The term “chief financial officer,” or “CFO,” refers to an executive of the senior level management of any firm who oversees the organization’s cash flows and financial strategies. In other words, they are in charge of managing the business’s financial activities.
A CFO may be the company’s highest-ranking financial officer. Controllership, treasury, risk management, taxation, investor relations, and internal audit are among a CFO’s primary duties. Let’s talk about these CFO roles.
The responsibility of presenting financial reports to other management officials in order to supervise the organization’s accounting is known as controllership. They are even held accountable as the company’s controller.
Treasury: A CFO plans all of the short- and long-term investments. The organization’s banking and investment activities fall under the purview of the CFO.
Risk management- CFOs are responsible for controlling the risk associated with investments, interest rates, and currency rates in international transactions.
Taxation – Taxation is the management of the calculation and payment of all taxes, including income taxes, sales taxes, and foreign taxes.
Investor relations – The CFO acts as a liaison between the company’s shareholders and the company, providing them with information on the company’s internal operations and financial health. This allows the company to keep a positive relationship with its shareholders.
Internal audit: to evaluate the financial records’ accuracy and conformity to organisational policies.
Overall, the CFO is very vital to the company’s success in terms of profitability, especially over the long term. When a business reaches its complexity, hiring a full-time CFO makes perfect sense. The owners of the company must determine whether an external CFO will suffice in place of hiring an internal CFO.
An in-house CFO is a manager who is employed full-time and given a designated position within the business.
Outsourced CFO means the officer hired part-time to perform all the functions of a CFO remotely and not being within the office all the time.
It is important to keep the size of the company in mind while deciding between the outsourced or in-house CFO. There’s a huge difference between a full-time or a part-time CFO relating to the cost, experience, diary , network and cultural fit.
Let’s discuss in additional detail about such differences.
Cost-effectiveness: The foremost crucial factor at the time of hiring any employee is the cost to the company. Hiring a full-time/ in-house CFO will certainly have a greater impact on the business expenses rather than hiring a part-time/ outsourced CFO. An organisation with an outsized number of in-house employees will incur larger amounts of staff expenses like insurance and medical benefits, office expenses like larger workspace or staff welfare expenses etc., which comparatively reduces within the case of outsourcing.
Multiple Industry Experience: one among the great advantages of an outsourced CFO over an in-house CFO is the versatile experience that they gain while working for different companies in different industry sectors. This leads to a wider vision and enhanced level of thinking being introduced into the organization which would not have been possible with the in-house CFO. together with the experience of the hired individual, the business benefits from the expertise of the team the outsourced CFO works with and every one the companies that the team of CFOs work for.
Track Record: An outsourced CFO will have experience working for multiple companies which brings more confidence by the convenience of building a picture of their performance and track record. An in-house CFO might lack the personality, skill set or sort of experience as compared to an outsourced CFO.
Vast Network: Most CFOs spend maximum years struggling within the industry before becoming an Outsourced CFO for a particular business. This makes them meet, interact and know many of us around the world professionally and results in a vast network of individuals. And this activity continues being an outsourced CFO, whereas it becomes difficult for an in-house CFO to possess such huge networking around them as they are assigned to one organization only.
Cultural Fit: a big benefit of a part-time or outsourced CFO is that they are used to working with people from various societies and characters. this provides them the critical experience of squeezing into another organization with no significant interruptions while joining. the very fact that they are perceived as outsourced frequently takes the tension of the ‘fitting in’ process and the assumption is for them to come in and continue ahead with the gig.
In conclusion, there are evidently many benefits in hiring a part-time or an outsourced CFO. It reduces the value of business by slashing the large salary with multiple extras and having other commitments that are a necessary part of employing a senior full-time member of staff.
By hiring a part-time or outsourced CFO, the business will, however, still get all the advantages of expert advice, skills and leadership and have somebody who can rise up to speed very quickly and who is accustomed to working in all kinds of different businesses and brings a wealth of knowledge, contacts and therefore the experience of all their CFO colleagues as well.