Tag Archives: Outsourced CFO

Currently in the fast-changing business world today, the role of a Chief Financial Officer (CFO) has been vital for any company who aims at sustainability growth and financial stability – or rather just about everything. The real-world harsh reality is that very few businesses, especially small and medium-sized firms (SMEs), can afford a full-time CFO. Outsourced CFO services come in to address this shortfall in financial leadership. It is a rather innovative way that makes businesses benefit from available expertise in finance leadership, as is the practice nowadays, all with the flexibility and lower costs.

This article studies the use of outsourcing for CFO services. It provides data and gives a perspective of the region, emerging trends included. We suggest graphical representation options for this trajectory and state the advantages of this approach.

Market Overview

Global finance and accounting outsourcing (F & A BPO) includes outsourced CFO services and is exhibiting exponential growth. In 2023, the total number is anticipated to reach US$60.31 billion and grow at a CAGR of 9.3%. That means that in 2030, the market will hypothetically reach a value of US$110.74 billion. Therefore, growth tends to confirm the increasing importance for which the outsourced CFOs play for the strategic financial management and the compliance.

Key Drivers of Growth

Efficient Financial Planning

CFO solutions that are outsourced will provide consumers with massive savings on costs. It is generally stated that firms are observant of 40-60% savings from the otherwise large expense of a full-time CFO. Partnerships with providers of such services lead to reductions in salaries, employee benefits, and office space, in addition to recruitment expenses

Varying Needs

Certainly, the one-size-fits-all model has been wholly replaced by flexible models. Now, as businesses are getting more inclined towards customization instead of standard solutions, companies will always call upon part-time CFOs with their very needs to solve very particular problem

Technological Progress

The addition of foundational technologies, for example, artificial-intelligence-driven analytics, cloud-based accounting platforms, and automation solutions that further assisted in improving the effectiveness and veracity of CFO services that have been outsourced. E.g.

Cloud-Based Platforms

To render access of real-time financial data possible.

AI Tools

Predictive Analytics for Decision-Making

Compliance Oriented

By staying on top of the lingering regulatory, companies subject themselves to finding outsourced CFOs who prove compliance with international standards thus becoming law-abiding as far as financial penalties and risks are concerned.

Regional Analysis of Outsourced CFO Services

Outsourced CFO services are increasingly growing in popularity all over the globe, where cost-efficient financial expertise and strategic planning become highly in demand. Below follows a regional analysis, which includes trends, demand drivers, and unique challenges across key markets:

Regional Analysis of Outsourced CFO Services

North America

The North American market is undergoing a rapid expansion owing to burgeoning niche start-ups having entered the high-tech sector with fast tracking industry advancement and evaporating barriers such as access to outsourced CFO services which provide for increased business continuity.

As a result, almost all VC firms today require startups to have professional financial oversight which has propelled the market for outsourced CFOs.

Asia-Pacific

Many of the Southeastern Asian and even Indian territories have come to exclusively outsource their CFO requirements because of the ever-swelling Small and Medium Enterprises (SMEs) and start-ups.

It is important to gain clarity about the services the CFO would perform at high-level estimates to minimize expenses.

Europe

Businesses in the UK are already looking around for interim CFO solutions since the Brexit-related frenzy. They must abide by their internal stipulations enforced to operate in different jurisdictions with convoluted tax and trade regulations.

Middle East & Africa

Such a substantial increase in startups in a country- like South Africa or UAE-can thus increase the rate of adoption for outsourced financial leadership. This growth necessitates that now generation of startup founders have to seek financial leadership services as opposed to waiting to grow from within.

How Outsourced CFO Services contributes to an organization

Strategic Financial Planning

Outsourced CFO provides strategic insights in order to fit the financial goals with the business goals.

Cash Flow Optimization

Efficient and effective use of cash flow will guarantee liquidation (liquidity) and ensure the stability of business operations, especially in the cases of small-scale business.

Scalability

The adaptability of this service allows companies to increase the scope of CFO services outsourced depending on their increasing requirements-the perfect business solution for the growing businesses.

Access to Expertise

A wealth of expertise will be yours. Through the outsourcing of CFOs, many years of significant practical experience in the sector have been transferred.

