According to research, the number one task that business owners and entrepreneurs dread the most is bookkeeping.
Most of us don’t open businesses to bury our heads in accounting software. Fortunately, as your business grows, you don’t have to be doing the financials forever.
In fact, it’s neither necessary nor wise. At a certain point, you will reach the stage where you need the experience, advice, and insights of a good CFO on your side.
When you get there, you will have an important decision to make. In previous times, companies had to simply hire on a full-time CFO (often before they could afford it). Nowadays, however, you also have the option of choosing an outsourced CFO to head up your business’s financial function.
Outsourcing has many advantages, such as cost-effectiveness, scalability, flexibility, convenience, and more. Thanks to the many benefits of outsourcing, surveys are showing that up to 37% of SMBs choose to outsource their financials.
However, before you decide whether to outsource or onboard, it’s important that you know how an in-house vs. outsourced CFO compare. Want to find out which solution is best for your business? Keep reading.
One of the big differentiating factors between hiring an in-house CFO and outsourcing the role is the costs involved.
CFOs in the US receive a median salary of $371,548 per annum. Many smaller businesses that are still growing might not be able to afford this type of payroll commitment.
What’s more, growing businesses also might not have enough work for a fulltime CFO, making a hiring one even more costly.
This is a historical scaling issue. A business urgently needs the expertise of a CFO, but they can’t afford to hire one full-time, nor is the workload large enough to justify this.
Fortunately, this is where using the services of an outsourced CFO can be ideal.
By selecting a virtual CFO service, business owners are able to pay only for what they need. What’s more, they also save on the overheads that come with hiring additional fulltime employees. These include payroll expenses, employee benefits, office space, equipment, etc.
One of the concerns around outsourced CFO services is that they won’t be as reliable as traditional in-house CFOs.
However, in many cases, outsourced CFOs might be more reliable than their in-house counterparts.
If you choose to work with a company that provides outsourced CFO services, the onus is on them to make sure you are taken care of. If the CFO in charge of your financials leaves, is ill, or otherwise indisposed, they will ensure that an equally competent CFO steps in.
With an in-house CFO, there is no backup. If they leave suddenly or are unable to work for a period, your financials will either fall behind, or you will have to source someone for the interim.
There are, of course, some cases where an in-house CFO might be more reliable than an outsourced one. For example, if you hire a solo-operating virtual CFO who is inherently unreliable, they might let you down by being unreachable, late with reports, etc.
In this instance, a CFO on your payroll might be more dependable, but not always.
Another area of dependability that business owners need to think about is trustworthiness. Some business owners worry that an outsourced CFO presents a security risk, as they might not feel a sense of company loyalty and share sensitive information to sources they shouldn’t.
In reality, this is not the case. In-house CFOs may have just as much, or more, motivation to share sensitive company information as virtual CFOs. What’s more virtual CFOs and companies that offer virtual CFO services have to protect their reputation at all costs, otherwise, they won’t be able to find business.
Size of Enterprise
When deciding between hiring an in-house or virtual CFO, it’s essential that you consider the size of your enterprise.
If you have just reached the point where your business needs the services of a CFO, virtual CFO services are often ideal. They present substantial cost savings. Virtual CFOs are also easier, quicker, and more convenient to hire that full-time CFOs.
What’s more, virtual CFO services can scale with you. Meaning you can stick with the same service through various growth stages without having to expand in-house financial functions.
However, if your enterprise has reached a size where it is generating an annual revenue of $50 million or more, you might want to consider hiring a full-time CFO instead. At this size, there will be more than enough work for the role, and your needs will be extensive enough to have someone devoted fulltime to your business’s finances.
When weighing up the benefits of virtual CFO services vs. an in-house CFO, you’ll also want to think about convenience.
Having an in-house CFO around full-time can be the most convenient if your financial needs are very extensive. However, if they are not, virtual CFO services will likely be the more hassle-free choice.
As mentioned above, hiring a virtual CFO service is usually the most convenient solution if you are in a growth phase, or don’t yet need a full-time CFO on hand. All you have to do is find a reliable service and sign up.
Hiring an in-house CFO requires a lot more work. You’ll need to advertise the position, screen applicants, check references, walk the successful candidate through the onboarding process, organize office space for them, etc.
Are You Looking for Trustworthy, Scalable Virtual CFO Services?
Both in-house and virtual CFOs have their own set of benefits. However, for the majority of enterprises, outsourcing the role of CFO will prove the most advantageous, thanks to increased cost savings, scalability, and convenience.
Is your business one of these? Are you looking for a virtual CFO that you can trust?
If so, you are in the perfect place. Here at Sterling Tax and Accounting, we offer a range of virtual financial services. To get started, you can learn more about our controller and virtual CFO services here.
Besides this, we also offer bookkeeping services, tax resolution services, and more. Whether you are looking for a one-stop-shop for your business’s financial needs, or just the help of an experienced and knowledgeable CFO, we have got your business covered.
Want to start leveraging the benefits of outsourcing and virtual CFO services? Contact us today and tell us what you need.