Benefits of Outsourced CFO Services
Engaging a fractional Chief Financial Officer to deliver Outsource CFO Services is a great way to improve your company's financial decision-making processes, strengthen and grow your business. Why do you need an outsourced CFO? An outsourced CFO is going to take the stress out of your business by alleviating the burden of financial management. In addition, an outsourced CFO can liberate more time for your leadership team and help propel your company toward achieving greater milestones.
In this discussion, we will delve into the specifics of Outsourced CFO Services and explore five ways theses services can contribute to strengthening your business.
If the distinction between a CFO and other financial roles like Controller or Accountant is not entirely clear to you, it may be beneficial to first read the following article: What is a CFO? Generally speaking, a Chief Financial Officer (CFO for short) helps enhance your business by building on historical financial data generated by Controllers and accountants (and business data from sales and operations) and by concentrating on the future financial strategy of the company.
Strategy, Planning For Business Needs, And Forecasting
Engaging an outsourced CFO can significantly aid companies in bridging the gap between their strategic vision and a practical, actionable plan. While company executives might craft a vision for the future of the business, it is the outsourced CFO who collaborates with the organization to navigate it from where it is (current state) to where it wants to be (desired future).
Outsourced CFOs provide valuable insights in several key areas, including:
Strategic financial planning, growth strategies, joint venturing, risk mitigation strategies, digital technology systems, and reengineering business processes.
Resource allocation planning to maximize utilization of company resources: people, assets, equipment, and materials.
Cash flow forecasting to predict the company’s financial trajectory based on expected collections (cash sources) and disbursements (cash uses).
Long term financial planning that allows businesses to look beyond the immediate future (+12 months) and implement the foundational elements of their strategic vision.
FP&A Services
Financial planning and analysis services or FP&A Services can be categorized as a component of strategic planning, but due to its intricate nature, it merits its own dedicated section. This is an area where companies without an in-house CFO can still access specialized corporate finance services by using outsourced CFO services or a fractional CFO with FP&A skill sets for:
Financial and/or operations dashboards tailored to company-specific metrics such as sales, costs, efficiency, utilization, productivity, manhours, inventory turns, profitability, working capital, etc.
Monthly Financial and Operations Review or MFOR™, including variance analysis, which is subsequently discussed with the leadership team.
Budgeting and forecasting, including continuous 3-way financial forecasts with pro forma financial statements (P&L, balance sheet, and cash flow sources and uses).
Strategic 5-year financial models or 5-Year plans featuring monthly financial projections for the first 2-years then followed by annual projections.
Scenario planning and detailed analysis. For example, what is the return on investment (ROI) to a shareholder adding a new attorney or consultant. Or what’s the ROI on maintaining and transporting a fleet of equipment for pipeline construction versus leasing heavy equipment.
Pricing and bid modeling. If your projects are consistently missing their profit targets, one of the first areas to investigate are project costs not reflected in your price book and/or pricing/activities in your construction bid models.
Assessing the profitability of products, services, projects, divisions, regions, wells, etc. and benchmarking them to industry competitors.
Evaluating cash requirements and determining the most suitable funding options, whether debt or equity.
Supporting owners in creating presentation materials for private equity investors, project financing, and potential buyers.
Analyzing and monitoring a variety of financial and operational ratios as an indicator of overall financial strength and productivity.
For more about these and other services you need for your private company, see our FP&A Services page.
Optimizing The Cash Conversion Cycle
A seasoned CFO will conduct a thorough assessment, identify key areas for improvement, quantify the potential benefits, and provide actionable recommendations. They will also assist in executing a strategy that ensures your energy manufacturing business remains resilient during challenging periods. Accelerating cash collection enhances your company’s balance sheet strength.
In times of high interest rates, inflation, extended supply chains, lengthy payment terms, climate crises, restricted bank lending in certain industries, unpredictable economic cycles, geopolitical tensions, and cyber threats, cash flow management becomes critical. Companies with sufficient cash reserves are often the ones that endure during economic turbulence. Engaging an outsourced Chief Financial Officer (CFO) can be a strategic move to minimize your company’s cash conversion cycle.