Selecting the Right Outsourced CFO Partner

Factors to Look for:

There are few things you need to think about while looking for a person to outsource as a CFO expert, so that it can be a match for your unique needs. The following are:

Target industry

Find firms that are well-experienced in health because those are the organizations that are in the best position to identify the finer elements of what one can do.

Type of Service

Different CFOs offer differing kinds of services; for example, one may focus more on tactical financial planning, while another might be more concerned with financial reporting or tax compliance. The nature of the services required must be understood to define the services to look for.

Reputation

It is important to have a good standing in the market. Check references, client reviews, and case studies to know the excellence of services they provide.

Technical Knowledge

Ensure that he has modern financial technologies, which can provide real-time insights and are compatible with your company’s activities.

Building a Strong Partnership

A successful financial director who is outsourced fosters trust, transparency, and communication to establish a very solid partnership thereof.

Clarify Expectations

Establishing transparency in expectations would entail defining roles and deliverables so as to ensure agreement with the company and the outsourced CFO.

Continuous/Constant Communication

Recurrent updates and feedback loops are the bread and butter to ensure that everyone is on the same financial strategy and that quick response to any newer shifting business conditions would be wrapped in a tighter blanket.

Cultural Fit

When outsourcing CFO, they need to understand the values and the culture of the company. Making these judgments in line with your organization’s core mission and objectives.

Case Study: The Success by ABC technologies Because of Outsourced CFO Services

Customer: ABC Technology

Industry: Information Technology

Case Study: Success with Outsourced CFO Services

Challenge

There is a scarcity of resources regarding financial management. It cannot even afford to hire a full-time CFO

Issues Encountered

ABC Technologies faced problems in managing its rapidly expanding operations. The expected heightened revenues would bring with them issues associated with managing cash flows, inadequate financial reporting, and an absence of a clear long-term financial strategy. New markets could have also posed problems related to regulatory compliance.

Solution Offered

The company partnered with an outsourced CFO service provider. The outsourced CFO did the real-time financial reporting, worked on cash flow optimization with budgeting and forecasting tools, and developed a long-term financial strategy. They also ensured that the company was in accordance with an ever-evolving succinct financial compliance.

Benefits

By outsourcing its CFO services, the company, ABC Technologies, would save 50% of what was being used as a full-time CFO. For this, ABC Technologies got specific expertise to drive better decision making, scaling operation, and adherence to global compliance standards.

Magistral’s Services for Outsourced CFO

Magistral provide services related to CFO outsourcing for cost effective solutions.

Financial Strategy and Planning

Magistral’s Outsourced CFO enables businesses to connect financial objectives with growth strategies through careful analysis and planning.

Cash Flow Management

They optimize cash flow by monitoring income and expenses to ensure liquidity and financial flexibility.

Financial Reporting

Magistrals provides accurate financial reports and analysis to guide informed decision-making.

Risk Management and Compliance

They identify financial risks and ensure compliance with regulations, protecting businesses from liabilities.

Scalable Solutions

Magistrals has customized services, CFO’s who grow and support the different needs of every business.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

What are the primary growth drivers for outsourced CFO services?

Key drivers can be called: Effective financial planning, different business needs, technological advancement, increasing compliance requirements.

How does technology affect outsourced CFO services?

Technologies such as AI-driven analytics, cloud-based platforms, and automation make outsourced CFO service better in terms of effectiveness and efficiency.

What is the size of the global market for outsourced CFO services?

The global market for finance and accounting outsourcing is anticipated to equal USD 60.31 billion by 2023, with a cumulative average growth rate (CAGR) of almost 9.3% annual.

What are the benefits of getting outsourced CFO services for small businesses?

Some of this include great cash flow, strategic planning, and financial risk management, all while attempting to minimize costs.

And how can outsourced CFO services assist with cash flow management?

Outsourced CFOs manage cash flow through the monitoring of cash which comes and goes.

Introduction

An Outsourced Chief Financial Officer (CFO) is a financial professional who delivers CFO services to other organizations. They add value to the business by providing the same level of expertise as an in-house CFO but at a lower cost. These financial professionals assist firms in managing their finances, improving financial performance, and making sound business decisions.

