Does Your Business Need to Hire a CFO?

| June 30, 2013 | 0 Comments

Alexander

Rarely do those who start their own businesses also have a background in finance; and rarely are they equipped to deal with potential investment, financial strategy, and budgeting that a growing business requires. Generally when small businesses start out there is a need for an accountant to handle the basics of payroll and taxes, while the directors concern themselves with other aspects of the businesses finances. If a company continues to grow and its financial reporting becomes more complex it’s likely that outsourcing all financial management becomes the reality or bringing in a Chief Financial Officer (CFO) responsible for financial analysis, market analysis as well as accounts management.

Costs 

In an ideal world, every company would undoubtedly benefit from the expertise of a CFO and in-house solutions tend to be more convenient; however, not every business can afford or needs a CFO. According to an article in the New York Times, a business should hire a CFO when their revenue reaches a tipping point of around £10 million. If your business is turning over that much money it’s reasonable to assume that the director would be able to afford to pay the six-figure salaries that are typical for CFOs. If your revenue is in the hundreds of thousands it’s more likely that a team such as Alexander & Co. chartered accountants will serve your needs and cost you a lot less. The advantage of outsourcing is that you pay on an as-needed basis rather than always having someone in-house.

Size of the business

Financial management outsourcing can be the perfect option for a small business or a start-up. In the heady days of setting out in the business world, you need to concentrate on recruiting the best team, marketing, and generating income; the intricacies of finances are something that you may not have the time or resources for. While a CFO will busy themselves with complicated measures such as capital management strategies, an outside accounting team will deal with more modest tasks suited to a small business like preparing tax and VAT returns are filed correctly, but can provide more in-depth services such as budget forecasts. If your business is growing to the extent that you suspect an acquisition is on the cards it might be worth getting a specialist CFO in or at least hiring someone who could be there throughout the process.

Influence

A CFO has a massive influence on the direction of your business and its future. Hiring a CFO is a decision that shouldn’t be taken lightly as it amounts to taking on a strategic business partner who you will have to relinquish quite a degree of control to. They are inside the business thinking up ways to generate wealth; it is essentially a more forward-thinking role, whereas an outside accounting team are generally thought of as backward-looking, focused on historical financial data. The most important thing is to make a decision that suits your business and that you have a good grasp of the business’ financials to ensure success whether that’s by outsourcing to accountants or hiring a CFO.

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Category: Finance

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