How an Outsourced Chief Finance Officer Can Drive Scale for Ambitious Startups

Business Insights

A good CFO will take a seat at strategy planning meetings, maintain compliant and accurate financial reporting, and play an integral role in the growth journey of the company. Having an individual with strong accounting competencies involved at a strategic level of any business is a huge benefit to the management team – but an appropriately qualified and experienced professional is an expensive resource. Not all small businesses, be they ambitious startups or small to medium enterprises can afford to engage a senior finance professional on a full-time basis.

However, there is an alternative approach – outsourcing your finance function to an external CFO. Here we look at the major benefits of using an outsourced model until a point that the business can afford to onboard a permanent hire.

6 Advantages of Outsourcing the CFO Function

    1. Cost Saving

    Outsourcing your CFO function rather than hiring on a full or part-time basis helps founders avoid the often-hefty recruitment and hiring costs (and the delays they inevitably entail) as well as the obligations and risks of employment. An outsourced CFO will only be engaged for the time the business requires but will have the same level of insight and control on the financial reporting of the business – giving founders cost efficiencies and flexibility as they scale.

    2. Strategic Advice

    An outsourced CFO will provide you with strategic analysis and support on every aspect of your financial performance. They will help you minimise your tax obligations, make informed budgetary decisions and navigate the landscape of tax incentives for startups in the UK. CFO’s play a key role in not only managing a young and fast-growing company’s finances but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones.

    3. Flexibility

    You can use the services of your outsourced CFO for what you need - when you need it. That could be for compliance related obligations such as VAT returns or yearend, value added reporting through monthly or quarterly management accounts or for specific projections such as raising investment or submitting an R&D tax claim. This means you and your CFO can tailor the role to suit your company’s needs at any time at an appropriate level of cost to the business.

    4. Crisis Management

    The loss of major contracts, customers or employees can be devastating for any business, but even more so for a startup. An outsourced CFO will be able to help you and your team navigate your way out of the crisis through diligent cashflow management. This could include producing short-term cashflow reports, identifying costs that can be cut, producing new financial forecasts, and helping with raising vital equity or debt funding.

    5. Sounding Board

    Running a company can often be a lonely, stressful experience for founders. That’s where a an outsourced CFO can help. He or she can act as an independent sounding board for the over-burdened, stressed-out business owner. With their ‘big business’ experience, it’s more than likely CFOs can provide solutions to what can seem like overwhelming problems to the founders of growing businesses, drawing on experience from similar startups facing similar challenges.

    6. Mentorship

    An outsourced CFO can help to establish sound reporting systems and tools that help improve reporting metrics and communications to investors. They can also act as mentors to members of your existing finance team, guiding them where necessary and providing the advice they need to rise to new challenges. Often this gives founders comfort that there is a succession plan in place to inhouse the FD function at an appropriate time for the business without losing continuity.

Example Scenario

Dragon Argent, a boutique professional service advisor to startups and SMEs based in London provide an outsourced CFO service, predominately to tech stations. Craig Williams, Head of the Accountancy Practice for Dragon Argent, became an outsourced CFO of a high growth technology start-up in February 2020.

Since then, Craig has overseen the finance department with a time commitment of an average of half a day per week. In this time, Craig has realised around £500k in R&D tax credits for the company, managed challenging cash flow situations, implemented incentivisation schemes to key staff and assisted in investor relations to raise over £3m of equity funding. The client testimonial states that Craig has “provided the vital support our business needs to grow and scale” and “ensured all shareholders have the confidence and comfort to embrace our journey”.

Dragon Argent’s CFO service includes regular meetings to assess the financial position of the business, creation of forecasts built on various case scenarios to project how income, expenditure and investment interact, and the provision of supporting information to obtain debt and equity funding.

  • Financial reporting

  • Cash flow management

  • Performance tracking

  • Financial management, market guidance, and strategic planning

  • Budgeting and expense control

  • Organizational leadership