Traditionally, CFOs were responsible for managing the finance department, supervising accounting processes, and verifying the accuracy of financial accounts. They were also in charge of the company’s financial health and offered high-level financial advice to the management team. The CFO function has developed over time to include a greater variety of tasks. CFOs nowadays are expected to be well-versed in economics, to have strategic business expertise, and to be able to drive advancement and creativity. They must also negotiate complicated regulatory settings while dealing with rising business concerns like market volatility, technology change, and global rivalry.

Outsourced CFO services have emerged in response to shifting expectations and demands placed on CFOs. Outsourced CFOs provide firms with access to high-level financial expertise and strategic assistance without the cost and commitment of hiring a full-time, in-house CFO. This adaptable and cost-effective solution has grown in popularity among startups, small to medium-sized organizations, and major corporations.

Benefits of an Outsourced CFO

Outsourcing CFO services may assist organizations of all sizes improve their financial performance, manage risks, and meet their financial objectives while saving time and money. Needless to mention the availability of talent and worldwide access to it without incurring significant operating costs. These abilities are merely at the disposal of a third party, from which organizations might gain.

Benefits of an Outsourced CFO

Here are some of the advantages of hiring an outsourced CFO:

Knowledge and Skills

An outsourced CFO delivers an abundance of financial skills and experience to a company without the expense of employing a full-time CFO. This enables organizations to gain access to the financial management skills required to make educated decisions and achieve their financial objectives.

Reduced Expenses

Instead of recruiting a full-time CFO as part of the team and incurring the additional price of covering their salaries and benefits, you can hire an Outsourced CFO for a fraction of the cost and obtain the same level of service as if you had a CFO employee within your firm.

Adaptability

Depending on the demands of the organization, outsourced CFOs might work part-time or full-time. This enables firms to obtain the required financial management assistance without committing to full-time employment.

Prioritize Business Affairs

Outsourcing CFO services helps organizations focus on their core capabilities while experts handle financial management. Businesses can benefit from this by improving their overall performance and profitability.

Minimized Risk

A remote CFO can assist companies in managing financial risks such as credit, market, and operational risks. This can assist organizations in making educated decisions and avoiding costly errors.

Time Savings

An outsourced CFO maintains your financial strategy and aids you in ensuring you’re prepared for any financial emergency, with responsibilities for cash flow management, budget preparations, tax-saving plan, and contact with bankers, attorneys, and vendors.

Proficient

Outsourcing CFO services provide better professionalism, accuracy, and dependability in accounting service administration that meets the professional needs of enterprises and organizations.

Configurability

As a company grows, its financial management requirements may shift. Outsourced CFOs can provide scalable solutions that can adjust to changing corporate needs without requiring extra staff.

Choosing the right Outsourced CFO services

The suitable outsourced CFO should be a trusted partner who can provide your company with the financial management experience and insights it requires to succeed and develop. Outsourced CFOs can provide the business with perspectives that are unlikely to be found elsewhere. Furthermore, because of the nature of their job, they are usually up to speed on the latest software, tools, accounting standards, and trends in the industry.

Businesses can select an outsourced CFO who is the best fit for their specific needs and goals by taking these essential considerations into account:

Strategic Knowledge

Consider the outsourced CFO’s experience in the industry or market in which your company works. Look for an outsourced CFO with appropriate industry knowledge who can provide significant insights and recommendations to help the business succeed.

Services Provided

Examine the services provided by the outsourced CFO to ensure they are in line with your company’s specific financial requirements. Choose an outsourced CFO who can supply your firm with the services it requires.

Communication Skills

When working with an outsourced CFO, communication is essential. Look for a responsive outsourced CFO who communicates clearly and effectively. They should be able to convey financial ideas in simple terms to non-financial stakeholders.

Price Quoted

Consider the expense of hiring an outsourced CFO. While money is not the sole consideration, it is a crucial one. Look for an outsourced CFO who offers high-quality services at an affordable cost.

Availableness

Consider the outsourced CFO’s availability. Choose an outsourced, adaptable CFO who can meet your business’s needs.

References

Ask the outsourced CFO for references. Contact current and prior clients to learn about their experiences working with the CFO. This will allow you to conclude whether an outsourced CFO fits the business well.

