Why hire a contract CFO?

It is common for entrepreneurs or start-ups to find themselves unable to make progress in their business plans due to their financial situation. The internal accounting processes not being optimal, or the financial data collected and analysed being irrelevant may be some issues you are facing in your business operation. You want to address them, but you cannot neither afford all your time and energy to the issues, nor the money to hire a full-time executive to do so. What option do you have?

Chief Financial Officer (CFO) — An asset instead of a liability

First, let us explore how a CFO can actually be an asset to your business. Typically, a CFO is responsible for activities which involve financial controlling & management at a firm, namely:

  • Budgeting and forecasting
  • Cash flow management
  • Corporate planning
  • Fundraising
  • Operational support (Financial reporting, audit preparation)
  • Transaction support (M&A, IPO, due diligence)

On a more relevant and specific level, the CFO will be able to help optimise your accounting processes, and ensure complete visibility of your accounts and ledgers. Moreover, you can receive much-needed insights into your business from proper cost allocations, tracking of revenue sources and expenses, and more importantly, improve profitability. With the CFO’s accounting knowledge and experience, you can eliminate problems that stem from inefficient processes and data which provide little to no value. Consequently, you can then channel more time into growing your business, while the CFO takes care of your financials for you.

Of course, the question of whether you can afford the services of a full-time CFO will naturally arise. You are looking at S$15,000 to upwards of S$40,000 a month for the services of a full-time CFO, a substantial sum that cash-strapped companies simply cannot afford, and comes at too high an opportunity cost for developing businesses. Furthermore, the value you get out of this may not justify the costs you have to incur; the cost of having a CFO around will become a liability to you instead. Fortunately, you are not out of options, as this is where a contract CFO can step in to help.

Full CFO services at a fraction of the cost

With a contract CFO, you are effectively paying for full CFO services at a fraction of the cost that you would otherwise normally incur. How so, you may ask. A contract CFO is similar to a full-time CFO in terms of his/her responsibilities, and possesses the necessary expertise to carry them out. The main difference, however, is the flexibility and potential cost savings you will have if you were to hire a contract CFO. You can engage the services of a contract CFO as and when you require the relevant expertise, and terminate them when it is unnecessary. You will thus only incur costs for the period of time the CFO is hired for, and the type of work that is carried out. Consequently, you will reap cost savings since you will not have to pay the high fixed costs that come with a full-time CFO for the same amount of work done.

Reducing opportunity costs to open doors

The cost savings you reap from hiring a contract CFO to resolve your problems opens doors for you to grow your business. Since you avoid having pay the exorbitant price of a full-time CFO, you are essentially making additional financial resources available for other purposes. These include investing back into the business itself to grow it further, or for an additional headcount that is necessary for your operations in another department. This may then result in more investment returns generated for your company, on top of the returns you are likely to receive from engaging CFO services. Hence, not only do you reduce the opportunity cost associated with engaging CFO services, you are also generating new opportunities to develop your business further.

Access to a wider range of skills

Hiring a contract CFO service is akin to hiring a company to help your business. Since a contract CFO service provider usually includes a team of CFOs and operational support staff, you are not just hiring an individual, but a dedicated team of experts to help your business.  This means that you may actually be tapping on all the talents available in the company, and extracting more value out of every dollar you have paid. If you were to contrast this with hiring an individual full-time CFO, not only are you limited to the knowledge and skills that particular individual has, you may even receive less value per dollar paid. As such, a contract CFO service may actually be better.

A contract for who?

Contract CFO services come at a substantially lower cost than the conventional full-time CFO role, and with higher value through more possible investment opportunities and wider range of skill sets. However, you still have to take some considerations into account before making your decision, mainly:

  • Do you require a full-time commitment or dedication from your CFO to your business?
  • Do you require a CFO to help you grow your business for the long-term or execute a long term strategy?

Depending on your answers to the above, a contract CFO service may or may not be what you need.

A contact for you…

If you answer “no” to the questions above, and are in need of CFO services to improve your business operations or explore near future business growth opportunities, have a look at our contract CFO services that we offer.

Alternatively, if you require CFO services that will help you in developing and executing long term strategies, here are some services that we offer which can assist you in achieving your goals.