Why You Should Outsource Financial Services

Why You Should Outsource Financial Services
Companies ranging from first revenues through high growth can easily outsource many of their financial duties to an experienced service provider. Many companies believe that once they hit that magical $1MM revenue threshold it’s time to bring their entire team in-house – that’s not a cost-effective strategy. We have worked with companies from pre-revenue through $25MM in ARR that utilize outsourced financial personnel to manage their costs.

Outsourced Services for Growth-Stage Companies

  • The process of handling invoicing, collecting, bookkeeping, updating assumptions in the model, closing out monthly financials; you name it: takes a lot of time. This is time that could otherwise be invested in growth aspects of your company like product and sales. Outsourcing financial services also does not often require a full-time employee that will require a heavy salary with healthcare, maybe stock options and other benefits.
  • An outsourced CFO has the bandwidth to look ahead to forecasting for the company, an incredibly important tool for any company, but especially a company focused on growth. It requires knowledge of not just the company and its capabilities, but also the industry surrounding the company as well as the competition. 

  • Expertise is often an undervalued trait when companies are weighing in-house versus outsourced financial personnel. When it comes to managing the cash, founders may say “I know how to work a basic Excel.” This will not be beneficial when it needs to be formatted in a way for an investor to properly understand. Founders will also need to know how to easily modify for assumption changes and risk planning –  if they are unable to do so, it will end up costing them more time and potentially their last dollar if not executed properly.
  • When it comes to raising capital: They know they’ve done it once before so why can’t they do it again? It will not be so easily replicated with a changed market, new players in the space, and new types of financing options like Venture Debt that will not dilute you as you scale. Also, previous financiers in the space may be on to new investing profiles.
  • An outsourced CFO can also assist in making your cost cuts more efficient and strategic. They have experience in the industry, which provides them  a well-rounded view to compare with your company’s budget and costs. As an outside source, they are able to be objective. Objectivity is more difficult as an in-house employee, therefore the budget and costs may not be as efficient as they could be. 

There are varying tasks and duties, whether operational or strategic, that early-stage and growth-stage companies should consider outsourcing to an experienced professional. There is, of course, a cost to everything, but with the right financial professional, the cost can be far outweighed by saving the founder precious time and costly mistakes.