Network

A capable outsourced CFO may cast a wide net for future referrals and obtain intelligent comments from their peers on a problem.

Education

A successful outsourced CFO should have a solid educational foundation in finance, accounting, or a comparable discipline, while also having extra certifications, industry-specific education, and continual professional development.

Magistral expertise in offering CFO services

Magistral provides Portfolio Management services for many types of company portfolios, such as Private Equity or a Venture Capital fund. We assist portfolio managers in centralizing their Marketing (primarily digital), Strategy (Fundraising and Exit), and Finance functions at a fraction of the cost of having specialized functions in each portfolio firm, large or small. The off-shored extended team also ensures no expertise is lost for similar projects across firms. Many company projects can run concurrently, prioritized according to the board meeting calendar. Of course, learning is interconnected across initiatives.

Magistral’s Expertise in Offering CFO Services

Our portfolio and services that we provide are as follows:

Strategy — Identifying add-on acquisitions and potential purchasers, funding, exit plan, growth strategy, and content marketing.

Analytics — Financial reporting and analysis, dashboard creation, data visualization, text cleaning and mining, predictive modeling, KPI tracking, and web scraping.

Sales — List development, CRM cleansing and administration, competitive intelligence, and social media management.

Financial planning — Budgeting, predicting, and updating competitive quarterly earnings.

Procurement — Spend analysis, vendor identification and management, spend base cost reduction, category strategy, RFP support, and procurement strategy.

About Magistral Consulting

For setting up an appointment with a Magistral representative: visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

What is an Outsourced CFO?

In today’s outsourced and globally connected business world there are many functions of businesses that are being outsourced like accounting, payroll, operations, IT, and marketing among others. Unfortunately, not many companies are aware that finance as a function can be outsourced too.

Herein, comes the importance of an Outsourced CFO. An outsourced CFO is a financial expert who provides financial services on a part-time or full-time basis to companies. The role of an outsourced CFO is to provide strategic insights as well as provide expertise in areas such as formulating strategy or providing core financial services help. This includes areas such as support in finding cash flows, raising capital, implementing more efficient systems, or formulating growth strategies. Usually, outsourced CFOs have considerable experience performing high-level financial roles as they may have worked in corporate finance roles in other reputed organizations.

Why one should hire an Outsourced CFO?

Outsourced CFOs can lead up to 40-50% savings in costs. About 80% of financial services executives outsource or offshore some of their services. Highlighted below are some of the top reasons for outsourcing this critical finance function.

Benefits of Outsourced CFO

-Currently undergoing growth – This is usually the case for companies that are witnessing a lot of growth. A common example could be growth related to the launch of new products or say when a company is entering a new market.

-Resolving key business challenges – This comes into the picture when a company for instance is trying to resolve challenges such as cash flow, cost cutting, or looking to improve operational efficiencies.

-Raising debt or equity capital – Outsourced CFO can be of great help especially when companies are looking to raise capital. They do so by assisting in strategy formulation for it, due diligence, and in raising capital in terms of debt or equity mix.

-Maximizing margins – By analyzing current spending and costs, the outsourced CFO can suggest improvements that can be made in spending.

-Need for an interim CFO – This normally is the case when there is a need felt to place an interim CFO, especially in cases where an organization is transitioning from one CFO to another or a need is felt to outsource an organization’s finance function simply because someone else can do it better.

-Taking advantage of consulting services- An organization can look to hire an outsourced CFO simply because they can do the task better.

How does an Outsourced CFO provide value?

We have already seen why companies should look forward to outsourcing their services to a third-party service provider. In this section, we will look at some of the key benefits that are provided by an outsourced CFO. It must also be mentioned here that there are cost implications associated with hiring a CFO. Smaller companies may not have the budget to hire a CFO. This means they can incur a lot of savings by outsourcing this function which can be at a fraction of the costs of the salaries that are paid to a CFO. Not to mention the availability of talent and global access to them without incurring many operational headaches. These talents are simply at a third company party’s disposal the benefit of which can be reaped by companies.

