Outsourced CFO Services
Having an effective financial strategy is critical to every size and type of organization. The Chief Financial Officer bears the primary responsibility developing and executing that strategy, but many businesses and nonprofits struggle to find an individual with the background, expertise, and skill set necessary for that duty. As a result, many businesses miss critical opportunities because they are not able to manage their financials effectively. The good news is that through Black Octagon Group’s Chief Financial Officer program, any size of organization can reap the benefit of effective strategic guidance without needed to incur the expense of a full-time CFO.
With the Executive-as-a-Service program, small and mid-sized businesses and charitable organizations can have access to the same level of marketing expertise and resources that larger corporations find to be indispensable. As part of the our Executive-as-a-Service program, clients can add an outsourced operations executive to their team for a fraction of the cost of a full-time staff member.
Black Octagon Group’s outsourced Chief Financial Officers work with the team to determine what actions the company needs to take to be able to effectively manage all aspects of operations. These specific operations related strategies can cover areas such change management, program improvements, risk management and safety, process management, inventory control, and cost reductions. All of these areas can be critical to build and maintain profitability.
Below are just a few examples of steps that a CFO from Black Octagon Group can help a business take to help it grow and thrive.
Financial Projections
Many of the topics that board meetings cover are directly linked to your finances: fundraising, business strategy, the annual budget, etc.
Some outsourced CFOs offer the service of attending board meetings to lead financial discussions and interpret the figures. The outsourced CFO can field questions, go into detail about financial projections, present financial models, and explain the theory behind the assumptions in their projections.
An outsourced CFO solution will use your financial results from previous periods to help predict how the company will perform over future months and years. This includes projecting your expenses and revenues across all key verticals, how your sales expenses will grow, and how many salespeople you’ll need to meet revenue targets. If you already have financial projections in place, an outsourced CFO can extend and maintain them.
Scenario Modeling
Scenario modeling involves creating alternative projections that show how your company is likely to perform under various conditions.
For example, you may model an aggressive scenario where the business grows by 25% in one month, as well as a more conservative scenario where it grows by just 5% in a month. For each scenario, the modeling would predict the impact on financial results like revenue and costs.
The current circumstances may also call for a COVID-19 impact scenario, where growth decreases month over month. Planning for multiple scenarios is necessary but time consuming, so outsourcing this task can give you back valuable hours.
Actual vs. Budget
The budget sets targets for how the startup should perform each month in order to achieve the results in your projections. To monitor whether the business is on track or underperforming, the outsourced CFO will compare your actual financial data to the budget and report back on where you stand. Calculating the variance between your budget and actuals highlights where you may need to adjust your strategy or review whether the budget is achievable.
Unit Economics
An outsourced CFO solution can help you establish and track the unit economics for your business model. They will also come alongside other departments to help guide product and service development to assure profitability to the organizational activities today and with future projects.
For example in SaaS companies, this usually involves looking at the average revenue and costs per customer. The CFO will likely monitor the ratio of customer lifetime value (LTV) to customer acquisition cost (CAC) to show how sustainable your business is, and to indicate ways you can improve profitability.
Financial Reporting
Even if an outsourced CFO won’t be presenting at meetings, they can support the team by preparing the reports, slides, and figures for you to present yourself. This service is particularly helpful when you’re preparing for meetings with investors. Having key financial documents on hand means you can respond immediately to requests and avoid the embarrassment of looking disorganized. Plus, your outsourced CFO will review and confirm the accuracy of your key monthly financial statements -- Profit & Loss (P&L) or Income statement, Cash Flow Statement and Balance Sheet.
HR Oversight
Headcount is a main HR function and also often the biggest expense of a startup (or any company, for that matter). An outsourced CFO can collaborate with the HR manager to monitor how changes to the team affect your ability to hit budgeted figures, and, if necessary, make recommendations about how to cut staffing costs. They can also advise on how to develop a competitive compensation package that is still good value for the business.
Strategic Planning
Founders who are new to the startup world may make strategic decisions that have unexpected consequences on their expenses or revenue growth. An experienced outsourced CFO will help you avoid these kinds of mistakes by advising on strategies that work from both finance and business viewpoints. For example, the interim CFO may be able to give advice on the business models you’re designing, and suggest an alternative model that might be a better fit.
Customer Contract Reviews
An outsourced CFO can advise business owners on how to negotiate more profitable contracts with customers. From a finance perspective, the CFO can identify potential risks that could end up costing the company, and make sure contracts are watertight. From the business perspective, they can assess whether the contract terms are in your best interest, and suggest ways to make them more profitable.
Legal Team Liasion
For a CFO to produce accurate financial statements, they need to have a clear view of the company’s contracts and legal obligations—something they can only get by working in close collaboration with your legal team. Such collaborations also give them an opportunity to review your legal documents to see if they’re in the best interests of the business. Having a CFO’s perspective on legal decisions ensures you’re aware of the financial outcomes before you make a commitment.
Startup Specific Guidance
As a startup, your finance needs are different than those of established businesses. An outsourced CFO who has years of experience in your vertical can guide you through processes like building out your team and exploring funding options, and highlight details someone with less specialized knowledge may have missed; for example, contract loopholes that need to be fixed. However, if you choose an outsourced CFO without the relevant experience, the support they can offer will be limited. For instance, if your business is a SaaS startup and you work with a CFO specializing in direct-to-consumer businesses, chances are they’ll only be able to act as an adviser rather than being a hands-on partner.
