Mohamed Chaudry, Interim CFO Seajet Systems looks at the Pros and Cons for SMEToday.
Outsourcing accounting and financial services is nothing new in business. But what about your CFO? The gut feeling is that any executive role within a company should – surely – be held in-house. But is the CFO different? If you can’t fill the position permanently, is it worth looking for other solutions? Could outsourced talent fill the gap on a temporary, or even ongoing basis?
As someone who has carried the role of Chief Financial Officer on both a permanent and outsourced basis, I’m well-positioned to discuss the pluses and minuses of CFO outsourcing. And, on balance, I think there are a lot of positives to be had.
The pros and cons of outsourcing the CFO role
The pros
Experience – Most CFOs willing to work on an outsourced basis are highly experienced. They have cut their teeth on other people’s time and can afford to eschew the regular pay packet of a permanent position. Because their role is their passion, and their opinions are always valued. While an inhouse CFO has the benefit of gaining in-depth, direct company insight over time, an outsourced CFO brings deeper experience gained across a wider field, which brings a different degree of insight. And this can be hugely useful when it comes to forming workable financial plans/strategies, and forecasts.
An unbiased eye – In business you form alliances. And it can be hard, once you’ve been in a role for a while, to keep your opinions free from bias. In some cases, it can be a disinclination to counter the opinion or object to the actions of a colleague who has become a friend. In other cases, it can be hard to admit your own mistakes. It shouldn’t happen amongst professionals, but it does. Either way, when you outsource the CFO role you gain access to a fresh, impartial eye. Someone who can correct mistakes and give opinions without fear of reprisals, or stepping on toes.
Cost-effectiveness – Outsourcing work of any kind is always cheaper than dealing with employees. They get to maintain their flexibility in exchange for a reduction in perks. Meaning that you gain a wealth of experience for your business, without needing to factor in holiday pay, sick leave, company car, or any of the other benefits that usually come with the CFO role.
Cons
Privacy and confidentiality – If you work with an established, professional contract CFO, with proven credentials, you can be assured of their reliability. But in some circumstances, it’s not always prudent to let outsiders into a company at a senior level. Any CFO needs to know the intricacies of a business in order to do their job. Even with the best NDAs and legal agreements in place, there are times when businesses won’t want to take that risk.
Communication – We’re all used to remote working these days, which means that we’re also all used to the potential for miscommunication. If your CFO is not working on site, then you can experience communication difficulties. An established contract CFO will be aware of this, however. And they will know what to do to counter the problem. And the one bit of good news to come out of Covid-19 is that we now all have plenty of tools to help overcome this issue.
Hidden fees – In all contract relationships, there is the potential for unexpected expenses. Before onboarding an outsourced CFO it’s imperative that you read the small print so that you know exactly what you’re paying for. And can avoid later unpleasant surprises.
For most companies, an outsourced CFO will not be a permanent solution. With new legislation relating to the contract industry (IR35), long-term outsourcing has the potential to raise as many problems as it can solve. But if you’re looking for an emergency solution to fill the gap between the departure of an existing CFO and the onboarding of their replacement, or simply want a fresh pair of eyes to provide an objective view of your company’s finances, an outsourced CFO can be an excellent option.
