In-house or Outsourced: Tackling the Startup CFO Debate
How you handle your startup’s accounting needs can determine its success
Starting and maintaining a successful company is challenging.
Your mission as a founder/owner is to oversee all daily operations while charting a course for your company’s long-term success. Your vision must be detailed-oriented and expansive. But there are parts of your business that necessitate delegation.
A startup’s accounting needs progress beyond general bookkeeping and tax management. It is helpful to think about your business’s financial hierarchy of needs when setting up your team. Accounting services that can be easily handled early on mark just the beginning of the financial processes and strategies you will need to establish to secure the lasting health of your company.
The insider vs. outsider question
Your startup needs someone to function as its chief money manager. There is much debate about whether that person should be hired in-house or an outside firm that your company has on retainer.
To guide your decision, think in terms of your three most valuable resources: people, money, and time. Insight into how you are willing to invest these three types of capital could lead to the best decision for your young company.
Take a critical look at your existing team
Consider the structure of your company and the strengths and weaknesses of those in all roles, not just financial. Is the CEO financially savvy? How involved do the founders want to be in the day-to-day financial operations? Is the current person or team tasked with transactional accounting concerns also equipped to handle complex matters of investing, tax strategies, and long-term planning?
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If your existing leadership team lacks financial depth, recruiting a full-time CFO could be the smartest thing you do. A seasoned CFO brings knowledge and strategy, and often ties to external financial support such as private and institutional investors.
A trusted CFO can be called upon to make vital decisions concerning staffing, HR, and IT that may be difficult for a founder or CEO.
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If you are not ready to commit to hiring a full-time CFO and your existing team is struggling with managing your company’s accounting needs, it makes sense to outsource to a dedicated consultancy. Outsourcing can provide comprehensive coverage for accounting services as well as long-term financial planning and tax management strategies.
An outsider’s perspective can be helpful, especially with critical financial decisions.
Assess your current financial position
When hiring a CFO, weigh initial expenses against long-term potential value. Could the associated cost of maintaining a larger team of mid- or entry-level employees equal or exceed that of one executive hire? Would your bottom line be best served by paying another company to handle all your financial needs?
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When considering hiring a CFO, conduct a detailed analysis of all existing costs required to keep your company financially sound. Include the salaries and benefits of your existing accounting team members, software systems or related expenses, and the transactional fees charged by outside accountants and lawyers. Also, consider the opportunity cost of operating a company without a long-term strategic financial plan in place.
A CFO can save many times his or her salary with expert tax management, well-placed investments, and company-building advice.
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Outsourcing to an accounting firm or a financial services company on an as-needed basis is a cost-effective option for new businesses. An outside firm can easily handle routine matters such as initial business set up, tax filings, and payroll management.
As a company grows, it is helpful to reevaluate the services it is procuring from its outsourced partner and add strategic planning, investment help, and tax mitigation strategies to the mix.
Whether charged by the service, on an hourly rate, or a monthly retainer, the cost of outsourcing could be less than maintaining a CFO and accounting team in-house.
Think about the value of time
Consider how you choose to allocate your time. Is too much of it spent focusing on financial matters? Do you wish you had someone to handle these matters completely, involving you only in the big-picture concerns? Is your team stretched too thin because of accounting issues?
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A CFO can save you time by handling all your startup’s financial concerns. Employing a trusted person who is singularly tasked with overseeing all things financial – from the day-to-day operations to long-term fiscal planning – can free your company’s leaders to create, sell, or otherwise play to your strengths.
An internal resource spares you the time of managing external resources
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Delegating accounting tasks such as tax filings and payroll to an outside firm can result in tremendous time savings. In addition to accounting services, the consultancy you retain likely uses sophisticated financial management software that will save your team the time and hassle of generating and analyzing the reports necessary to direct your business decisions.
Outsourcing allows you to focus your resources where they are needed most.
The best decision for your company
The debate rages on, with valid cases to be made for both options. How you choose to proceed depends on your company’s circumstances. Who you employ, what type of business you practice, and where you are on the startup timeline, are all contributing factors to consider.
Decide with care, because the long-term viability of your company may depend on it.
At Franco Blueprint, we can provide help in making this critical decision. We provide guidance to manage your business’s financial needs from startup through all stages of its life. It is our business to create peace of mind for you as you focus on what you do best – manage your business
Contact us for a free consultation today.