There are some of the other benefits which an outsourced CFO can provide. Some of them are:

-They help in financial planning and analysis by providing assistance in the form of budgeting, and forecasting future revenue or cash flows for a company.

-They can help an organization in assessing its strengths and weaknesses vis a vis competition.

-Help in designing complex business models which necessitate the use of techniques such as NPV and IRR.

-Help in analyzing spending and cost incurred by a company and thereby suggest improvements in cost cutdowns.

-Assistance with financial statement preparation.

-Assistance with yearly financial reporting.

Top 10 Outsourced CFO services

A question that arises naturally is what kind of services are provided by Outsourced CFO.

Listed below are the top 10 services –

Top Outsourced CFO Services

-Financial Strategy – One of the key benefits of outsourcing CFO services is in designing a company’s financial strategy. These are designed both short term as well as long term.

-Forecasting – Forecasting for the future is one of the key functions of any finance division of an organization. Preparation of the details helps in planning an operational roadmap for an organization. It requires a strategic understanding of requirements, assessing current and future capabilities of a company, competition analysis, and mastery in building financial models

-Financial systems strategy and design – With growth, it becomes imperative for any organization to implement software and improve process that can match an organization’s growth strategy. An outsourced CFO can help address this pain point by redesigning systems and suggesting improvements in current processes.

-Budgeting – Managing budgets is one of the key functions of the finance function. Normally budgeting is done for a 5–10-year time horizon. Budgeting helps to plan spending and future revenues in great detail.

-Financial statement preparation – An outsourced CFO can help in preparing financial statements as well as interpreting their consequences. This is the most useful information for any organization.

-Raising capital – Here a person is introduced to a host of investors, people or organizations who can help a company in raising its capital.

-Capital structure – This is done by suggesting which would be a better route – debt or equity or a mix of both.

-Interim CFO services – This service is most useful to avail of in case there is a transition from one CFO to the next or in cases where low-cost outsourcing seems to be a better option.

-Cost cutting – Costs are an important factor in decision-making. Outsourcing its services to a third party can help in this.

-Complex decision making – This is especially true with companies where complex decision making is involved and which requires the knowledge and expertise of a person. Examples could be making models for Mergers and Acquisitions, management buyouts, etc.

How can Magistral help in providing CFO services?

Magistral offers Portfolio Management services for varied kinds of the portfolio of companies such as Private Equity or a Venture Capital fund. For all the investors who sit on multiple boards, it is a headache, to implement something in a company that worked in another portfolio company. The problem is more acute when all companies are in similar industries and are facing quite similar headwinds. Limited supervision time available to board members, unavailability of resources across companies, and implementation knowledge held in a single portfolio company, all play spoilsport. It’s like re-inventing the wheel every time for the same problem.

We help portfolio managers in centralizing their Marketing (mostly digital), Strategy (Fund-raising and Exits), and Finance at fraction of the cost required to have dedicated functions in each portfolio company, big or small. The off-shored extended team also ensures no knowledge is lost for similar projects across companies and multiple projects in multiple companies can run at the same time, prioritized as per the schedule of board meetings. Learning, of course, is cross-pollinated across projects.

Our service offerings for portfolio and other companies are:

-Strategy: Identifying add-on acquisitions and potential buyers, fundraising, exit strategy, growth strategy, and content marketing

-Analytics: Financial reporting and analysis, preparing dashboards, data visualization, text cleaning and mining, predictive modeling, KPI tracking, and web scraping

-Sales: List generation, CRM cleansing and management, competitive intelligence, and social media management.

-Financial planning: Budget preparation, forecasting, and competitive quarterly earnings updating.

-Procurement: Spend analysis, vendor identification and management, spend base cost reduction, category strategy, RFP support and procurement strategy.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is in Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Financial process outsourcing has been on the horizon of businesses for over a decade now. But there are a few trends that are making this process all the more strategic. It is not only about cutting costs, but having the right partner who could improve the processes, change culture, bring in the new talent and technology and make finance more predictive and proactive.

When it comes to Financial Process Outsourcing, the following trends are changing the landscape of the industry

Smaller and niche clients

Bigger players with a headcount of hundreds of thousands started taking advantage of outsourcing around a decade back. They are increasing it in terms of scale and complexity, however, the major volume is now going to come from smaller players as small as 1 or 2 men companies. Niche processes that are difficult to deliver on a turnkey basis also show promise.