This essentially involves reducing the time span between initiating a service or production of a project and collecting or receiving payment that clears the bank. A seasoned professional CFO will conduct a thorough assessment, identify key areas for improvement, quantify the potential benefits, and provide actionable recommendations. They will also assist in executing a strategy that ensures, for example, that your energy manufacturing or industrial business remains resilient during challenging periods. The faster your company collects cash, the stronger your company’s balance sheet.
CFO Coaching
Across the United States, energy, chemical, and industrial companies are grappling with a significant shortage of accountants. This scarcity, coupled with inflation and fierce competition for skilled professionals, has deeply affected private companies. As a result, these companies are seeking ways to maximize their financial resources through automation and technology while also extending their bandwidth by leveraging outsourced CFOs and FP&A services. Additionally, they are investing in the growth and development of their dedicated employees to navigate these challenges.
The Energy CFO is stepping in to assist companies grappling with these issues by providing outsourced CFO and FP&A services. Additionally, our Outsourced CFO provides weekly personalized mentoring sessions with your team members. These sessions focus on coaching your staff, aiding them in developing new skills, broadening their perspectives such as learning to think and operate like a CFO. They also offer a valuable opportunity to observe problem-solving techniques in action and the intricacies of leading financial discussions and supporting executive decisions firsthand. Having a CFO mentor who guides them through practical experience significantly helps them internalize the crucial tacit knowledge needed for their growth and promotion to the corner spot.
This particular service stands out as one of the more distinctive offerings from The Energy CFO because our consultants serve as external CFO Advisors professionally (as opposed to being CFOs in transitional phases). This means our CFOs are dedicated to mentoring and sharing their expertise with your staff rather than seeking a permanent CFO position at your organization.
Talent Solutions
An external CFO can assist your business in developing an organizational chart that includes essential roles, particularly those that intersect with operations critical to financial and accounting success. Our outsourced CFOs are adept at identifying gaps, suggesting alternative solutions, or creating new roles as needed. For instance, for one client, we recognized the necessity of hiring an inventory accountant for a recycling company specializing in salvaged pipelines and a project accountant for a firm engaged in pipeline and power construction services. Leveraging our deep understanding of our clients' requirements and company culture, we meticulously outlined the responsibilities for these positions, defined job qualifications, crafted job descriptions, reviewed resumes from HR postings, conducted initial candidate interviews for business owners, and compiled a shortlist for the organization to interview. We provide these services to our clients who contract CFO services at a cost that is on average 10% to 15% lower than that of staffing and executive search firms.
Additional CFO Services Offered
The list of CFO services provided here is far from exhaustive when considering the capabilities of an outsourced CFO. A CFO can offer a multitude of ways to strengthen your business, tailored to the unique needs of your enterprise. They can specifically customize their expertise in areas such as:
Facilitating business growth, whether through organic expansion or mergers and acquisitions.
Conducting analysis and making recommendations to improve the company’s top-line revenues.
Evaluating the sales mix concerning profitability, cash requirements, customer concentration, customer profitability, and risk profiles.
Implementing strategies to reduce the cost of goods sold or cost of sales expenses.
Assessing and enhancing company costing / cost accounting / project accounting methodologies.
Suggesting improvements to EBITDA by reengineering business and operational processes to increase efficiency and organizational effectiveness.
Cutting down on general and administrative expenditures.
Increasing overall EBITDA.
What to Expect From Our Part-Time CFO Services
The Energy CFO’s Outsourced CFO Service is crafted to enhance financial decision-making, strengthen your business, and help stimulate growth for both established companies and startups. We have purposefully structured our offerings to complement your existing accounting or controller services, thereby avoiding redundancy and ensuring you don’t incur CFO costs for basic bookkeeping and accounting tasks.
Our commitment is to provide a high-touch service, always prioritizing your needs. We genuinely care about helping you find the right CFO solution for your organization. Our CFO professionals bring a wealth of experience from the corporate and entrepreneurial energy sector, with c-level experience and knowledge in board meetings, corporate governance, institutionalizing businesses, strategic planning at both corporate and business unit levels, petroleum planning, FP&A and investor relations, financial modeling, corporate finance, operations finance and accounting chops, energy accounting, internal audit, commercial risk management and mitigation, launching startups and running businesses and operations.
Are you ready to unlock your organization’s potential? Contact us to schedule a virtual CFO consultation and learn more about outsourced services. Consultations are always free.
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