Internal vs. external CFO: Which one is better to your company?

The choice between an internal and an external CFO (Chief Financial Officer) can have a significant impact on the success of a company. CFOs play a key role in financial strategy and planning, making them indispensable for companies of all sizes. But which approach is right for your company? In this blog, we look at the advantages and disadvantages of both models to help you make an informed decision.

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Highlights

  • An internal CFO offers long-term planning and is deeply integrated into the company
  • An external CFO is flexible and brings expertise from different sectors
  • An internal CFO needs a full-time salary and additional benefits
  • An external CFO often has less in-depth understanding of a company‘s internal processes
  • The CFO as a Service approach combines flexibility with in-depth financial expertise

Content

  • Internal vs. external CFO: Which one is better to your company?
  • Highlights & content
  • What is a CFO?
  • Internal CFO: advantages and challenges
  • External CFO: flexibility and expertise on call
  • The role of the CFO in corporate management
  • When is an internal CFO the better choice?
  • When is an external CFO the better choice?
  • CFO as a service: flexibility and expertise on demand
  • Do you need a reliable CFO partner in Switzerland?
  • FAQ
  • That’s what our customers say

What is a CFO?

The CFO is responsible for all financial aspects of a company. This includes the preparation of financial reports, budget management, ensuring liquidity and compliance with tax and regulatory requirements. In addition, the CFO plays a key role in strategic planning and provides valuable financial insights to help make informed decisions.

A CFO also oversees the areas of accounting, tax optimization, financial forecasting and risk management. The position is crucial for the smooth functioning of a company, especially in phases of growth or restructuring.

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Internal CFO: advantages and challenges

An internal CFO is a permanent employee who understands the company in depth and is involved in all financial processes. This option offers a number of advantages, but also brings with it some challenges.

Advantages of an internal CFO

  1. Deep integration into the company: An internal CFO knows the company and its processes inside out. This familiarity makes it possible to develop customized financial strategies that are precisely tailored to the company’s needs.
  2. Long-term strategic planning: As an internal CFO works for the company over a longer period of time, he or she can develop a sustainable and future-oriented financial strategy. The long-term perspective makes it easier to set clear growth targets and identify risks at an early stage.
  3. Direct cooperation with management: As a permanent member of the management team, the internal CFO has direct access to other decision-makers. This promotes efficient communication and the rapid implementation of financial decisions.

Challenges of an internal CFO

  1. Limited expertise: An internal CFO may have extensive knowledge of the company, but may not have the broad industry experience that external CFOs gain through their diverse work in different companies.
  2. Limited flexibility: An internal CFO is fully committed to the company. If the company needs additional expertise or a new perspective at short notice, it may be difficult to find this internally.
  3. Costly: An internal CFO requires a large investment as they receive a full-time salary and additional benefits. This can be a significant financial burden for smaller companies.

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External CFO: flexibility and expertise on call

Ein externer CFO bietet eine flexible Alternative, die insbesondere für kleinere Unternehmen oder Start-ups attraktiv sein kann. Externe CFOs werden in der Regel auf Projektbasis oder als Teilzeitkräfte engagiert und bieten spezialisierte Dienstleistungen in genau definierten Bereichen an.

An external CFO offers a flexible alternative that can be particularly attractive for smaller companies or start-ups. External CFOs are usually hired on a project basis or as part-time employees and offer specialized services in precisely defined areas.

Advantages of an external CFO

  1. Cost savings: As an external CFO does not usually work full-time, companies can reduce the costs for salary and benefits. Instead, only the services actually rendered are billed, which is particularly attractive for start-ups and growing companies.
  2. Broad expertise: External CFOs often have experience in different industries and companies of different sizes. This experience enables them to bring best practices from other areas into the company, providing fresh perspectives and innovative solutions.
  3. High flexibility: Companies can engage external CFOs according to their needs and project scope. This offers the opportunity to draw on additional expertise during growth phases or for special projects without making long-term commitments.

Challenges of an external CFO

  1. Dependence on external consultants: As an external CFO is not a permanent member of the team, there is always a risk of dependence on external consulting services. If the CFO leaves the company, valuable knowledge could be lost.
  2. Limited integration: As external CFOs usually only work in the company for a limited period of time, they often lack an in-depth understanding of internal processes. This can make it difficult to develop tailor-made strategies.
  3. Less control over processes: External CFOs are not always present in the company, which can limit direct control over financial processes. This can lead to delays in decision-making.

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The role of the CFO in corporate management

A CFO not only assumes responsibility for a company’s finances, but also plays a central role in management. In particular, the CFO is closely interlinked with the management in strategic planning and decision-making.

This position requires a deep understanding of the company’s goals and the ability to integrate financial aspects into the overall planning. A CFO ensures that the company not only remains financially stable, but also quickly recognizes and reacts to opportunities and risks in the ever-changing business world.

Various areas of responsibility of a CFO

The tasks of a CFO involve far more than just preparing financial reports and keeping the accounts. A modern CFO is also increasingly responsible for controlling and monitoring the company’s key performance indicators.

