When Do You Need a CFO?

Small business owners and solopreneurs often handle all of the finances in their company when they first get started. But at some point, it’s time to outsource bookkeeping and accounting to an expert, freeing up your energy for other things. But when do you need a CFO? When is it time to make that level of an investment in your business? 

For funded startups, having a chief financial officer is generally non-negotiable since you’re relying on other people’s money. For other companies, however, it’s not always so clear when they need a CFO. 

At Fisher Bookkeeping, we can help you set up and maintain your bookkeeping processes. Our team can also provide CFO services for your company when the time is right. Book your free consultation today to learn more.

What Does a CFO Do?

A company’s chief financial officer is responsible for the financial decisions and strategy for the business. They typically oversee the organization’s bookkeeping and accounting experts and provide financial reports to the board or other C-suite executives. An outsourced CFO can fill this same role but as an independent contractor rather than an employee. 

The big-picture items that a CFO is responsible for include:

• Return on Investment (ROI): A chief financial officer helps the CEO determine which products and services will likely provide an acceptable return on investment. This expertise can help them determine whether or not to introduce new offers. The CFO also examines the ROI for existing services and products when deciding if it’s time to discontinue something.
• Risk Management: One of the most critical roles of a CFO is to help the company identify and mitigate financial risks. Their expert eye can help craft a strategy that allows the business to grow while still maintaining protection.
• Liquidity: A CFO makes sure the company can meet its short-term liabilities with liquid funds and is paying its bills on time. They also monitor expenses to ensure there is enough cash on hand.
• Financial Forecasting: Of course, no professional has a crystal ball for planning purposes. But a CFO uses economic models, historical data, and trade research to provide a forecast of a company’s financial position and performance. 
• Team Management: A chief financial officer is often responsible for hiring and managing a company’s financial experts, from the treasurer to the CPA. Whether the financial team is outsourced or in-house, the CFO manages them.
• Financial Reporting: The CFO provides regular financial reports to the CEO and board of directors. Cash flow statements, balance sheets, and P&L statements all fall under their responsibility for synthesizing and sharing with the rest of the leadership team.
• Strategy: When planning for future growth and expansion, a CFO is invaluable. They help guide a company’s finances to reach short and long-term KPIs and goals. The CFO will also help business owners seek and secure investors as the company grows.

Outsourced vs. Full-Time CFO

As with just about every facet of the business world, the way you work with a CFO looks different now than it did a few generations ago. One of the greatest developments for small business owners is the option of outsourcing the CFO role.

When you choose to hire an outsourced chief financial officer, it’s sort of like having a timeshare of their expertise. Rather than hiring them as an employee, you contract with them for a certain number of hours per month. This arrangement can be ideal for small businesses and startups that don’t have a budget for this full-time position.

If you go the outsourced route, it’s important to remember that you cannot dictate when and where that person works. They will not be your W2 employee, which means they must be able to set their own schedule. If you want to have that level of say in their work, you need to hire someone rather than outsourcing.

When Do You Need a CFO?

Hiring a chief financial officer is a significant investment for any business, so deciding when to take that step can be difficult. Business owners have to balance the value a CFO brings with the cost of supporting that role.

Here are some signs that it’s time to invest in a chief financial officer for your business.

You Are Ready to Grow Your Company

Any business growth strategy must include a solid financial plan. When you want to grow your company, it’s time to move beyond just monitoring your bank accounts and P&L statements. Bringing a CFO onto your team will help you plan and strategize for sustainable growth.

You Want to Pursue Investors

If your kind relatives are funding your startup, they may not care if you have a CFO. When you pursue more traditional investor funding, however, you should have a CFO on your team. Some investors and lenders won’t consider funding you if you don’t have a chief financial officer on board.

You Have an Annual Revenue that Supports the Investment 

A business can hire a chief financial officer any time they want to do so. However, due to the cost of a full-time CFO, the return on that investment is often lacking until your revenue hits a high benchmark.

Once you are bringing in several million dollars each year, it’s probably time to have a CFO. Some experts suggest the $10 million mark, but that’s not a set-in-stone number. An outsourced expert is often sufficient at this point since you may not need a full-time position yet. At the $50 million mark, you should consider hiring a full-time CFO for your company.

Find Your CFO

At Fisher Bookkeeping, we help companies in all stages of business. For bookkeeping, CFO services, and Profit First coaching, we are the team you need. We serve funded startups and many other companies from our offices in Portland, OR, and outside Lexington, KY. Connect with us today to see how we can help your company grow and thrive.