 

8. Navigating Major Transitions

This advantage of outsourced CFO services can benefit SMEs that have an in-house CFO and SMEs that don't have an in-house CFO. While your company might have everything under control during "business as usual" operations, it will likely benefit from additional help and an outside perspective during major transitions that affect operations or increase the total financial workload. For example, some situations where virtual CFO support and consulting services can be especially advantageous include mergers and acquisitions, periods of rapid growth, expansion into new markets, investment rounds, or initial public offerings. 

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9. Professional Expertise

Virtual CFO services provide SMEs with high-level professional expertise from experienced, educated, and qualified management accounting professionals. Additionally, outsourced services give SMEs access to top talent in the industry who can provide a fresh, objective, and unbiased perspective on the business's financial strategy, challenges, opportunities, and goals. 

10. Reliable Reporting and Analysis

Virtual CFO services also improve the CEO's ability to make good decisions based on the business's data. An outsourced CFO facilitates sound data-collection procedures to ensure reliable and timely financial reporting and analysis while helping business leaders learn to read, understand, and use their financial reports. 

Read More: Financial Reports vs. Management Reports: What’s the Difference?

Outsourced CFO Best Practices: What to Look for When Choosing a vCFO

A virtual CFO can provide countless benefits to SMEs. However, business owners must choose wisely when selecting a virtual CFO or outsourced accounting firm. Some of the most important factors to consider during the selection process include:

• Your Business Needs and Goals - As you begin the process of choosing an outsourced CFO service provider, consider your business's needs and goals. What does your vCFO need to provide or do for your business? What do you hope to achieve as a result of the relationship?
• Industry Experience - Every business is different and each industry presents unique challenges, opportunities, compliance requirements, and operational intricacies. Look for a virtual CFO who has experience and a successful track record of working with other businesses in your industry. 
• Tools and Technology - Choose a vCFO who uses the best, cloud-based tools and technology and is prepared to implement these systems in your business. 
• Cultural Compatibility - While a virtual CFO is not an in-house employee, it is still important to consider your company's core values and workplace culture to ensure you select a vCFO who aligns with your business. 
• Communication - Think about how you prefer to communicate and how often you need to communicate with a virtual CFO. Look for a provider whose communication style, availability, and scheduling can accommodate your needs and preferences. 
• Cost and Budget - Compare the various plans and services offered by different providers in addition to their costs. You will most likely spend less than you would on an in-house CFO, but it's still important to choose a provider whose fees fit your budget while still delivering value and generating an impactful ROI. 

Strengthen Your Financial Strategy With Outsourced CFO Services for Businesses

Outsourced CFO support services are designed to help your small or medium-sized enterprise strengthen its financial strategy and grow with a better back office. A virtual CFO can help you avoid and overcome challenges while identifying and leveraging new opportunities to improve your business's operations, achieve your goals, and transform your future vision into your current reality.