A Chief Financial Officer, or CFO, is without a doubt one of the most important leaders in any organization. They’re tasked with driving the financial strategy of the business. That’s a wide remit that encompasses many tasks, from helping leaders determine where to allocate resources to identifying opportunities to drive increased revenue.
Despite the undoubted importance of this role, it’s a position that can be overlooked by many technology startups and SaaS businesses. In the early days of building and scaling a business, finance may seem relatively unimportant. For founders, the focus is primarily on activities like business development, product strategy, and hiring: not plotting out the business’s long-term financial plans.
In many cases, this seems to be working fine, until one day, it isn’t. Perhaps a business goes out to raise a new round of funding and is passed over by several investors because they don’t know their numbers. Or maybe an unexpected cash crunch threatens the business’s ability to meet payroll.
These events, while often shocking and uncomfortable, don’t happen overnight. In most instances, they’ve been brewing for a while as the business’s finances deteriorate.
To address these issues, businesses need proven financial leadership. The types of leaders who have seen these problems before, successfully navigated them, and built enduring financial infrastructure that enables businesses to scale.
The issue with that? Leaders like that aren’t easy to find. And even if you can identify the right person for the job, they won’t come cheap. The answer lies in hiring an outsourced CFO: a proven financial leader that works with your business on a part-time, contract basis to help you overcome your greatest challenges.
What Does an Outsourced CFO Do?
In short, an outsourced CFO can do any of the tasks an internal CFO would be expected to do.
The services offered by an outsourced CFO can be tailored to the exact needs of your business. If you only need help with a specific, short-term issue, an outsourced CFO can help. Equally, if you’re looking for an experienced long-term financial advisor, an outsourced CFO can be the perfect fit for that too. You might also see outsourced CFOs referred to as fractional CFOs or contract CFOs.
Here is an example of the tasks that business leaders can delegate to an outsourced CFO:
- Creating and sharing monthly, quarterly, and annual financial statements with leadership
- Generating, monitoring, and analyzing budgets and financial forecasts
- Implementing financial controls and processes
- Assist with raising capital, either through debt or equity financing processes
- Manage internal accounting and finance teams
- Help preparing for an audit
- Financial modeling
- Maintenance of your business’s cap table
- Assistance preparing for board presentations
Of course, this is not a complete list of the responsibilities that business leaders can outsource to a fractional CFO.
The best outsourced CFO services are bespoke. Instead of forcing you into a predefined package that might not represent the best fit for your business, a great outsourced CFO service provider invests the time to learn about your business and determine how they can best help solve your greatest challenges.
Want to learn more about the financial tasks a growing business should consider? Check out our Ultimate Guide to SaaS Business Accounting.
Why Do Businesses Hire Outsourced CFOs?
An experienced CFO can provide guidance on any number of topics. However, there are several common scenarios where the support of an outsourced CFO service can unlock significant value for businesses.
Let’s explore four of the top reasons why businesses hire outsourced CFOs.
1. Support Upgrading Accounting and Finance Infrastructure
Businesses, particularly venture-backed technology startups, often opt to bring in an outsourced CFO to bring their business’s financial infrastructure up to a higher standard.
Once a business reaches a certain point, typically after a Series A funding round, investors may require the business to commit to meeting Generally Accepted Accounting Principles (GAAP). This often involves an overhaul of the existing accounting infrastructure: a process that should be managed by financial leaders with a track record of helping startups build more mature financial infrastructures.
2. Guidance Navigating Debt or Equity Financing Processes
For those unfamiliar with the process, securing debt or equity financing for a business can be intimidating. Both processes are characterized by lengthy due diligence periods that can be demanding for founders to navigate.
There’s also the question of forming relationships with banks and other funding partners. A strong outsourced CFO firm has a well-developed network across the financial industry and will be able to connect your business to potential funding sources.
3. Performance is Stalling
If business is slowing down and you’re not sure why, that’s a major problem. An outsourced CFO has the analytical skills to dissect your business’s financial statements and help you discover both what’s causing your problems and how they can best be addressed.
Even if you understand the challenges your business is facing, an outsourced CFO can bring a fresh perspective to help you think through them. Remember, CFOs are experienced financial leaders and there’s a good chance they’ve previously encountered the problems your business is facing.
4. To Support M&A Activities
Whether you’re considering acquiring another company or are preparing to exit your own business, navigating M&A activities can be very challenging.
Realizing the best possible outcome from selling your business requires a great deal of preparation. Your books should be pristine. If there are any financial issues that might jeopardize a potential deal, they must be addressed head-on.
Once the preparation is complete, businesses preparing for an exit should aim to run a competitive M&A process. This ensures that you get the best deal possible, but can require a significant amount of additional work.
While an M&A process is running, business leaders are still responsible for running the day-to-day operations of the business. It can be easy to get distracted, but the support of an outsourced CFO with experience running M&A processes can make all the difference in driving a successful outcome.
Work with G-Squared Partners: An Experienced Outsourced CFO for Tech Businesses
Regardless of your business’s current growth stage or the challenges it faces, partnering with an outsourced CFO is a decision that can reap major benefits. From bringing your books up to GAAP to helping shape the long-term financial strategy of your business, there are many reasons to work with an outsourced CFO.
In some cases, this is a relationship that can completely reshape the trajectory of your business, laying the foundations for years of sustained growth.
At G-Squared Partners, we provide a wide range of outsourced CFO services to businesses in the technology sector and beyond. Our team brings decades of experience running finance functions at a variety of industry-leading companies and has the skills to address your challenges, whatever they are.
Interested in learning more? Contact us today.