How To Strengthen Your Business With An Outsourced CFO
Updated: 3 days ago
Hiring an external Chief Financial Officer ("CFO") to manage your company’s finances is a great way to 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 and help you take your company to the next level.
Today, we’re talking specifically about Outsourced CFO Services and five different ways you can utilize these services to strengthen your business.
If you are not familiar with the difference in the CFO vs. other financial roles such as Controller and/or Accountant, you may want to read the following article first: What is a CFO? Generally speaking, a CFO helps strengthen your business by building on historical numbers produced by accounting and focusing on the company’s financial future.
Planning and Forecasting
Outsourced CFOs are often brought in to help companies fill in the gaps of their strategic vision for the future with an executable plan. While company leadership may come up with a vision for the business, an outsourced CFO works with the business to get it from where it is to where it wants to be.
CFOs provide valuable insights into areas such as:
Strategic planning of finances, resources, growth, joint venturing, risk mitigation, digital technology systems and business processes.
Resource planning to maximize utilization of company resources: people, assets, materials, etc.
Cash forecasting to project its financial future based on anticipated receivables collections and payments.
Long term financial planning enabling businesses to look beyond 12 months and execute the tenets of its strategic vision.
Financial Planning and Analysis
Financial planning and analysis ("FP&A") could fit under the umbrella of strategic planning, but because it is such a complex process, it gets its own section. This is an area where companies without a full-time CFO can still get laser-focused advanced corporate finance services by utilizing an outsourced CFO for:
Financial and/or operations dashboards which can include sales, costs, efficiency, utilizations, productivity, manhours, inventory turns, profitability, working capital, etc. based on company needs.
Monthly Financial and Operations Reports (MFOR), including variance analysis, which are then reviewed with leadership.
Budgets and rolling financial forecasts, including Proformas (P&L, balance sheet, cash sources and uses).
Five-year financial models with 2 to 3 years monthly projections and then the rest annually.
Scenario planning and analysis.
Pricing and bid models.
Quantifying cash needs and evaluating which funding options (debt and/or equity) are the best fit for the company.
Assisting owners in developing presentation materials to present to private equity investors, project finance, and buyers.
Various financial and operating ratio analysis.
Analyzing the profitability of products, services, regions, wells, etc.
For more about our monthly financial planning and analysis services, see our Outsourced FP&A Services page.
CFO Coaching and Talent Solutions
You can utilize the services of an outsourced CFO to coach your company’s finance and accounting team how to think and act more like a CFO so they can ultimately move into the corner spot. The trick is finding an experienced CFO who is willing to coach and transfer their knowledge to your staff versus securing a full-time role. This is actually one of the more unique services that The Energy CFO offers since our consultants work as CFO Advisor for a living (as opposed to being in transition).
An experienced CFO helps your company develop an organization chart, including positions that sit or straddle operations that are critical to company finance and accounting success. Our outsourced CFOs can help identify gaps, recommend workarounds, or create new positions. For example, last year we identified and recommended hiring an inventory accountant position for a recycling manufacturer of salvaged pipelines and a project accountant for pipeline and power construction services company. We used our inside knowledge of our client needs and their culture to detail position responsibilities and establish job qualifications, draft job descriptions, review resumes from HR postings, conduct first round candidate interviews for company owners, and create a shortlist for the organization to interview. We do all this for 10% to 15% of the cost of competitors.
Shrinking the Cash Conversion Cycle
Global pandemics, climate crisis, banks existing oil and gas lending, oil crisis, etc. create situations where cash is often king and only those with it will remain in business. When there are economic hardships, an outsourced CFO can really help you shrink your company’s cash conversion cycle. What that means is basically reduce the amount of time between when you start perform a service or manufacturing/sell a product and when you get actually paid (clears the bank). An experienced CFO will evaluate, identify, quantify, make recommendations, and help you implement a plan so that your company successfully survives these trying times. The faster your company collects cash, the stronger your balance sheet.
By no means is this a comprehensive list of services an outsourced CFO can provide. There are numerous ways a CFO can help strengthen your business based on your individual company needs. They can custom-tailor their services in areas such as:
Growing the business organically or via M&A transactions.
Analyzing and making recommendations to improve the company’s top-line revenues.
Reducing the cost of goods sold or cost of sales.
Shrinking general and administrative costs.
Increasing overall EBITDA.
Setting and evaluating pricing, bids, etc.
Analyzing Sales Mix in terms of profitability and cash needs, customer concentration, customer profitability, or risk profile.
Making recommendations to EBITDA by reengineering operating and business processes to increase efficiency and effectiveness across the organization.
Evaluating and improving company costing.
CFOs can also secure funding, be it debt, private equity, project finance, or advance planning for IPO. But keep in mind, not all CFO services are created equal.
What to Expect from the Energy CFO
The Energy CFO’s Outsourced CFO Service is intentionally designed to wrap around your accounting or controller service provider. It’s a white-glove service with your best interests in mind. Our team has a corporate energy background and training in areas such as corporate governance or institutionalizing a company, board experience, corporate and business unit planning, investor relations, corporate finance, energy accounting, risk management, and much more.