5 Ways Outsourced CFOs Can Drives Your Business' Performance with Technology

5 Ways Outsourced CFOs Can Drives Your Business' Performance with Technology As we continue to move into the new year, many businesses are reevaluating their general approach to managing finances. While some businesses will make the choice to modify or improve financial systems on their own, others have recognized that—in order to get the best financial and accounting results possible—it may be in their best interest to look outside the company for help.

Naturally, the decision that makes the most sense for your business will depend on the size and scope of your company as well as your specific financial objectives. However, the cost of CFO advisory services may be significantly less than you initially assumed.

By hiring an expert outside of the company to handle your tedious financial reporting responsibilities, you will be able to commit significantly more time to focusing on your business’ more important tasks.

When comparing your outsourced CFO options, variables such as cost, experience, and available services should all be actively “accounted” for. But in addition to helping you with your standard financial reporting duties, these individuals—who usually offer themselves as an available consultant throughout the year—can also help you significantly improve your business’ day-to-day operations.

The advancements of​ ​CFO advisory services​ can largely be attributed to the advancement of accounting technology in general. In this article, we will discuss just a few of the ways that outsourced CFOs can help your business make measurable improvements.

1. Transitioning to Digital Bookkeeping For years, businesses of every kind would need to record every financial transaction they ever made by hand. Even when making purchases as simple as a pen or pencil, failing to record these things could compound into much larger financial issues for the company.

While modern businesses still need to keep track of everything they do, new technology makes it much easier to do so than ever before. Digital bookkeeping makes it possible for businesses to consistently update their financial well-being without the tediousness of making entries into an old-fashioned book by hand. Furthermore—and perhaps most importantly—digital bookkeeping makes it much easier for CFOs to correct mistakes. If a mistake has been “compounded” and carried over multiple times, a digital accounting system may allow you to balance your books entirely using just one simple entry.

2. Automating Financial Statements Generally speaking, there are two essential financial statements that all businesses will need to make. An​ ​income statement​ w ​ ill help report the amount of revenue and expenses (and net profit) that your business has accrued over the course of the past year. A ​balance sheet, ​on the other hand, will help indicate your business’ assets, liabilities, and equity at any given point in time.

Both of these financial statements will be very important and failing to keep them updated can be very problematic. Through the use of automated and streamlined accounting systems, an outsourced CFO can help create a system where—following each transaction—these statements can be instantly updated. By having access to the most recent and accurate financial information available, it will be much easier to make decisions that are in the financial best interest of your business.

3. Identify Redundant Expenses One of the ways that many businesses tend to underperform is through the use of redundant expenses. This can include anything ranging from repetitive systems to over-purchased office supplies. Eliminating redundant expenses will consequently be reflected on your income statement and help your business move closer to achieving its annual financial objectives.

The best outsourced CFOs will be able to categorize each of your expenses in a way that is consistently useful. For example, you may categorize (and then use technology to help sort) your expenses as operational, equipment, salaries, or various others. Once all financial data has been sorted in a useful way, it should be much easier to recognize which expenses are unnecessary or perhaps overstated. This process will be important for any business that is preparing a financial plan for the next year.

4. Scan for Errors As stated, one of the best things about new technology is that it makes it much easier to identify—and correct—any errors on your financial statements. Years ago, even a small error would create many reporting issues due to the fact that it would be carried over page after page after page. Misstated liabilities, for example, would also cause a business to misstate their assets and owner’s equity. Depending on the degree of this error, this could even result in certain legal issues.

In the past, creating accurate financial records would sometimes require dozens of changes in response to a single error. In the present, however, accuracy is much more

possible. Errors can quickly be reconciled using advanced accounting spreadsheets and pre-entered formulas can help outsourced CFOs identify fundamental inconsistencies (such as differences between assets, liabilities, and equity). Depending on the nature of your business, these error scanning processes may even be customizable to account for niche industry issues.

5. Establish Consistent Accounting Practices Contrary to what many people assume, accounting practices are not always universal.

In fact, any accountant or outsourced CFO will readily tell you that there are actually many different ​subjective d ​ ecisions that will be made throughout the process.

Depending on your tax objectives, financial situation, operational goals, and other relevant variables, your overall financial reporting strategy may be significantly different than your competitors’.

For example, while some businesses prefer to use a​ ​FIFO​ (first in, first out) inventory system, others may benefit from using the less common LIFO method (last in, first out).

A good accountant will make it easy to identify which of these practices is objectively best. Your business may also need to choose whether a straight-line or accelerated depreciation method is in your best interest. This can have a tremendous impact on the overall value of your inventory and the company itself. Regardless of what choices you end up making, it will be important to create a system that is consistent and easily understood by potential investors.

Conclusion Accounting and financial reporting involves many different moving pieces. There are countless important financial decisions that will need to be made throughout the year—this is why CFOs of the world’s top companies earn considerably high salaries.

However, if your business is operating with a limited budget, then it may be in your best interest to hire an outsourced CFO. Due to improved technology and general accounting practices, many outsourced CFOs can help your business achieve financial objectives that would have otherwise been impossible.