These tasks are crucial to ensure the efficiency and profitability of a company. A professional accounting system helps to maintain an overview of all financial flows and create a solid basis for management decision-making.

Financial planning and cost efficiency

Another important aspect of a CFO’s role is financial planning. Especially in times of economic uncertainty or expansion, it is up to the CFO to create accurate financial forecasts and develop a clear strategy to control costs.

This includes optimizing budgeting and investments to ensure that the company remains competitive without overstretching its financial resources. The CFO’s ability to plan effectively has a direct impact on the long-term success of the company.

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When is an internal CFO the better choice?

An internal CFO is particularly suitable for companies that want to develop and implement a long-term financial strategy. Larger companies that have complex financial structures and processes benefit from a CFO who is deeply integrated into the processes.

In addition, an internal CFO is ideal if the company needs a strong financial leader who works with the management team on an ongoing basis.

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When is an external CFO the better choice?

For small and medium-sized companies or start-ups that do not yet have the financial resources for an internal CFO, an external CFO offers a flexible and cost-effective solution.

An external CFO can also provide valuable support in transitional phases, for example during a restructuring or growth process. Companies carrying out special projects such as a company valuation or a financing round can benefit from the expertise of an external CFO.

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CFO as a service: flexibility and expertise on demand

In today’s digital world, the CFO as a Service (CFO service) approach offers a flexible solution for companies that do not need a full-time CFO resource but still want to have access to in-depth financial expertise.

This service allows companies to access the expertise of an experienced CFO without the financial commitment of a full-time position.

An external CFO can provide support as part of CFO services or as an interim CFO for specific projects such as financing rounds, restructuring or the introduction of new business areas. An interim manager often acts as an interim CFO in the company for a limited period of time in order to manage the necessary changes or transition processes.

The CFO as a Service thus offers the opportunity to access first-class financial expertise flexibly and in line with requirements, without entering into long-term commitments.

This gives small and medium-sized companies in particular a clear overview of their financial options and strategies to support their growth in the long term.

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Do you need a reliable CFO partner in Switzerland?

Choosing a competent CFO, whether internal or external, is crucial to the financial success of your business. At Nexova, we understand the challenges faced by start-ups and SMEs in Switzerland and offer customized solutions tailored to your needs.

Our experienced team of financial experts offers you both the flexibility and expertise of an external CFO and the depth and long-term strategic planning that comes with an internal CFO. With our extensive experience in the Swiss financial landscape and our digital approach, we guarantee efficient, transparent and professional services that will take your business to the next level.

Whether you are looking for a short-term finance project, a long-term CFO strategy or a flexible solution, Nexova is your trusted partner in Switzerland. Contact us today and find out how we can help you achieve your financial goals and make your company sustainably successful.

FAQ

Answers at a click

When does it make sense to switch from an external to an internal CFO?

Switching from an external to an internal CFO can make sense if your company is growing and has to deal with more complex financial requirements on an ongoing basis. As soon as you need regular strategic support, for example in areas such as financing, mergers or strategic expansion, an internal CFO could be the right choice. An internal CFO can dive deeper into business processes and develop long-term strategies that are crucial for sustainable business development.

What are the costs associated with hiring an external CFO?

The cost of an external CFO depends heavily on the type of arrangement. Typically, external CFOs work on an hourly or project basis, which can be advantageous for small businesses or start-ups. Rates vary depending on the CFO’s experience and specialization, but they are usually more flexible and scalable compared to the salary costs of an internal CFO. It is advisable to make clear agreements on the cost structure in advance to avoid surprises.

How much time does an external CFO usually need per month for a company?

The amount of time an external CFO spends with a company varies depending on the specific needs and complexity of the business. For smaller companies or start-ups, it might be sufficient for the external CFO to be available only a few hours per month to review financial reports, prepare budgets or provide strategic advice. However, for larger projects, such as financing or restructuring, the CFO could take up more time.

What are the biggest risks when working with an external CFO?

One of the biggest risks when working with an external CFO is the potentially limited availability, especially if the CFO is responsible for several clients. This could lead to delays in decision-making at crucial moments. Another risk is the lack of deep integration into the corporate culture and processes, which could make it difficult to implement long-term strategies. It is important to set clear expectations upfront and ensure that the external CFO understands the company’s objectives.

Can a company employ both an internal and an external CFO at the same time?

Yes, in some cases it can make sense to have both an internal and an external CFO. For example, an external CFO can be brought in during a transition phase or for special projects such as a merger or acquisition, while the internal CFO takes on the day-to-day tasks. This combination offers the company both the long-term stability of an internal CFO and the flexibility and expertise of an external consultant.

How do I find the right external CFO for my company?

To find the right external CFO, you should first define your own company needs and objectives. Look for a CFO with proven experience in your industry or in similar sized companies. Recommendations from your network or other business owners can also be helpful. Pay attention to the expertise, professional background and whether the potential CFO shares your values and company goals. A detailed preliminary discussion helps to avoid misunderstandings and ensure that the external CFO is a good fit for your team.

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