For leaders of fast-growing technology companies, keeping a handle on the business’s financial position is no easy task.
As the business grows, everything is constantly changing. New customers sign up for your service every day, driving new revenue. At the same time, costs rise as you hire new staff, pay for additional server space, and deal with all the other expenses involved in running a fast-scaling business.
But in all of this, understanding your financial position is key to long-term success. That’s especially true if your business is planning to raise venture funding to fuel growth. Investors expect a certain standard of financial clarity. If you can’t provide that, getting the funding you need to grow is an uphill battle.
So, what’s the answer to this problem? You could hire an in-house accounting and finance team to manage all of this for you, but that’s expensive. Alternatively, you might just bring in a bookkeeper to help make things more organized – a more basic approach that’s probably not going to yield the insights you need.
For many companies, the optimal solution is to partner with a Contract Chief Financial Officer (CFO) Service. If you’re curious about what that partnership looks like and what benefits you can expect to realize, read on as we unpack contract CFO services for technology companies.
Need more than a contract CFO? Visit our Ultimate Guide to SaaS Business Accounting.
What is a Contract CFO Service?
Working with a contract CFO service, also known as a fractional CFO or outsourced CFO, allows businesses to benefit from the expertise, skills, and strategic guidance of a CFO on a part-time, contract basis.
It’s an approach that offers your business the financial clarity and expertise you need at a fraction of the cost of hiring a team in-house. Contract CFO services can be provided by an individual. More often though, they’re provided by companies like G-Squared Partners. These providers typically offer advanced capabilities and essentially serve as a complete outsourced finance team for your business.
What Do Contract CFO Services Do?
One of the most beneficial aspects of working with a Contract CFO service is that the relationship is often entirely tailored to the unique needs of your business. Support can range from a few hours of consulting each month to having the contract CFO service function as an outsourced accounting and finance department.
The responsibilities typically absorbed by a contract CFO service often include tasks such as:
- Creating monthly financial statements
- Reviewing budgets and creating forecasts and financial models
- Managing cash balances, including tracking accounts receivable and payable
- Providing strategic guidance on financial and operational matters
- Overseeing in-house and outsourced staff, including bookkeepers, controllers, and accountants
- Assisting in the sale of the business, raising capital, and obtaining debt financing
- Providing support for board presentations
The nature of these relationships often evolves over time as the accounting and finance needs of your business change. Well-established contract CFO services have the resources and skills to provide a full spectrum of financial services.
Why Do Technology Companies Work with Contract CFO Services?
Once your business reaches a certain point in its growth journey, it often becomes clear that the basic approach you’ve been using to manage your finances is no longer working. Perhaps you have a Quickbooks account set up or work with a part-time bookkeeper.
For almost all technology companies, this approach becomes unsustainable. It could be that leaders aren’t getting the financial information they need to make smart decisions or that your books have devolved into a complicated mess. At the same time, the financial needs of your business will often have changed significantly as a result of growth. As a founder, it’s unlikely you’re equipped – either with skills or the time – to effectively manage these needs.
Equally, if you’re around the Series A stage of growth, it’s unlikely you need a full-time CFO and accounting team just yet. But you still need CFO-level financial leadership, and that’s where a contract CFO service comes in.
The best contract CFO service providers have a deep bench of talent and the ability to function as a fully-fledged finance department. By working with one, technology companies can benefit from access to the specialized skills and knowledge they need to be successful: whatever business throws at them.
What Are the Pros and Cons of Working with a Contract CFO Service?
For technology companies looking to embrace a higher level of financial maturity, it’s clear that working with a contract CFO service can offer many benefits. But what exactly are those benefits?
Let’s take a closer look and also explore the potential drawbacks entrepreneurs should be aware of before engaging a contract CFO service provider.
The Advantages of Working with a Contract CFO Service
Partnering with a contract CFO service offers technology companies many benefits. These include:
Access to Proven Financial Talent: contract CFO firms provide services to many different companies. This gives them the skills and experience to help technology companies navigate through the financial challenges growth brings. Whether it’s building a long-term forecast or preparing financial statements for the board, a strong contract CFO will keep you on the right path.
Cost Savings: when you work with a contract CFO, you only pay for the services and time you need. This is an efficient approach that’s highly scalable and enables your business to avoid the complexity of hiring a full-time team.
Flexibility: high-quality contract CFO services have the ability to support a wide range of needs as your business evolves over time, from sealing that first round of funding to landing a successful exit.
Network: many contract CFO services have relationships with a network of investors, bankers, attorneys, and more that they’re able to introduce founders to.
Fresh Perspective: contract CFOs, and their teams, are often seasoned financial professionals who bring a healthy skepticism to your business. They help leaders see the bigger picture, think through decisions, and plan for a better future.
The Disadvantages of Working with a Contract CFO Service
There are some drawbacks to partnering with a contract CFO service over building your own team in-house, however, with the right partnership it’s possible to mitigate these. Disadvantages include:
Not Fully Dedicated to Your Business: contract CFO services have many clients. The team working on your business won’t get to know it as well as they would if they were full-time employees. Make sure you partner with a service that has the bandwidth to handle your needs.
Lack of Industry Experience: there are many outsourced CFO services out there, but few of them specialize in technology companies. Take care to select a partner that knows the industry well and has the track record to prove it.
Partner with G Squared: A Contract CFO Service Built for Technology Companies
Working with a contract CFO can hold the answer to many of your business challenges. With the right partner, you’ll benefit from increased financial clarity, better relationships with your investors, and an improved ability to make decisions with greater confidence.
If you’re searching for a contract CFO service that’s equipped to handle the needs of your technology business, G-Squared Partners is well-positioned to help your business meet its goals. Our firm is led by technology industry veterans, backed by a unique group of sharp financial minds ready to help you tackle the financial challenges keeping you up at night.
With the right financial support, businesses don’t just survive, they thrive. Interested in getting started? Schedule a consultation to discuss your business today.