Top 10 outsourced CFO services for startups

What is an outsourced CFO?

An outsourced CFO, or fractional CFO, offers the same skill as an in house hire, but on a contractual basis. So, the individual in charge of your startup’s finances will be a contractor, not a full time employee.

Outsourcing a CFO service is a great option for those that can't afford to hire a full time CFO just yet. The benefits and services they provide outweigh the expense of employing an outsourced CFO. And, it can be significantly less costly than hiring a traditional full time CFO.

But wait a minute, aren’t CFOs reserved for bigger businesses that generate lots of revenue? Not necessarily. You see, the right CFO will contribute lots of value to any business, no matter its size.

Just like a normal CFO would, an outsourced CFO provides financial, business, and accounting services and advice to your startup. So, in other words, an outsourced CFO does exactly the same thing as a full time CFO.

What do outsourced CFOs do?

Considering that outsourced CFOs have the same functions as full time CFOs, they perform a wide range of tasks in respect of your startup’s finances and operations. As such, their key functions include:

Budgeting and planning

Outsourced CFOs can help you create a budget and plan your finances. In this way, you’ll know that your startup’s finances are always under control, and you’ll know how much you can spend, what to spend it on, and when you’ll be able to spend it.

Financial Projections

Simply put, financial projections help you see into the future. In other words, they help you see your revenue potential and how your company might perform both over the short-term and long term.

Cash flow management

One of the biggest challenges for startups is sufficient cash flow. In simple terms, without proper cash flow, you’ll struggle to keep your startup afloat. Here, outsourced CFOs can help you manage your cash flow and ensure that you always have the necessary capital available to pay your expenses or invest in services for your startup.

Financial reporting

Financial reports like balance sheets or profit and loss or income statements show you the financial health of your startup at a glance. In addition, these reports can help you when you need to demonstrate your finances to investors or when you need funding.

Financial presentations

An outsourced CFO can be invaluable when you need to make presentations to investors or other stakeholders. Because they have the experience and skills, they will be able to handle any questions or inquiries that your start-up might receive.

Risk mitigation and crisis control

Risk is an inevitable part of doing business. Founders and entrepreneurs know this better than anyone. The danger is that if risk goes unmitigated, it could prevent growth, or in more serious cases, become terminal to a startup.

Outsourced CFOs generally have a comprehensive knowledge of operating in different markets and across industry segments meaning they can intuitively help to identify and address risk from your internal operations, current financial management and external market conditions.

10 must have skills to look for in outsourced CFO services

The one thing we haven't mentioned above, is although outsourced CFO services can be great....

It can be difficult to find an outsourced CFO to fit your business.

The market is saturated, you know a Google search won't give you the quick answers you need anymore. So, you need to be armed with understanding and expectations before you start enquiring. That's where this list will be your saviour.

1. Scenario modelling

Look for an outsourced CFO that demonstrates skills and services around scenario modelling for alternate futures and situations. These make sure your business operates continually and maintains financial solvency during worst case events (think Covid-19, the war in Ukraine, and the current recession). This modelling deepens the strategic understanding that an outsourced CFO can bring, and raises the awareness of risk across the business.

It highlights friction points and emphasises the weight of any uncertainties that are in your business model. And it's not all doom and gloom. An outsourced CFO with these skills will also use scenario modelling to plan for best case scenarios (like favourable market conditions). This in turn will encourage broader, more innovative thinking across your teams.

When done right, scenario modelling:

• Helps to support your startup’s culture
• Allows your finance team to position itself as a strategic partner to the business
• Encourages collaboration and creative/strategic thinking in managers

As you move forward with your business plan, an outsourced CFO can positively impact other parts of your business. A great example of this is when you're communicating financial results to stakeholders. The outsourced CFO will support you in this endeavour, and keep you cool under the collar when those questions start flying.

Scenario modelling has been shown to improve the performance of teams, boosting confidence in employees, customers, and investors.

2. Compliance

When it comes to handling compliance issues, especially relating to tax, experience speaks volumes. Look for an outsourced CFO that has the experience, specific knowledge and skills to help you when tax time comes around. Tax is one of those jobs that sucks out your time and energy, and causes stress that, let's face it, we want to avoid.

By making sure your outsourced CFO is seasoned in tax compliance, you have one less thing to worry about, so you to focus on what you’re good at, like running your business and talking to customers. It also allows gives you peace of mind, knowing that if an audit does come your way, your accounts will be in order.

