Is Outsourcing Financial Management Right for You?

Having a virtual office space, virtual secretary, virtual business, even a virtual trade show is not uncommon. My partner, Jan Triplett, steps in as a Virtual Marketing Officer for our clients. She helps set up alliances, sales channels, runs trade shows, recommends and implements a sales strategy to find right prospects and keep the best platinum profile™ customers.

The decision to outsource financial management is another matter. It’s scary to do — to open your books to someone outside the business; to have less control than if they were an actual employee. It can keep you up at night wondering if you can rely on a Virtual Chief Financial Officer to get things done.

Why do business owners do it? Because they…

Is this you?

1. Hate doing books, dealing with collections, payroll, taxes, etc.
2. Don’t understand financial management or are not good at numbers
3. Can’t afford someone full time with financial and compliance expertise

If you’re an owner-operated business where you are directly involved with providing service or creating products, you may also feel that there’s just not enough time to keep on top of this and do everything else. Hiring someone to help periodically may make perfect sense.

That’s what happened to a client of ours. While working with us, he grew his business from two employees to over 100; from a payroll of about $50,000 to well over a million; from two small ongoing contracts; to four very large monthly contracts plus SXSW, ACL, etc. There just weren’t enough hours in the day. We stepped in as his finance department.

Bottom line, however, if you’re considering using a Virtual Chief Financial Officer, I don’t recommend abdicating your responsibilities. You still have a job to do.

1. Know your business.

If you know your business and your exit strategy, you can meet your obligation of guiding the VCFO. They should set up your books and provide reports that make sense to you and tell you what you want to track. They can make suggestions and should. You still have to make the decisions.

2. Know your pricing.

If you can identify your true total costs and build in a reasonable amount for profit and contingency, you can rely on your pricing. Again, the VCFO should advise you on general rules and their experience. You have to evaluate how it applies to your business, agree with the principles, and feel comfortable about the numbers that are used to calculate the financial health of your business.

3.Know your customer.

No one knows your customer better than you do or you should. Again, a Virtual CFO can and should help and advise you. They can help you determine the bookkeeping and recordkeeping system you need to put in place, how to better manage your cash flow, how to improve collections, when you need to restructure, seek funds and where, how to cut costs, etc. Your job is to choose what’s right for your customer and company.

Outsourcing can make sense but you can’t just leave it all to others. The same is true if you employ a bookkeeper or CFO on staff. You’re the boss. You have to have the big picture and direct others.

What has been your experience with outsourcing your financial management?