Technology

Technology impacts all industries all the time. Financial process outsourcing is no exception. It has now moved from process outsourcing to process reengineering to automate steps and bring down the costs further and improve the operational efficiencies

Outcome-based offerings

Outcome-based offerings are still to take off but are on the horizon. It makes the vendor, your business partner where they are accountable for business results and not only delivering on the processes. Metrics related to a reduction in sales outstanding, operations costs, cycle time reductions, liquidity improvements, forecast accuracy are a few related to advisable business outcomes

Strategic importance

Outsourcing started as a low-cost low-value add jobs outsourcing. It still is to some extent. Firms are now outsourcing more strategic and high-value tasks. They actively outsource processes like budgeting, fundraising, and investor communications, in addition to routine accounting jobs.

Advantages of Financial Process Outsourcing

There are multiple reasons why outsourcing the financial processes is the best way of doing it. The reasons not only involve cost savings but a host of others that raise the operational standards of the client, whatever business they are in.

Magistral's Financial Process Outsourcing Advantages

Financial Process Outsourcing Advantages that Magistral Consulting Offers

These advantages are:

Cost

Of course, cost considerations here are tangible and very obvious. One dollar saved is a dollar earned. That is a saving that starts showing in the P&L as soon as you decide to outsource. You can normally expect to save 50–80%, depending on your location and the specific process you choose to outsource.

Flexibility

Apart from the absolute cost savings, there is a further scope of savings due to fractional resources. Fractional resources mean that you are not hiring anyone permanently but are tapping into the skill and experience of the resources only as and when required.

CFO outsourcing

CFO outsourcing or substantial outsourcing of strategic tasks is an emerging trend. This is all the more important for start-ups or funds that are small and can’t afford a full-time CFO.

Focus on core tasks

Outsourcing frees up the management and workforce bandwidth to focus on more strategic aspects of business and operations

Technology

Since the vendor has experience outsourcing similar processes for other clients, it can better recommend and implement technologies that reduce effort or improve turnaround time. The vendor achieves this by automating several tasks using Artificial Intelligence and machine learning algorithms.

Operational efficiency improvements

Outsourcing to an expert improves the operational efficiency of a process by multiple notches. Something like an increase in efficiency due to touchless processing, reductions in operations cost, and reduction in Day Sales Outstanding (DSOs) are very typical operational outcomes of outsourcing

Improved plan compliance and making finance more predictive

With tools like dynamic real-time scenario planning, dashboards, visualization tools, data science and analytics, and on-demand reporting, it’s possible to make the finance function more predictive

Financial Process Outsourcing: What could be outsourced?

Financial processes that are low value add and not strategic could of course be outsourced. Now added onto transactional outsourcing is the strategic outsourcing elements that require specialist interventions. The activities that could be successfully outsourced are:

Bookkeeping and back-office support

Organizations have consistently used activities like account reconciliations, deferred revenues, customer billing and payments, expense processing, managing the general ledger, financial and tax reporting, currency consolidation, payroll services, and vendor invoicing to reduce costs and enhance operational quality.

Controller services

The services like audit reports, auditor facilitation, compliances, MIS, dashboards, etc form the backbone of outsourcing here

Financial Planning and Analysis (FP&A)

This is the bulk of the planning and analysis aspects of the Finance function. This includes acquisition integration support, board reporting, financial data analysis, ratio analysis, comparative analysis with competition, financial research, along with planning, budgeting, and forecasting

Fundraising

This aspect requires a very specialist intervention. Here the offerings include pitch deck content and design support, investor reach-out, modeling and valuation, and investment bank’s selection

Mortgage process outsourcing

This is a specialist process of a lender whose critical elements could be successfully outsourced. These elements are marketing, loan origination data entry and analysis, underwriting documentation, background investigation, property assessment, accounting, financial checking, documentation checking, mortgage underwriting, and every other micro sub-steps required for the evaluation, underwriting, and approval of loans.

