Why Outsourcing Your CFO is 30% Cheaper

With the change in the business scene, businesses have altered their way of practicing business entirely in a new profound way. Everything is outsourced and can be managed without hiring permanent resources. Indian companies whether small or big can now have a CFO- Chief Financial Officer on call to do company law, financial reports, financial strategies, financial advisory  to fund raising, says Arijit Barman and Biswarup Gooptu.

Outsourcing CFO services is a growing trend. However, definitive statistics on the use of outsourced CFOs are hard to come by in a country like India, but there are few factors that are encouraging companies to embrace this strategy.

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A CFO continues to be viewed as someone to be an “insider” to an organization that he/she works for. The number of experienced CFO’s available is not proportion to the number of companies that have mushroomed, grown  and in few cases have become larger organizations.

Outsourcing in recent years has given small and medium sized companies an option to bring on board a good quality CFO skill sets who could fit in.

A Unique Approach

Providing experienced and qualified CFO talent on a part-time or an outsourced basis at a fraction of cost of a full time employees is what these days companies are doing. Their CPAs work as a team member with in a company, which helps an organization to immediately address the pressing financial concerns, mentoring and help in making important decisions. This unique approach of outsourcing CFO services has been growing vigorously in India, especially in small businesses as affording a CFO salary is a biggest concern.

What Is The Cost To Hire Outsourced CFO?

Generally, the cost is the function of business scale and growth aspects. The cost varies from per man day in case of specific on-site assignment OR in the form of fixed monthly retainership kind of assignments with on-site & off-site presence with typical lock-in of six months to one year to start with to serve the business as shared CFO.

Fund raising mandates or any other strategic services mandates not covered under shared CFO. They are being charged based on certain % points depending upon challenges & work involved on the transaction amount or on fixed fee basis.

What’s In For The Companies?

About a dozen such on call counselors have sprung up recently like, here is this “MyCFO”, “Elevate” “Visiting CFO”,  “CFO4U”, “Amplus Consulting” and “Alamak Capital”. Also, some of the traditional accounting firms have diversified into this space. “While demand is  less compared to the west, it is been picking up here as well,” says MK Tyagi, partner at Bangalore-based MK Tyagi & Co.

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Outsourcing is 30% cheaper than hiring an experienced full-timer. MyCFO’s retainer fees ranges from Rs 1.5 lakh-7 lakh a month, with 20-25% of it linked to milestones. Typically, such engagements are for time-bound projects. While the sweet spot remains six months to a year, occasionally, they continue for longer, stretching to up to 4 years.

Handling Over The Reins??? – Not Exactly

The value of hiring a CFO, C-level financial executive even only it is a part-time or temporary basis is in for tapping his/her experience for a big picture issues and financial challenges. However, that may raise a bit of quandary for some – how much authority you can hand over to your part time CFO?

As in this case, the CEO or the president of the company calls the shots, so there isn’t much difference when the CFO is outsourced.

Is It For Everyone?

Outsourcing CFO services is a upcoming trend especially in the Indian markets.  The recession may have encouraged more experienced accounting professionals to start their services independently. Meanwhile, financial questions and challenges for small and midsize businesses themselves only got more pressing even as revenues declined.

Similar to Visiting CFO, iXCFO and Elevate;  Alamak Capital, and Amplus Consulting also offers CFO services to small and medium sized company that not only help you to gain credibility, and backup your company with a strong financial plan that is 30% cheaper than your in-house CFO professional.

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