The outsourcing industry has brought significant leverage to businesses and enterprises. By getting professional expertise and assistance in on-demand contexts, organizations can boost performance and production at much lower costs. Outsourcing also allows for a leaner workforce, maintenance of core competencies in-house, and more efficient resource management.
Big businesses and megacorporations still generally employ full-time consultants, officers, and talented professionals. However, a new generation of companies is getting the same advantage by contracting out professional assets. In the context of outsourcing, the above includes the position and function of a Chief Financial Officer – a fractional CFO, to be precise.
Compared to an internal full-time senior financial leader, he or she works for a company on a retainer or contractor basis. The functions and responsibilities could differ, depending on the specific needs of the outsourcing company. But in general, he or she provides the oversight that an organization needs to fill a financial insight gap.
That financial oversight accounts for three essential functions that need establishing in the outsourcing company:
Demonstrating Financial Leadership by Working With the CEO
In general, the fractional CFO provides financial coaching to the business owner or company CEO, especially if the latter is not finance-oriented. In other words, he or she uses financial statements to help the CEO understand the finances of his organization in a strategic sense.
Likewise, if there were plans for expansion of operations or acquisition of a business, then he or she would bring to the table the best financial strategy to meet them.
The above-mentioned plans might involve overhauling reporting by varying and tracking key performance indicators. He or she then delivers the resulting reports to the CEO for making informed decisions. The plans could also include replacing technology platforms to aid the CEO in streamlining processes and implementing other solutions.
Using Financial Expertise in Working With Banks
One of the critical tasks of a fractional CFO is helping an organization navigate through a cash crisis. That includes optimizing the mix of debt, deposit, and treasury management products, which results in improving credit while reducing risks for the business. It could also include overhauling the entire accounting process to eliminate errors and improve financial efficiency.
He or she likewise leads the organization in strategic negotiations from banks or financial institutions to credit or legal departments. Such assistance would help advocate for the business and sustain relationships with the right financial institutions.
Establishing Financial Credibility by Working with Investors
Financial credibility requires raising capital. One effective way to achieve that is to build and maintain vital stakeholder relations. The tool to create such relationships comes in the form of well-packaged financial reports.
A financial report must have at least two elements to receive consideration. First, it must have curated financial data that boosts the objectives of the business. Second, that data must come with the right narrative or communication, showing how the organization uses its capital to yield investment returns to its stakeholders.
The bottom line is that any company, whether it is generating annual revenues of 50 million USD or 500 thousand USD, could boost profitability further with the help of a fractional CFO. The resulting partnership would better align everyone to the business objectives of the organization.
Moreover, it would establish additional counsel with other financial experts who work closely with him or her. Ultimately, the benefits would yield stronger financial standing and influence for the organization.