Magistral’s tried and tested process for outsourcing

Magistral has helped scores of clients in the financial industry and elsewhere in outsourcing operations. Magistral follows a customized and low-risk process for a smooth transition. The process puts business continuity and risk minimization at the center. Here are the major steps in offshoring that is proprietary and unique to Magistral:

Magistral's Financial Process Outsourcing Steps

The approach followed by Magistral Consulting for outsourcing financial processes

Project Kick-Off

There is a call with all the client stakeholders to understand their challenges and expectations from offshoring a process. Once the business imperative of offshoring is understood, a proposal for services is prepared. The proposal carries in detail the commercials, methodologies, KRAs and KPIs, project plans, and other details required for client management to take a call. Once the proposal is signed off the action begins.

SOP preparation

Before taking any project for delivery Magistral invests a great deal of time and expertise in preparing Standard Operating Procedure documents. For preparing SOP a trained analyst gets in touch with the client SPOC (Single Point of Contact) and by his skills in business analysis brings all the knowledge of people onto a process document. We call this “bringing what is between the ears onto the paper”. Every fine detail is captured. A Magistral SOP document would carry lots of process diagrams, tips for analysts, swim-lanes, along with audio and video recording of meetings and training. The whole of this process is done without any cost to the client. Clients first-hand see the expertise that Magistral brings to the table without any investment on their part. Once the SOP document is ready, the signoff about its accuracy is taken from the relevant personnel in management. Till this point client does not spend even a single penny and we are fine about it.

Business Reengineering

Once the detailed SOP is ready, business reengineering opportunities make themselves evident. We identify processes where Artificial Intelligence, Automation, and Machine Learning can reduce costs or improve turnaround time, and we share and validate these opportunities with the client.

Pilot Projects

Our proposals are always signed based on the projects or milestones that we deliver. It is never based on the number of people (FTEs) that we employ to deliver services. Normally vendors will charge for FTEs and then they will sit and undergo process training at the client’s expense. With Magistral, you only pay when we deliver the project or processes that meet your quality standards. We start with low volumes. Trainers get trained in the process. Coordination with the client is very close and done almost daily to fill any gaps in delivery and expectations. For bigger projects, an onsite analyst sits with the client for weeks and is responsible for business analysis and knowledge transfer.

SLA finalization

Many times, there are no Service Level Agreements decided for internal teams. We make sure we are accountable for everything we deliver and decide the SLAs of every process. These SLAs can be in terms of improvement in quality, turnaround time, analyst’s availability, prompt acknowledgment of requests, etc. With Magistral, if you have internal SLAs, we promise to beat that further with at least 20% improvements.

Process Stabilization

With SLA compliances meeting standards, we increase the scope and volume of work offshored.

The phased approach ensures the client is never too invested to back off. The process is also designed to give enough confidence to the clients to trust the expertise of Magistral.

About Magistral

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsutling.com for any queries or business inquiries.

What is Outsourced CFO?

Outsourced CFO (Chief Financial Officer) is an arrangement of having all the services of a qualified CFO, without hiring one full-time. It is known as various other names too like “Fractional CFO”, “Interim CFO Services” or “Online CFO”. It is specifically important for start-ups, who due to budget constraints may not afford a full-time CFO, but still need quality CFO services for activities like fund-raising, financial system design, M&A, and IPO opportunities for an exit, cash flow management and securing further working capital financing rounds. CFO services for startups are the most talked about, but outsourced CFO is equally important for Hedge Funds and Private Equity.

It also finds an application in Private Equity and Hedge Funds commonly known as Hedge Fund Outsourced CFO and Private Equity Outsourced CFO

How does an Outsourced CFO work?

You may naturally ask how a virtual CFO performs their functions and what duties and responsibilities an outsourced CFO handles.

It works like any other outsourced function. A virtual CFO takes the tasks over the mails, chats, or video calls. His team understands the work that is required to be delivered. As a competent outsourced CFO is working with multiple start-ups and he may also suggest the best financial strategy for your company’s size, industry, or situation.

How much Outsourced CFO services cost?

