What are the advantages of outsourcing the financial management of your startup?

External CFO

A few weeks ago, our CEO Jaime Medina explained in which cases you should consider hiring an external CFO to help your startup grow.

Saving costs, reducing unnecessary risks by not having an expert in finance or improving your negotiating skills in front of potential new investors are some of the benefits that Jaime wrote about.

This week, we want to show you, in a little more specific way, the advantages of outsourcing financial management for your startup, compared to hiring a full-time junior or senior finance position.

We begin the article by reminding you of the functions that the CFO must perform in a startup.

advantages of outsourcing the financial management

What functions should a Chief Financial Officer (CFO) perform?

The functions that the CFO of a startup must carry out, either as part of the company itself or being hired externally, and regardless of its size, are the following:

  • Preparation of your complete business plan by projecting metrics, P&L and cash flows.
  • Monthly reporting for CEO and investors.
  • Update of forecasts, always changing in startups.
  • Set up financial processes.
  • Proactive analysis of metrics.
  • Support in decision-making.
  • Support in fundraising processes.
  • Negotiation with potential new investors.
  • Constant work to ensure the appropriate funding of the startup by any means.

What are the advantages of outsourcing the financial management of your startup?

Here we explain the five advantages of outsourcing your startup’s financial management to an external position (external CFO), instead of hiring someone full time.

1. Allows you to have a senior finance expert with the cost of a junior role.

The first advantage of having a part-time senior financier (external CFO) is that the cost is very similar to having a full-time junior finance position, even lower in many cases.

2. Allows you to adjust the workload to the needs of your startup.

Another great advantage of having an external CFO is that their work can be adjusted depending on the needs, size and circumstances of your company at each moment of the year, while maintaining a low fixed cost.

You may need these services more hours because you are applying for grants for your startup, closing the accounts of the previous year or negotiating with a new investor.

Due to this variable workload, the CFO’s work can be adjusted based on it, so that the benefit to your company is always going to be much greater than having someone full time.

3. Avoids the possibility of hiring someone unsuitable for the position.

If you hire a full-time CFO for your startup, you run the risk that he will not be able to adapt to the position, either due to his lack of experience (especially if he is junior) or because he does not satisfy your expectations.

Hiring an external CFO gives you the possibility to change your setup easily without incurring in unnecessary costs in case you are not convinced by their work.

In any case, the experience of a CFO who performs tasks externally will always be very broad, so the risk you run will always be much lower.

4. Provides an enriching vision to your startup.

An external CFO usually works for several startups simultaneously, allowing him to be in touch with different ways of work at the same time.

This fact allows you to give yours a much more enriching vision than someone full-time in a single company will give you. something very useful when planning the strategy and providing financial solutions for your startup.

In addition, it should be noted that since the position of financial director is one of the most important in any startup, on many occasions it is a founding partner who performs these functions part-time or full-time, so outsourcing this work will provide you with greater objectivity in decision making.

5. Allows you to focus your efforts on other key areas of your business.

Due to the experience that is assumed to be an external CFO, you don’t need to give him the training that you would have to give to a full-time junior position.

This, allows you to save a lot of time that you can dedicate to other important tasks, especially the development and expansion of your business.

Are you thinking of outsourcing the financial management of your startup?

If you are thinking of outsourcing the financial management of your startup, you should analyze whether it is really going to be worth it to have someone full time or not.

Depending on the size of your startup it is very possible that your best choice is to outsource these tasks to someone with a lot of experience in finance.

Whether you are in doubt or if you finally decide to have a senior role who carries out the financial management of your company in an outsourced way, we invite you to contact us at info@tscfo.com

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