CFO as a service: definition and advantages

When it comes to developing growth strategies, convincing investors or managing financial risks, financial expertise is required. This knowledge either exists internally or can be covered by a Chief Financial Officer (CFO). A CFO can be crucial to success in a competitive market where almost every product and service already exists.

However, not every company can or wants to afford a full-time CFO. This is where the concept of the “CFO as a Service” comes into play. In this article, we shed light on what exactly a Chief Financial Officer does, what role they play within a company and why CFO as a Service is an attractive option for start-ups and SMEs in particular.

What are the CFO’s tasks?

The CFO is the financial heart of a company. Their main task is to ensure the financial health and stability of the company. But what does that mean in concrete terms?

The core tasks of the Chief Financial Officer are:

1. Financial strategy and planning: The CFO develops long-term financial plans that are in line with the company’s objectives. This role analyzes market trends, identifies growth opportunities and prepares budgets.
2. Risk management: The CFO identifies financial risks and develops strategies to minimize them. This includes, for example, the management of currency risks or interest rate fluctuations.
3. Financial reporting and compliance: The CFO ensures that all financial reports are prepared correctly and on time. Also, ensures compliance with legal regulations and is the point of contact for auditors.
4. Raising capital: Whether through investors, loans or other sources of financing – its task is to raise the necessary capital for the company’s growth.
5. Operational financial management: He monitors all data: daily financial operations, cash flow management, accounting and controlling.
6. Strategic advice: As part of the management team, the financial genius uses his expertise to advise on strategic decisions and ensures that financial considerations are taken into account in all areas of the business.

The role of the Chief Financial Officer therefore requires not only financial expertise, but also strategic thinking and leadership qualities. Nevertheless, he is not necessarily the managing director of a company.

Is a CFO also a managing director?

The managing director (or CEO) is responsible for the overall management of the company. He makes the final decisions regarding strategy, personnel, business development and finances. The CFO, on the other hand, is responsible for the strategic planning and monitoring of the company’s finances.

The question of whether a CFO is also a managing director cannot be answered in general terms, as it depends on the company structure. In many companies, the CFO is a member of the management board and reports directly to the CEO (Chief Executive Officer). However, this does not automatically mean that the CFO also assumes the duties of a managing director.

In small companies or start-ups, it can happen that the CFO is also the managing director, especially if resources are limited. In larger companies, however, the roles are usually clearly separated to ensure specialized management.

CFO as a service for start-ups: the advantages

Start-ups face particular challenges. They have to grow quickly, assert themselves in dynamic markets and often work with limited financial resources. This is why a full-time CFO is not feasible for many young companies. This is where CFO as a Service comes into play.

Why does CFO as a Service make sense for start-ups?

• Expertise: One of the most important points is the expertise of an external CFO. They often have years of experience and a broad network from which start-ups can benefit.
• Focus on the core business: While the founding team concentrates on product development, market entry and marketing, the Chief Financial Officer takes care of financial matters.
• Cost efficiency: Instead of paying a high salary for a full-time CFO, start-ups can hire an external CFO as required and invest the costs saved elsewhere.
• Flexibility: An external CFO can be deployed depending on the phase of the company and its needs, be it for capital procurement, financial planning or risk management.

By using “CFO as a Service”, start-ups can therefore benefit both financially and strategically, which in turn increases their chances of establishing themselves in their market.

Learn more about this here: Internal vs. external CFO.

The advantages of CFO as a service for small and medium-sized enterprises (SMEs)

Not only start-ups, but also small and medium-sized enterprises (SMEs) can benefit significantly from CFO as a Service. SMEs often do not have the resources to hire a full-time CFO, but still need professional advice to improve their financial stability and growth opportunities.

Further advantages for SMEs:

• Improved financial processes: A Chief Financial Officer helps to optimize financial processes and implement more efficient systems. This improves the accuracy, speed and transparency of financial reports and forecasts.
• Better decision making: With access to data-driven financial analysis and reporting tools, SMEs can make informed decisions based on realistic forecasts and analysis.
• Scalability and growth: An external financial services provider helps SMEs scale the business by developing clear financial strategies to manage growth and efficiently manage necessary financing or investments.
• Risk management: With an experienced CFO on board, small and medium-sized companies can better identify and manage financial risks by reacting early to market changes or internal weaknesses.
• Cost control: By hiring an external CFO, SMEs can plan their expenses better and avoid unexpected costs.
• Up-to-dateness and compliance: An external CFO ensures that the company is always up to date with the latest legal regulations and financial standards.

Overall, an SME benefits from professional and independent financial management without having to bear the costs and obligations of an internal CFO.

What does an external CFO cost?

The costs for an external CFO can vary and depend on several factors:

• Scope of services: Does the company only require specific advice or comprehensive support?
• Experience and qualifications: A Chief Financial Officer with specialized knowledge or industry expertise can demand higher fees.
• Time commitment: Is the CFO engaged on a project basis, on an hourly basis or as a part-time employee?

Typical cost models:

• Hourly rate: The costs are calculated per hour. The hourly rate is based on experience and specialization.
• Monthly flat rate: Monthly retainers can be agreed for regular services.
• Project-based: Fixed project fees may apply for specific projects such as financing rounds or M&A transactions.

Consider the cost in the context of the potential benefits and savings an external CFO can bring to the business. Financial knowledge is incredibly valuable to a business, which is why CFO as a Service is a service that will pay off in the long run if you find the right match for your team.