Pricing of these services varies from company to company and from country to country. Best outsourced CFO companies offer multiple outsourced CFO solutions. They work with the exact estimates in terms of hours required for the job before the job starts. We do this to eliminate any confusion about what you will be paying for the services at the end of the specific task. Sometimes there are monthly billing models for a dedicated person. If the services are based out of a low-cost country like India, costs can turn out to be competitive for the quality of services. An hourly rate of $ 30-100 is currently acceptable. Tasks like accounting are at the lower end of the price spectrum, whereas tasks like financial modeling and strategy are at the higher levels of the price spectrum.

Why outsource CFO? Advantages of Outsourcing

There are multiple advantages to this. The best services are about producing business results. Some of the major ones are:

Cost Reduction: Comparing Outsourced CFO vs. the in-house permanent CFO, there are unmistakable advantages in terms of costs. The outsourced option, who is based out of a low-cost country like India can bring down the cost in the tune of 30-70%, depending on the location where you are based.

Team Skill Enhancement: When a company is small, it has got very little resources to have all the skills onboard. A start-up should build a finance team that understands fund-raising, prepares pitch decks, establishes financial systems, and manages accounting. All of this is difficult to get in a single or a few people. The solution here is to outsource this so that you can take advantage of the skill and team of the outsourced vendor

Variable Cost: When you outsource there are no contractual exit barriers. If a start-up needs to conserve cash, it can defer the outsourcing engagement. Also if it needs hyperactivity regarding finance and would want to quickly add the outsourced team members. Payment is based on pay per use which gives immense flexibility to the start-up

Ramp up and Ramp Down: Multiple functions of Corporate Finance are not permanent. For example, preparing financial management systems is a one-time activity. You complete it once and won’t need to do it again unless the financial system requires a major overhaul. Similarly, you will need a pitch deck only when raising funds. Hence the demand for corporate finance function is un-even. For meeting those un-even demands, it’s not possible to hire specialists every time. What instead makes sense is to have an outsourced team that can be ramped up or down depending on the work requirements.

Third-Party View: As an outsourced entity is a third party that is managing CFO functions for multiple start-ups, Private Equity Funds, and Hedge Funds, it has limited motivation to be part of financial irregularities. It comforts investors. Investors prefer to invest in a hedge fund or a private equity fund that has outsourced the fund administration process. Outsourced hedge Fund Operations are generally considered a plus for the fund looking for investors

What are the tasks performed by the outsourced CFO?

Activities Performed by an Outsourced CFO

The roles operate at multiple levels like Strategic, Tactical, and Daily Tasks. A CFO for startups performs multiple functions. Here are the major tasks they handle.

Strategic Tasks: Fund-raising, Fund-raising documentation, Financial Strategy, M&A facilitation, Finalizing KPIs for Business Verticals in line with the Strategy, Investment Strategy, Strategic CFO services, Business Advisory Services, Consulting

Tactical Activities: Design of Financial Systems, Renegotiating Contracts for Cost Reduction, Structuring and Finalizing Cash Flow Positions, Financial Reporting, Budgeting, Forecasting, Implementing the Best Accounting Practice, Fractional CFO for Startups, Contract CFO

Daily Management: Accounting services for startups, Daily/Weekly/Monthly Dashboards, Data Collection, and Reporting, Reporting KPIs for all Business Verticals, Dashboards and Management Information Systems, Accounting CFO Services

How to finalize an outsourced CFO?

There are many outsourced CFO firms in India and elsewhere. Here is a stepwise approach to finalizing an outsourced CFO

Step 1: Prepare the list of outsourced CFO companies in India and elsewhere.

Step 2: Get in touch with the companies and ask for a meeting and CFO services brochure

Step 3: If the meeting was impressive, and you are satisfied with the capability of the vendor ask for work samples and client references

Step 4: Check the work samples and reference and shortlist the vendor for Outsourced CFO engagement letter after reviewing the CFO services proposal,

Step 5: Select the engagement model that is most flexible and responsive to your business needs

About Magistral Consulting

Magistral Consulting (www.magistralconsulting.com) is a Research, Analytics, and Consulting agency helping start-ups, hedge funds, private equity funds, real estate funds, and other companies in outsourcing CFOs. It also offers startup accounting services

About the Author

Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsulting.com for any observations or queries related to the article. If you want to outsource your CFO raise an inquiry at https://magistralconsulting.com/contact/