Should I hire a CFO for my construction company or outsource?

For some construction companies the major difference between a full-time chief financial officer and one that’s outsourced is this: money saved. As costs, taxes, regulations, competition, difficulty of finding qualified professionals, and other obstacles get between construction companies and their ability to operate profitably, an increasing number of small-to-medium-sized construction companies are reducing costs by outsourcing their CFO or bookkeeping functions.

The negative:

a person responsible for financial reporting and management who isn’t a full-time employee with loyalty to the company; therefore, what might be lost in terms of lack of long-term interest in the company’s fortunes?

The positive:

An outsourced, or “virtual,” CFO is an accounting professional with a professional’s responsibilities to perform to the best of his or her ability, and being separate from the company creates an ability to be objective rather than emotional about a company’s financial activities.

As with most things, there are positives and negatives. But an increasing number of companies are discovering the positives to outweigh the negatives.

So, let’s focus on the positives:

The right tool for the right job. An outsourced CFO can be brought in as-needed to perform whatever tasks the company requires, whether it’s a financial statement; debt refinancing; budgeting by project, fiscal year, or other criteria; develop financial plans or perform financial projections on a project or projects; supervision of bookkeeping staff to ensure compliance with financial reporting plans and policies, and more.

The outsourced CFO’s reputation depends on the service. The loyalty issue is significant, but loyalty comes in various forms. For example, an outsourced CFO survives generally on his or her credentials, reputation, and recommendations from clients. Credentials may be impeccable, but if service or results are poor or mixed, that affects the individual’s ability to be hired by other clients for similar work. Therefore, there’s a premium on doing it right.

Note: there’s a difference between doing a job right and doing to the desire of the company’s CEO or supervising manager. Their expectations might be unrealistic or, worse yet, they might wish that what they want to see in the numbers take precedence over a best-practices approach to the task.

Multiple and varied experience is a great teacher. Outsourced CFOs works with, in, and for, different companies, seeing all manner of situations and scenarios. As they work for multiple companies it gives them a skill set that can be broader than a full-time CFO who has been with a company for a number of years and perhaps hasn’t seen the options and possibilities that exist in the ever-adapting construction world.

How much did you say? A cost comparison of a full-vs.-outsourced CFO:

“A full-time CFO with a base salary of $175,000, plus an additional 25 percent for taxes and benefits, would cost $218,750 per year, or $18,229 per month. But he says most small companies might only need a CFO's services for one day per week, at an estimated cost of at $6,400--a 65 percent savings.”

Today, more than seven years later, one can figure the costs as they’ve changed and determine the benefit accordingly. Outsourcing such a high-profile position can be a challenge for a company that looks at it and says, "But we've never done it that way." For a CEO who acts as de-facto or actual CFO becuase they don't think they can spend the money on the function, it can be an even more difficult decision. Until the numbers are seen to work in their favor. 

Outsourcing of CFO functions is an idea growing in awareness and popularity. Perhaps it’d be good to explore how the dollars add up.

I'd like to speak to a Construction CPA.



Tagged Bookkeeping, Construction, Construction Accounting, CFO