Outsourced CFO vs. In-House CFO: How to Decide Which Your Business Needs

Most business owners around Augusta and Aiken didn’t open their doors because they love accounting. As Jason Douglas, our CFO Services Manager, puts it, people start businesses because they’re good at what they do and they care about doing it well. The books usually come second. Michelle Bennett, one of our partners, sees the same pattern. Owners put the accounting on the back burner while they take care of customers, and nobody looks at it closely until tax time.

That works for a while. But as your business grows, you’ll reach a point where a bookkeeper recording last month’s transactions isn’t enough, and you need someone helping you plan the next move. That’s usually when owners start asking whether to hire a CFO or bring in outsourced CFO services.

“If you’ve outgrown your bookkeeper but aren’t ready to bring on a full-time CFO, that’s exactly where we come in.”
Michelle Bennett, CPA, Partner, SME CPAs

What does a fractional CFO do that a bookkeeper doesn’t?

A bookkeeper records what already happened. They enter your transactions and reconcile your accounts so your books are accurate when it’s time to file taxes.

A CFO, fractional or full-time, uses those same numbers to plan ahead. They’ll build your budgets and cash flow forecasts, and they’ll show you which parts of your business are making money so you know where to put your time. They also weigh in on bigger decisions, like taking on a bank loan or opening a second location.

Larger companies often have a controller in between, who manages the accounting staff and makes sure month-end reports are correct. Most small businesses don’t have all three. They have a bookkeeper, or an owner doing the books at night, and nobody in the planning role at all.

What’s the difference between an outsourced CFO and an in-house CFO?

An in-house CFO is a full-time executive on your payroll. An outsourced CFO does the same kind of work through a CPA firm without joining your staff. You’ll also see this called a fractional CFO.

The biggest difference is what you’re taking on. When you hire in-house, you’re responsible for recruiting that person and keeping them, and if they leave, you’re back at the beginning.

“Beyond gaining access to experienced accounting professionals, they’re able to shift the burden of the hiring process and cost… HR costs, benefit costs, training costs… and they don’t have to worry about their in-house accountant or CFO leaving down the road and having to start that process all over again.”

Jason Douglas, CPA, CFO Services Manager, SME CPAs

The other difference is depth. A single hire brings one person’s experience. An outsourced team brings several people who’ve worked with businesses like yours, and at a CPA firm, that team sits right next to the people doing your tax planning.

What is a fractional CFO, and is it the same as an outsourced CFO?

A fractional CFO is an experienced financial professional who works with your business on a part-time or scheduled basis, usually through a firm, instead of joining your staff full-time. Outsourced, fractional, virtual, and part-time CFO all describe that same basic setup. 

Since the labels overlap, look at what’s included when you compare firms instead of going by the name. Some firms assign a single person. Others, including SME, give you a team, which means your CFO support and your tax planning come from the same place.

How do I know if my business needs CFO services?

Michelle says the clearest sign is also the simplest one.

“I think the biggest sign is that you haven’t reconciled your bank accounts and you’re really not sure where you stand cash flow wise.”

Michelle Bennett, CPA, Partner, SME CPAs

We see a few other signs come up often with new CFO clients.

• You don’t trust your own numbers. Many small business owners come to us unsure how the business is doing and not confident in the reports in front of them. If you’re second-guessing your profit and loss statement, you can’t use it to make decisions. If you’re not sure which numbers to watch, start with the five financial metrics we recommend reviewing every month.
• Your books only get attention at tax time. If you catch up on your accounting once a year, you’re making decisions the other eleven months without current information.
• You’re applying for financing. Your bank will want up-to-date financial statements before it lends. Jason spent eleven years in retail banking before joining SME, so he knows what lenders look for on the other side of the desk. Our guide to what your financials need to show for an SBA loan covers the basics.
• You’ve added a new line of business. Current numbers can show you when one part of your business isn’t as profitable as you thought, or when another is growing fast enough to deserve more of your focus.
• You’re facing a bigger decision. Expanding into a new market or bringing on investors calls for forecasts and planning that go beyond what a bookkeeper provides.

When should a business hire an in-house CFO?

There’s no single revenue number that settles it, but many businesses start considering a full-time CFO somewhere between $5 million and $15 million in annual revenue. Size isn’t the only factor, though. An in-house CFO works best when there’s already an accounting staff for them to lead. Without one, a new CFO often ends up doing the bookkeeping themselves.

A full-time hire can also make sense when you need someone in the building every day, such as during a merger or while you’re preparing to sell the company.

For most businesses in the CSRA, that point comes later than owners expect. Until then, outsourced CFO services give you the planning without adding an executive to your payroll. If you do reach the point of hiring internally, an outsourced team can support the transition and keep your books running while you search.

What does working with SME’s CFO team look like?

Our CFO clients work with a dedicated contact who learns their business, backed by the rest of our team in Augusta and Aiken. If you already have a bookkeeper on staff, we’ll work alongside them, reviewing their work each month and using it to build your forecasts.

Day to day, we help close out your books each month and answer questions as they come up during the year. When we notice something in your numbers that needs your attention, we’ll bring it to you before it turns into a problem.

“Not only are we looking at the numbers and what’s happening within the business, but we’re also able to take notes along the way and help guide them through any major decisions they may face in the future.”

Jason Douglas, CPA, CFO Services Manager, SME CPAs

Because our CFO team works alongside our tax team, the planning you do during the year carries straight into your tax strategy, and you won’t have to sort through advice from two different firms.

Ready to Get Clear on Your Numbers?

If you’ve outgrown your bookkeeper but aren’t ready for a full-time CFO, SME CPAs can help you figure out the right level of support. Our CFO team works with owners on both sides of the Savannah River, and we’ll start by looking at where your books are today and what you need from them going forward.

Reach out to our CFO team, and we’ll walk you through what outsourced CFO services could look like for your business.