Tag Archives: Outsourced CFO Services

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

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

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

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 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

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

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

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?

It’s natural to ask as to how exactly a virtual CFO performs its functions and what is outsourced CFO duties and responsibilities.

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. This is done so that there is no confusion as to what will you 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 finance team should be well versed with fund-raising, preparing pitch decks, establishing financial systems, and 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. Once it’s done, it would not be done again until there is a major overhaul required in the financial system. Similarly, a pitch deck will only be needed in case of fund-raising. 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

Activities Performed by an Outsourced CFO

The roles operate at multiple levels like Strategic, Tactical, and Daily Tasks. There are multiple CFO functions along with the CFO for startups Here are the major tasks performed

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/