How to Use an Outsourced CFO to Strengthen Your Business
Updated: Jul 1
It’s becoming more popular amongst private energy companies to outsource CFO services to strengthen their business, especially when times are challenging. Yet some businesses are still confused over the difference in CFO services vs. other roles such as controllers and accountants. The scope of roles varies depending on company size and other factors. But generally speaking, a CFO helps strengthen your business by building on historical backward-looking accounting and focusing on the company’s financial future. I explain the difference in more detail in this article: What is a CFO?
Today, we’re talking specifically about outsourced CFO services and the different ways you can utilize these services to strengthen your business.
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 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.
You can utilize the services of an outsourced CFO to teach 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. An experienced CFO helps your company develop an organization chart, including positions sitting in operations that are critical to company finance and accounting success. CFOs can identify gaps, recommend workarounds, or create new positions. Additionally, they can work with you to detail position responsibilities and establish job qualifications, draft job descriptions, review resumes from HR postings, interview candidates for company owners, or create a shortlist for the organization to interview.
Shrinking the Cash Conversion Cycle
Global pandemics, oil crisis, a downturn economy, etc. create situations where cash is often king. When there are economic hardships, an outsourced CFO can help to shrink your company’s cash conversion cycle. An experienced CFO will evaluate, identify, quantify, make recommendations, and help you implement a plan so that your company successfully survives these trying times.
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 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.