Hiring a CFO

Should You Hire a CFO for Your Small Business?

Most business owners know that the people who are hired will make-or-break the success of the company. If you bring in the right team members, then you will have a wide range of skills and expertise to handle every problem that may be encountered. Not only will you be able to avoid potential problems, but an experienced team will help with future growth and development. Whether you are hiring an entry-level employee or a CFO, you need to consider the way they will interact with your team.

It is a big decision to hire a new employee, especially if you only have a few people working for the company. So, don’t rush into the decision. Instead, look at the skill sets that are necessary and the way the person will fit in the company. Sometimes, it makes sense to hire a new employee. Other times, you might find it beneficial to outsource the tasks so that you can avoid the cost burden of another employee.

Overhead Costs of Hiring an Employee

If you are thinking about hiring another employee, then you need to evaluate the overall costs that will be added to your overhead expenses. Inexperienced employers only look at the hourly wage or salary of the employee when factoring the expenses. But, there are other cost burdens that need to be factored into the decision:

  • Salary: The wages for the employee is the base of the financial burdens that you need to bear. Look at the monthly and annual cost that will go towards that person’s paycheck.
  • Employment Taxes: Some taxes are withheld from the employee’s check. But, there are other employment taxes that need to be carried by the employer. Calculate the amount that you will be paying in taxes, worker’s compensation, and insurance.
  • Benefits: How much money will be needed for the benefits package that is offered? Most companies provide health insurance, life insurance, Paid Time Off (PTO), sick leave, and other benefits. These costs can add up over time.
  • Office Space: If you are hiring another employee, then you need to make sure that you have desk space available for them in the office. A small floorplan might make it difficult to add another person in the room.
  • Computer Equipment: Depending on the type of company that you have, you might need to provide a work computer, desk, or other equipment. If you are bringing in a financial employee, such as an accountant or CFO, then it is often necessary to provide a computer and cell phone.
  • Hiring and Administrative Costs: Also, consider the money that you will spend on job advertisements, onboarding, and training. Ongoing administrative costs are needed for payroll processing, management, and benefits administration.
  • Training Costs: Even if you find an employee that fits your desired profile, the person will need to be trained on your company practices and procedures. Not only will initial training be required, but ongoing education is often necessary to keep the person current in the industry.

Break-Even Point of Hiring an Employee

As you evaluate these costs, you need to consider the break-even point of hiring the employee. Yes, the person will be able to contribute to your team. But, will they be beneficial enough to generate the amount of cash that will pay for the expense of bringing on another employee? It’s usually worth the expense if they will bring in more profit than what you will be spending on the overhead costs. Otherwise, you might consider the option to outsource the accounting tasks instead.

Evaluating the expenses in advance will help you make the right decision for your company. There’s no doubt that you will benefit from the expertise. At the same time, you also need to ensure that you are making decisions that will add to the profitability of the company.

Sometimes, there are instances where you need to hire an employee that won’t be profitable on paper. For example, certain overhead tasks need to be addressed, and it is hard to measure the ROI of spending money on the expenses of that employee. If you are bringing in a sales rep, then you can measure their productivity by looking at the amount of business that they bring in the form of sales. On the other hand, it is hard to make the same measurement for an administrative employee, such as a secretary or assistant.

Should You Hire a CFO?

Small businesses often hire a few specialized employees, plus lower-level employees. Eventually, you will need to look at options to bring in management-level staff, such as a CFO, CMO, and more. These positions vary from one industry to the next. So, you need to consider the needs of your company before rushing into the decision.

There isn’t a hard rule that should be followed to determine when you need to hire a CFO. Some business owners want to know a sales quota or revenue level that needs to be reached in advance. But, you can’t plug in the business numbers to see if it is time to hire a CFO. Instead, you need to evaluate how the CFO will contribute to your company and whether you are prepared to carry the burden of the additional employee.

Here are a few signs that it might be time to hire a CFO:

  • Your abilities aren’t strong enough to match the financial requirements of managing the books for your company.
  • It is time to expand your company and grow to higher levels of success.
  • You are too busy, causing you to fall behind with financial tracking and reports.
  • It is hard to make important business decisions because you don’t have enough financial information to make informed decisions.
  • You are ready to bring someone in who will identify weaknesses in your business strategy, helping your company position for future growth.
  • Your business is struggling, and you want to turn things around before everything fails.
  • Financial strategy is lacking in your daily, weekly, monthly, and annual planning sessions.
  • You are thinking about bringing in investors or stepping into acquisition opportunities.
  • You don’t have professional accounting experience, so you don’t understand the laws for taxes and business management.

Even if you have experience in the financial industry, eventually the growth of the company will keep you spread too thin. As a business owner, you don’t need to do everything on your own! Instead, look for the best ways to utilize your time and expertise, while hiring others to fill in the gaps. Eventually, the growth of the company will exceed your experience, and you won’t have enough time to get it all done.

Keep in mind that some of these tasks can be handled by an outsourced accounting team. If you aren’t ready to bring on the expenses of a full-time CFO, then you might learn more about accounting services to see if you can save money without sacrificing the quality of services that are available for your company.

Don’t Overlook Lower Level Financial Tasks

Hiring a CFO won’t be the answer for some of the lower level financial tasks that need to be addressed. If you are having a hard time with bank reconciliation and data entry for invoices, then hiring a CFO won’t fix that problem. Instead, you need to start with basic financial services that are available from a bookkeeping team or small business accountant.

Most companies in the beginning stages only need these basic financial services. Our accounting team can help with tax preparation and the ongoing reporting and tracking that is required. Eventually, you might consider the option to hire a CFO if those services are still needed at a later date.

Professional accounting services are important to create a financial system that will set your company up for success. This step delays the need to hire a CFO or a full-time financial employee because you will have control over the tracking and invoices for the company. Be strategic with your plan so that you can manage expenses and plan for the future at the same time.

Benefits of Outsourcing

When you are ready to hire a CFO, you might consider outsourced CFO services as well. Many companies are seeing the benefits of outsourcing accounting and CFO services, helping to minimize the cost of hiring new employees. Compare the expenses of bringing on a full-time CFO with the cost of outsourcing the tasks that are needed, and you will see that you can probably save thousands of dollars every year with outsourced services.

If you are interested in learning more about outsourced financial services, then Easier Accounting is here to help. We offer a full range of outsourced accounting options, including payroll, ongoing financial management, tax filing, and more. Our goal is to cater your services to match the needs of your company.

Learn more about the ways that Easier Accounting can help your business. Call us for more information about the ways that we can help with your business growth. We are always here to answer your accounting questions: (888) 620-0770

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