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Is it Better to Hire a CFO or Outsource Your Small Business Financials?

How many people are employed by your company? If you need to bring in a specific skill set to help with your business goals, then the first inclination is often to post a job opening and hire another employee. While there’s nothing wrong with hiring employees, it is important that you consider the needs of your business and all of the options that are available.

Not only will you take on the financial burden of one more salary to pay, but you also need to oversee the in-house management of an additional person. So, you should evaluate your motivations for hiring another employee, and also consider the benefits of outsourcing if it makes sense.

Today we are going to compare the options that you might be considering if you need help with your business financials: in-house bookkeeper or accountant, hiring a CFO, or outsourcing the tasks to an experienced team.

Be Prepared if You Hire Another Employee

If you are hiring an employee to help with business financials, then you probably need someone to assist with basic bookkeeping tasks, such as tracking transactions and cutting paychecks. On the other hand, a high-level executive can be helpful if you need assistance with bigger financial decisions.

It can be a hassle to go through the process of finding the right employee that will fit the scope of work that you need. Plus, you will need to ensure that a good onboarding program is in place to help the employee learn more about the in-house practices that you are using.

On top of the logistics of bringing another employee into the office, you also need to think about the monthly costs that will need to be covered. Most small business owners only think about the salary that will be paid. But, you shouldn’t overlook the additional costs that come with employees: employment taxes, benefits, office space, equipment, and more.

The salary is just the starting point… with many other cost burdens that will need to be carried by your company. These expenses go up exponentially if you are hiring a top-level executive instead of an entry-level bookkeeper. You will spend more money for an experienced CPA or CFO compared to the costs for someone who is only looking after the books.

Outsourcing for Efficiency and Affordability

In comparison, outsourcing gives you the access to the skill sets that are needed without the hassle of bringing another employee onto the team. You can hand the financial tracking responsibilities to an experienced team. But, there is no need to pay the costs of a full-time employee or benefits.

Many small business owners see the benefits of outsourced accounting. These services are growing every year, giving you more access to the best in the industry without the need to hire an employee. It is a win-win situation: accountants and bookkeepers love the freedom of self-employment, while small business owners can minimize costs and maximize profits.

What Skills Do You Need?

Whether you are hiring an employee or choosing an outsourcing team, you need to consider the tasks that should be addressed and the skills that need to be provided. If you don’t know a lot about business finances, then it can be hard to know if you should hire a basic bookkeeper, accountant, or CFO.

Here are a few questions that you can ask to help you identify the skill set that will fill your needs:

  • Do You Need Someone to Manage the Invoices and Paperwork? In some cases, business owners already have an accountant to handle tax filings. But, it can be a challenge to keep up with the invoices that come through the office each day. If you are looking for a person to oversee the filing and data entry, then a bookkeeper might be the right solution. There’s no need to pay someone with more experience if you won’t be using their services for financial analysis or tax preparation.
  • Are You Looking for Help with Tax Preparation and Strategy? Then, you will be best served to hire a CPA to oversee these tasks. A CPA knows the current tax laws and they can help with the strategy of minimizing your tax burden. Their job is to make sure that you are staying in compliance with the various state and federal regulations. In most situations, a CPA will keep the financial records and perform regular audits to ensure the quality of the reports. At the same time, they also take care of the reports and paperwork necessary for tax filing. If you face an IRS audit, then a CPA will assist with the proceedings.
  • Do You Need an Expert to Forecast the Future and Design a Financial Strategy Around Your Business Plan? Then, a CFO might be the right answer. CFOs don’t handle the busy work like invoice data entry or payroll processing. Instead, they are looking at the way the numbers are working out to anticipate the future of your business. A CFO can help with the capital structure of your company, as well as assisting with fundraising and relationships with investors. The goal of a CFO is to help a company sustainably reach peak performance levels, helping to improve company profits.

CPA vs. CFO

The benefits of hiring an accountant are if you need someone to oversee your business finances to ensure that the reports are accurate and you are maintaining compliance. A CPA can also assist with clarification of tax law, as well as preparing and filing the tax paperwork. If needed, these skills might encompass other financial tasks such as bookkeeping, payroll preparation, and more.

On the other hand, a CFO is needed if you require higher-level financial analysis. Don’t hire a CFO if you just need help with tax preparation! Instead, a CFO offers the skill set to bring insight and top-level strategy for the operations of your company. CFOs focus on the future of the business, forecasting, anticipated cash flow, and long-range planning to help the company grow. In comparison, CPAs are usually focused on reporting and accuracy of historical data.

One of the biggest mistakes that growing businesses make is hiring an accountant and assuming that they will get the full long-range strategy and business plan designs that should be coming from a CFO. Accounting services are perfect if you need tax strategy services. But, you need to tap into the expertise of a CFO if you need forecasting and financial strategy.

Best Solution? Regular Accounting with Occasional CFO Services

If you are running a start-up or small business, then the highest priority is to make sure that you are maintaining regular accounting services to keep up with the daily financial tracking and reporting. Your accountant can oversee company assets and offer the technical financial knowledge that you need as you are making decisions along the way. Accounting services are also essential to make sure that you are current with internal auditing.

To sum it up, most small businesses need accounting services for tax preparation and more. But, not all companies need to bring on a CFO. Instead of hiring a full-time CFO, consider the benefits of occasional consultations until your company is strong enough to carry the costs of a full-time CFO. In the meantime, don’t harm the future of your company by cutting corners on accounting services. These regular financial skills are essential to make sure that you are staying on track and keeping up with the cash flow demands for your company.

Accounting Services Will Boost Your Results and Decrease Your Stress

Most business owners will agree that hiring an accountant is one of the best decisions they made for their company. Your accountant can take responsibility for the financial reports. Instead of crunching the numbers, you can turn your attention to the business development activities that will help your company grow.

If you want to expand your offerings and help your company grow, then it is essential that you hire a CPA to assist with your tax strategy and preparation. These services are key so that you don’t have to carry the financial responsibility on your own. Plus, you will make better business decisions when you always have accurate financial reports to assess the current status and anticipated cash flow for the year.

Is it time for you to bring in the accounting skills that are needed for your small business? Instead of spending the cash on a full-time employee, consider the benefits of outsourced accounting. You will have full access to an experienced team while saving money on your monthly cash flow at the same time.

Our team at Easier Accounting specializes in these accounting services for start-ups and small business owners. We invite you to call us today to learn more about the options that can support your business goals. We will cater the services to match the needs of your company, helping to create the long-term success that you are working hard to achieve. Call today to learn more about the services that we offer: (888) 620-0770

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