No matter what kind of business you run, staying on top of your finances is critical to keep growing in the short term, and over the long haul. For example, research from SCORE found that cash flow problems bring down 82% of small businesses in America. And cash flow is only one piece of your financial picture. If you’re operating with a small team or a limited budget, staying on top of every financial detail can be challenging.
What’s the solution? The key is outsourcing various aspects of their team members’ financial duties for many founders. Outsourcing financial tasks allow you to clear your plate of responsibilities bogging you and your employees down. Plus, it gives you the chance to save your business money in several different ways.
How can you whittle away some of your corporate expenses by paying others to manage your most nagging financial chores? Here are a few good places to start.
Get Expertise Without Putting an Expert on the Payroll
According to PayScale, the average full-time CFO earns around $138,000 annually, not including benefits. If that figure makes your knees go a little wobbly, you’re not alone. Many small businesses don’t hire CFOs. Or, if they’re family-based businesses, they put close relatives into the CFO position — even if those relatives don’t have a background in finance.
Here’s the truth, though: You don’t have to put a CFO on the payroll to get the advantage that comes from having expert advice. Instead, consider contracting with a fractional CFO. Many fractional CFOs have impressive resumes. In addition, they make a living by helping grow businesses on an as-needed basis, which allows you to tap into their wealth of knowledge in an affordable way.
If you’ve been trying to play both the CEO and CFO position, you could be doing your organization a disservice. Unless you have a CFO’s training, consider working with a fractional CFO. The advice you’ll get will be highly valuable and worth every penny. And if you’re not right ready to take the CFO plunge, try finding an accountant who focuses on small businesses. Many accountants offer advisory services that extend beyond taxes to help with duties like bookkeeping, payroll, accounts payable, projecting cash flow, and long-term financial planning.
Consider How Financial Decisions Affect Your Business Today and Tomorrow
Small businesses make choices all the time that can affect their finances in unexpected ways. Take the government response to the pandemic in 2020. Per research from payroll and benefits provider OnPay, more than half of applicable companies availed themselves of Paycheck Protection Program (PPP) loans. A smaller but still substantial percentage of organizations chose to implement CARES Act Social Security tax deferrals (30%) and employee retention tax credits (27%) as well.
In a time when business owners were scrambling to figure out how to keep their doors open, the added stress of pulling nuanced financial details for loan applications kept a lot of smaller businesses from applying for free money from the government. As a result, one percent of PPP borrowers snatched up 25% of the available loan money.
But having an outsider who could have the time and know-how to conduct the financial analysis necessary to apply for PPP loans and loan forgiveness made a big difference. For example, OnPay’s research also showed that businesses with an outside accountant were more likely to receive government aid. They were also more likely to expect things to return to normal soon and expected to see increased revenues in 2021.
It’s obviously hard to foresee something as disruptive as COVID on the horizon, but having good help on standby can help small businesses weather any storm.
Make Changes Without Any HR Hassle
Making a bad hire is always an expensive prospect. Depending upon the amount of effort you put into the process of hiring an internal CFO, you could wind up wasting more than $200,000 on the wrong person. That’s reason enough to take a second look at outsourcing many of your financial jobs and tasks.
Though you’ll want to do your due diligence to find the right financial partner, you won’t be locked into your choice. That’s the beauty of working with outsourced consultants or providers. If the relationship doesn’t prove as fruitful for either party, you can sever ties without all the formal headaches.
Again, this doesn’t release you from interviewing financial freelancers carefully and pragmatically. However, it does give you a bit of wiggle room (and save your business money) in the event that the arrangement doesn’t pan out.
Keep Your Small Business Truly Small
There’s something to be said for keeping your small business on the smaller side. Sure, you’ll find tons of articles online devoted to the subject of scaling your company. Yet not every CEO wants to get huge.
Staying smallish could give your organization some advantages. For instance, you might be able to operate a remote workforce with a tight, lean team. Or you could make staying small (while growing) a long-term goal. In the case of one tiny confectionary maker in Philadelphia, staying the same size for more than 150 years has led to positive press. Certainly, the candy-maker is doing well financially by choosing not to expand physically.
While outsourcing financial responsibilities doesn’t affect how many workers you have on your payroll. It just bumps up your capacity to stretch your budget and perhaps improve your profit margins.
Scale Your Business Without Recruiting
Let’s say that you’re on the opposite end of the spectrum and want to scale. One big issue you’ll face is figuring out how to leap forward possible without overspending on salaries that shorten your runway.
As you look over your scaling plans, think about your financial needs. Can you outsource anything that you’re currently working on in-house? This could involve anything from evaluating monthly or quarterly budgets to reconciling figures at the end of each day or week. The more items you can outsource, the less you’ll need to bring other workers into the fold. Consequently, you’ll save your business money.
And as you figure out how to scale things like marketing, sales, and operations internally, the responsibility for scaling your finances can sit with an outsourced professional who’s more likely to know what it takes.
Gain Access to Modern Tools
What does your financial tech stack look like? Is it rife with the latest gadgets and software? Or are you and your colleagues bogged down by legacy systems that don’t get the job done?
One upshot of outsourcing some of your financial to-dos to another individual or team is that you don’t have to invest in top-notch tech. Instead, the other person or entity should have the tech at their fingertips. As a result, you get all the advantages of the technology without having to directly pay for it, which will really save your business money.
Of course, your relationship with your outsourced financial provider may encourage you to bring in new tech eventually. Maybe your fractional CFO recommends a particular budgeting program. Or your outsourced payroll specialist suggests that you invest in a cloud-based portal to make exchanging and downloading financial data easier. These byproducts of outsourcing can only serve to make your team stronger. And if you’ve planned on undergoing a digital transformation anyway, they can speed up the process.
Empower Your Internal Financial Team to Work More Strategically
If you have an internal financial team, how much time does it spend on repetitive, mindless tasks? Or solving problems that are outside its skillset? Probably more than you’d like to assume. Many workers lose no less than four hours weekly on responsibilities that could be automated, and it can be frustrating to reinvent the wheel to address issues a more experienced outsider may be able to fix right away.
Outsourcing so-called “busywork” gives your team the breathing room they need to work on higher-level items. Rather than sitting on the phone all day and trying or copying information between spreadsheets, they can focus on being leaders and innovators. They can also adopt best practices sooner and overcome obstacles more easily when pulling in an expert with more perspective.
As you know too well, time equals money. When you can put time back into the hands of your strongest players, it can make a big difference.
Add Reinforcements to Your Roster
In some situations, you may end up outsourcing — not to an individual person — but to a firm. This can add additional resources to your account quickly. For instance, an outsourced CFO might be able to bring in a bookkeeper or CPA to get everything in order. Or, they may have a good debt collection agency on speed dial. In addition, a well-connected partner makes it a lot easier to address an array of issues that might otherwise require a lot of legwork to figure out.
Ultimately, doing your corporate finance correctly doesn’t have to mean spending a ton of money or making permanent increases to your payroll. Instead, outsourcing some of your financial to-dos can free up valuable time, save your business money, and allow your team to have a much more significant impact.