If things do go wrong, an outsourced CFO should have the skills and knowledge to help. Being experienced in business, they'll understand other laws and regulations relating to your business, including company laws. This means they’ll be able to help you with all your compliance issues and challenges should any arise.

3. Resource management

As a startup founder, your list of responsibilities is ever increasing and seemingly never ending. But there are only so many hours in the day and you're only one person.

So, you have a choice. Face severe time constraints and often struggle to fit everything you need to do. Or, find an outsourced CFO that can help manage the big financial side of product development, customer relationships, capital raising, employees and other business operations.

When seeking a CFO service, be sure to ask about their resource management support, as well as their specific experience in your line of work. Why?

You need an outsourced CFO you can trust. Otherwise, you'll be adding "check on the CFOs work" into your to do list...and you'll be back to square one. You need to assure yourself that they’re the experts in this field. Making an outsourced CFO part of your team should save you a lot of time, effort and resources.

4. Training

An outsourced CFO should offer to collaborate with you and your team, offering insightful training to help you better understand the inner workings of finance and its implications in your business.

Remember, real improvements come with understanding. And training is the way to get there. Ideally,you should start by building your skills in:

Reporting and forecasting

Bookkeeping and due diligence

Cashflow management

5. Financial projections

Every startup needs financial projections. Not least because they outline the revenue potential of your startup and help you to attract investment. They also form the basis of your budgets. So, it’s important that projections are developed by a finance expert to make sure you're making realistic predictions.

An outsourced CFO should use your financial results from previous periods to help predict how the company will perform over the coming months and years. They'll project expenses and revenues across all business functions and from here you can see how your sales expenses will grow, or how many new employees you’ll need in order to meet revenue targets.

An outsourced CFO should also look at any financial projections already in place, and then take responsibility for extending and maintaining them.

6. Customer contracting

You want a CFO that can provide expert advice to startup founders on how to negotiate the most profitable contracts with customers. So, ask for some examples in their previous relationships.

From a finance perspective, the CFO should identify potential risks that could end up costing the company money. And by doing so can make sure contracts are not exposing the company to undue risk.

From a business perspective, they should also assess whether the contract terms are in the startup’s best interests, and may suggest ways to make contracts more profitable. Customer contract reviews require a CFO who intuitively understands and has experience with your industry and customer base. So make sure they do!

7. Budgeting

A budget helps you to keep track of your business’ financial position. Your outsourced CFO should be really hot on this. Effective budgeting will keep you on top of your business’s expenses and make sure you always know what your revenue position is.

Budgeting in this way allows you to plan better for the future, not only in the short term but also when taking a longer term view. When enquiring with CFOs, ask about their budgeting services, and the level of support they can provide.

8. Schedules that work for you

This one's not so much a skill as a little bit of advice. Ask how their process works in regard to schedule. Remember, as they're outsourced, they dictate their own hours, meaning even if they tick all those skill boxes, they may not be on hand to help when you need.

Decide how many meetings and catchups you think you'll need, then find a service that can work with those musts.

9. Financial reporting

Financial reports like balance sheets, profit and loss sheets and income statements provide startups with valuable information about a startup’s finances. These reports can be used to show whether or not you’re on track with your growth plan.

So where does an outsourced CFO come in? They should have the skills and experience to analyse and interpret these reports, to provide you with valuable insights into the financial health of the business.

10. Business growth

An outsourced CFO service should help you to facilitate growth. From helping build and optimise your financial processes, to conveying it in a presentation that can wow investors, you need to be confident that the CFO you choose is up to the job. Remember, they should be well versed in:

• Department budgeting

• Paying bills and prioritising

• Profitability analysis

• Cash flow forecasting

• Payroll management

• Handling financial paperwork and offering professional scrutiny

• Accounting system design and implementation

• Internal process and risk control design and implementation

CFO services that flex to your needs

We've unpacked a lot of detail on you there. Feeling confident? Don't worry if not, we're about to make this really simple for you. We're Accountancy Cloud, the all in one financial support your business can rely on. And, we offer outsourced CFO services.

We help ambitious startups, like you, with flexible access to strategic financial expertise and knowledge.

Most startups know they need a CFO but aren't 100% sure what it entails. Based on your stage of growth and business goals we can recommend a plan - or you can tell us what you need. From growth forecasting to complex accounting, we do it all in house.

Your level of CFO support is dictated by you. We offer monthly, pay as you go or one off plans, to suit your needs and budget.