Everyday business owners are faced with the challenges of their industry. The economy has had its highs and lows and it seems that every ten years or so we need to bail some other industry out of the mess they’ve created. Competition from all sides is non‐stop and profit margins seem to get thinner every day. In addition, employees rely on their company’s ownership to be successful so that they can maintain their livelihoods and take care of their families.
The daily pressures are a constant reminder to every business owner that being successful means never becoming complacent. It’s for this reason that owners are always mindful of anything and everything that can and will give them an edge over their competition, an edge over the economy, and the next rung on the ladder of success. CFO outsourcing services provide today’s business owner with that distinct advantage.
Outsourced Services Significant Growth
According to Deloitte’s 2016 Global Outsourcing Survey, “outsourced services” has experienced significant growth among the various industries. The Financial Services industry has been the growth leader with a 36% increase over the previous year. Furthermore, according to their survey, current market trends forecast continued growth in this area because of several key factors, such as: cost savings, enhanced focus on core business functions, higher level of service, and access to enhanced intellectual capital.
Without question, outsourcing has fundamentally changed the global business landscape. The traditional in‐house accounting departments have long been a source of frustration for every business owner. For the last 30 years, I’ve personally listened to ownership complain about insufficient and inexperienced staffing, the cost of carrying a department that produces nothing but yesterday’s news, and the lack of reliable information that gets produced. Inherently, owners understand their accounting department is not a revenue producing business unit within their organization. It’s this understanding and frustration that has business owners embracing this new paradigm of CFO outsourcing services.
Why Outsourcing Makes Sense
Reducing cost remains the number‐one reason that organizations elect to outsource. Virtually every company cites lowering costs as the primary driver for adopting this business model. The average small business (small business is defined as under $500MM in revenue) has an average of 1‐5 employees manning the company’s accounting functions, which include the following: Accounts Payable, Billing/Accounts Receivable, Payroll, Human Resources, Accounting/Financial Reporting.
According to salary.com, the average combined salaries for an accounting staff can run anywhere within the range of $180K to well over $500K, depending on the number of personnel, the skill level, and the size of the company. In addition, the base salary of the accounting department is only a portion of the costs expected to be incurred. The chart below shows that a company will potentially experience additional costs of almost 50% of the base salary for carrying their accounting personnel. Therefore, at a minimum, the cost of an internal accounting department could be well over $250,000 per year. That’s a lot of money for a non‐revenue producing business unit in a small business.
Contrast that cost with the cost of outsourcing the same functions to a CFO services group:
- Fixed fee contract pricing
- No payroll tax costs
- No healthcare costs
- No retirement costs
- No vacations
CFO outsourcing services allow business owners to dig up those sunk costs and experience a potential savings, which could be as much as 40%. Furthermore, a third‐party service provider, such as a CFO outsourcing services entity, provides their clients with the highest level of quality and experienced personnel.
Focus on Core Business
Every business owner will tell you, they are at their best when their selling the business, producing the business, and operating the business. The time they spend to stop and manage the business is time not producing revenue for the business. It’s for this reason that more and more business owners are embracing outsourcing as a vital resource to their companies. Internal staff requires administration, which boils down to cost and time that have zero effect on business growth. What business owner wants to voluntarily commit resources to managing that? CFO outsourcing services provide ownership the freedom to focus on their core business model and continue to committing those resources toward growing the business.
Access to Higher-Level Intellectual Capital
Small business owners say they’re always on the lookout for talented people. The problem is, they have difficulty finding talent. They’re usually not big enough to be on any recruiter’s “A‐List”, so they’re often wading through insufficient candidates. In addition, the “talent” they have is very often ill‐equipped and inexperienced to provide ownership with timely, accurate information. Over the last 30 years, in both private and public practice, I’ve heard management’s complaints. They continue to be frustrated by the lack of accurate information provided by their accounting departments and their need for better information in order to make better business decisions.
Historically, business owners would turn to their outside accounting firms to help make up the shortfall for better information. It’s a reasonable reaction to their predicament; however, most accounting firms are not set up to provide these services. An outside accounting firm is a company’s buffer between it and the outside world. They are there to report on a company’s financial standing through review or audit, and assist with a company’s tax compliance by producing such documents as: corporate tax returns, other corporate filings, and financial statements. As such, typically accounting firms neither have the resources nor the personnel to assist business owners with their business at the granular level. Their focus is the output, not the business drivers.
In stark contrast is the CFO service provider. As a marketer of C‐Suite services, they only acquire talent that has the prerequisite knowledge and experience to provide services at that C‐Suite level. When hiring a CFO outsource service provider, the business owner doesn’t get a single person with their single experience, they get a team of individuals that have decades of knowledge and experience within a multitude of business industries. Their knowledge and experience allows business owners to capitalize on that intellectual capital to help propel their business toward higher profitability.
The Bottom Line
CFO outsourced services represents the new way forward in today’s marketplace. Business owners have embraced this competitive edge as a way to improve their bottom lines. Today’s environment requires that business owners run their organizations as lean and mean as they can. CFO outsourcing saves them money, allows them to focus on their core business, and provides intellectual resources previously unattainable. CFO outsourced services has become the current business paradigm.