Understanding outsourced CFO services from the remote consultant’s perspective

Understanding outsourced CFO services from the remote consultant’s perspective

From the colonial era to the present day, small businesses have been an integral part of America’s economy. In fact, more than 99 percent of America’s 24.8 million firms are small businesses. A strong market, and the need for independence and self-satisfaction, have been key contributors to the consistent growth of the business sector. While the expansion resulted in increased sales, the strategies to accommodate the advancement differed for small business owners compared to their bigger counterparts.

Mid-market companies were already prepared to handle an expanding workforce. However, most small businesses lacked the resources to quickly adjust to increased sales. With that came the need to put an additional focus into financial and data analytics. Most small business owners start their journey after a prior work experience, which motivated them to strike out on their own. They often envisioned themselves working in their own company focused on doing what they love, not understanding just how many hats they would have to wear before their business became successful. It is neither efficient nor advisable to fight a battle on multiple fronts. Often due to time constraints, the business owner focused primarily on sales, leaving their financial position to chance. Other financial aspects remained difficult to analyze or understand. Statistics says 60 percent of small business owners feel they aren’t knowledgeable about accounting and finance.

As an outsourced CFO, I have worked with numerous small business owners, and quite often hear the same question regardless of the industry: “My sales keep increasing, so where is all the money going to?”

To those within the accounting profession, the image of a multitasking small business owner is very familiar. While the thought of an overworked business owner who is stretched too thin may scare many of my peers, I see it as a great opportunity to introduce the benefits of outsourced CFO services.

To understand my excitement, I must first help define what it means to be an outsourced CFO for a company. A fractional or virtual  CFO “is an outsourced service provider offering high skill assistance in financial requirements of an organization, just like a chief financial officer does for large organizations.” (Wikipedia) Depending on the needs of the company we are working with, the tasks required can vary greatly. While improving a company’s cash flow is always important, there are often tasks that are just as important to ensure the business’s success.

Financial Literacy Training                                         Break Even Analysis

Capital Acquisition                                                     Budget Vs Actual Reporting

Capital Structure                                                         Merger & Acquisition Activities

Financial Strategy & Advisory                                   Exit Strategy

Forecasting

My journey to advisory services

Prior to joining Analytix Solutions, I spent 10 years as a member of numerous internal teams across a wide range of industries, including oil and gas and finance, as well as various startup companies. It was during those years that I understood the financial and management requirements of the business, above and beyond the traditional bank reconciliations and monthly closes. While startups requested assistance in setting up their accounting procedures, generating budgets, and even raising capital, more established businesses often needed help analyzing the data points of their business to help them overcome an obstacle.

Looking back on my career, I remember the pivotal moment that my role as a traditional accountant transformed into the advisory role I am in today. It all started with a client, Brenda, when we first onboarded her startup in early 2017. This was Brenda’s first business, and as could be expected, she was extremely excited. Initially, I was hired to handle basic bookkeeping tasks, including recording bank transactions and monthly reconciliations. Each month, I would capture the data from her financial statements and present a list of questions that we needed her assistance with. Even when the list of open items grew, I was unable to draw her attention until we reached December. With year-end approaching, the client finally asked about the growing balance in the uncategorized expense account. We quickly scheduled a meeting to review all the information.

Brenda came into the meeting convinced of being in a strong financial position. During our very long meeting, I was able to convey the message that even if she had a good year of sales, she had various liabilities and other important cost factors that may have put her into a negative bottom line. Something interesting happened, Brenda now opened and reached out for help by asking me two questions:

  1. What did she do wrong?
  2. What should she do now?

While my immediate suggestion would have been to hire an expert, she and I both knew that the business did not have a margin to pay for a management-level employee. For a cash strapped company, it can be scary to consider adding to their headcount, especially if the work to be completed did not require a full-time employee. Understanding Brenda’s circumstances, I offered to act as an outsourced CFO until we were able to hire someone directly. The solution turned out to be a true win-win for both of us. Together, we managed to raise additional capital for her business while increasing her sales 17 percent. Once I had her attention, I was able to educate her about various benefits of outsourced CFO services.

For the past year, I worked with Brenda on raising more capital and adding a partner. I maintained my advisory role in the growth of the partnership, as well as both the partners individually. During our first year working together, our focus was primarily centered on the products being sold compared to the cost of goods sold, and the price they were sold at, which created a positive impact on sales. This year we were able to shift our focus toward the company’s current workflow and to find ways to reduce labor costs, while also improving overall efficiency. When earlier this year both partners recognized different vision for their business, they had to take the difficult decision to part ways. I remained a financial advisor for both through the separation process and continue to advise Brenda in her established business as well as now another new startup.

As the number of millennial business owners continues to increase, the accounting industry must continue to adapt and evolve forward. When we are approached by an established company, there is a need to suggest and implement ways to automate their process. One of the key areas to work on is to evaluate their existing manual workflows and implement various applications such as data import tools, and accounts payable and accounts receivable platforms.