Outsourced CFO
In-House Vs. Outsourced CFO: Which Is Better?

Accounting and bookkeeping are complicated tasks requiring an expert to oversee and manage them. The expert and top personnel to fulfill this responsibility is a CFO. Every business needs a CFO to complete the accounting function accurately and efficiently. As it is a huge responsibility, a business must be diligent when choosing the right CFO. Businesses can hire an in-house full-time CFO or a professional outsourced CFO services provider. Both come with pros and cons, and a business must carefully compare them before deciding what type of accounting services will best manage the CFO’s responsibility for the business. Let us know which is better, in-house CFO or outsourced CFO. 

Meaning and roles of CFO

A CFO or Chief Financial Officer is the person that manages the entire financial function of the business. CFOs are at the top of the financial management tree. They track the cash flow, prepare financial planning, and analyze the financial statements and reports to determine the strengths and weaknesses of the business. They keep in mind the current financial health of the business and strategize for future financial planning processes. A business can hire an in-house CFO or outsource to accounting and bookkeeping service providers.

The duties of a CFO vary as per the size of the organization, type of industry, and type of business; however, there are some general duties that every CFO has to perform. The duties of a CFO can be divided into three main parts based on the type of activities, including:

  1. Treasury- 

Treasury means that the CFO is responsible for managing the business’s assets, debts, and liquidity. It includes keeping track of all business investments, whether physical or financial.

  1. Controller- 

Controllers handle the day-to-day financial and accounting activities of the business. They prepare reports to provide better insight into the important accounting functions, including accounts payable, accounts receivable, payroll processing, etc. A controller often has an MBA or CPA degree.

  1. Strategy and Forecasting- 

A CFO manages the strategy and forecasting function for business growth based on the internal and external financial data and reports. They offer advice on business fields like market expansion, product development, human resource management, and investments. They strategize and forecast to enhance business growth based on the current financial position. 

Points of difference

As accounting and bookkeeping are important business functions, many businesses prefer to outsource their accounting services to expert third parties, whereas some still use in-house experts. Both methods have pros and cons and are chosen per business requirements. When it comes to business, CFO has access and control over the entire business’s financial functions. This makes choosing the right type of CFO services even more important. 

However, before deciding whether a business should hire an in-house CFO or outsource the activity, it is necessary to know their differences. It will help determine which method is better. The important points of difference are:

  1. Costs- 

Hiring an in-house CFO involves additional costs like training, equipment, office space, etc. The business also needs to invest in good accounting software for efficient accounting. These costs make it difficult for a business to earn good ROIs with in-house accounting, especially if it is a small or medium-sized business.   

On the other hand, outsourcing saves these additional costs. The outsourced accounting services providers bring equipment and software to manage the business’s finances. They also usually work off-site, saving extra office space costs for the business. An outsourced CFO is a cost-effective model. A business doesn’t even have to hire and train the outsourced CFO. 

  1. Convenience- 

Hiring a full-time in-house CFO is a costly affair. Therefore, businesses usually prefer to hire a CFO only when they encounter an unusual financial situation. CFOs are also required to ensure statutory compliances, and with the increased focus on legal and regulatory requirements, businesses need a CFO all the time.    

A CFO helps businesses with enhanced growth, transition issues, and highly specialized projects. The constant need for a CFO and the high cost of in-house personnel has shifted businesses’ dependency on virtual or outsourced CFO. Hiring an outsourced CFO for accounting and bookkeeping services is convenient for businesses concerning cost and services. 

  1. Security level- 

Businesses are very prone to fraud and embezzlement from their finance team. A business generally has a small finance team comprising 2 to 3 members, with complete control over its finances. It weakens the business’s security level and puts the business at risk of fraud.      

Outsourced CFO services have a high level of security in their functioning and help businesses overcome security issues. Outsourcing accounting services providers have a professional and expert team of personnel who work dedicatedly on a business’s finances. They also use accounting software and tools that keep the data secure. Outsourced CFOs are bound to confidentiality and security of business data by their work contract. 

  1. Focus on core activities- 

When a business uses in-house accounting and CFO, it needs a team of expert finance personnel. Hiring, training, and managing the in-house team needs time and resources from the business. It leads to numerous resources involved in a single activity. Though it is good for small businesses, it becomes a distraction for the core activities.

Outsourcing accounting services helps businesses to focus their personnel on the core business activities. As the accounting function is handed to an expert third party, the business personnel are free and can put their efforts into the more business important activities. 

  1. Size of enterprise- 

An in-house CFO is ideal for businesses that have just started and have few transactions and activities to be managed. Also, the businesses that have reached the stage where they have substantial revenue benefit from having a full-time CFO.

However, businesses that are focused on their growth should hire outsourcing CFO services. They help businesses save cost and time and enable scalability. Outsourced CFO services are also faster and more convenient for businesses that have just reached the stage where they need a CFO to manage their finances.

Which one is better?

Every business has its needs regarding accounts management, and it must be the basic point for figuring out which one to choose. After considering the need and points of difference between an in-house and outsourced CFO, it is easier to determine which is best suited for a business. In-house CFOs are best when cost and resources are not an issue for the business. On the other hand, an outsourced CFO is the best solution if a business focuses more on saving costs and resources to enhance growth and productivity. Though businesses need to choose the right type of CFO services, outsourcing accounting services are suitable for almost every type and size of business.