As your business grows, so too does the need for strategic financial oversight. Choosing between a traditional chief financial officer (CFO) and an outsourced finance director can be one of the most important decisions you make for your company.
But which one is the right fit for your business? Let’s explore the key differences and benefits of both options, so you can make a well-informed decision.
What does a CFO do?
A CFO is responsible for overseeing a company’s financial operations. Traditionally, this has meant handling everything from financial planning and analysis to budgeting, cashflow management and ensuring the financial health of the business. As a full-time executive, the CFO works in-house, collaborating closely with the CEO and other leadership team members to drive the company’s financial strategy.
A CFO is best suited for larger organisations needing constant, hands-on financial management. Their value comes from their deep involvement in the business’s day-to-day operations and strong relationships with other executives. The average salary for a full-time CFO can exceed £100,000 a year. This makes hiring a CFO a significant financial commitment.
What is an outsourced finance director?
An outsourced finance director (FD) provides services similar to those of a traditional CFO but on a more flexible basis. Instead of being a full-time employee, an outsourced FD typically works part-time or on an as-needed basis, offering the same strategic advice and financial oversight but without the associated overheads of hiring an executive full-time.
Outsourced FDs are particularly well suited to small and medium-sized businesses. An outsourced FD can fill this gap if your company doesn’t require a CFO every day but still needs expert financial guidance for key decisions. They offer an affordable, scalable solution without sacrificing expertise. Many FDs have backgrounds as CFOs or other senior finance roles, meaning they bring substantial experience without the full-time commitment.
Cost comparison: Value for money
The most obvious difference between a traditional CFO and an outsourced FD is cost. As mentioned earlier, a CFO’s salary can be a significant investment. In addition to their salary, businesses need to account for benefits, bonuses and pension contributions.
In contrast, hiring an outsourced FD can save businesses significant money. Depending on the level of involvement required, you can hire an FD for a fraction of the cost. Research from The CFO Centre suggests that businesses save up to 50% on the costs associated with hiring a full-time finance executive by opting for an outsourced solution. Additionally, businesses can scale the engagement up or down based on their needs, providing flexibility that a full-time CFO cannot offer.
Flexibility vs availability
Another key consideration is flexibility. A full-time CFO is embedded within the company, allowing them to be available at any time and deeply involved in all business areas. This is particularly beneficial for larger companies where daily financial oversight is required. Their constant presence ensures they are fully integrated with the leadership team and comprehensively understand the company’s operations.
On the other hand, an outsourced FD offers far more flexibility. This can be the perfect solution for smaller businesses that don’t need a full-time executive but still require high-level financial advice. An outsourced FD works around your needs and can be brought in for specific projects, quarterly reviews or when the business needs more support. This level of flexibility ensures you only pay for the services you need when you need them.
However, the downside to this flexibility is availability. While an outsourced FD can offer the financial insight your business requires, it won’t be as readily available as a full-time CFO. A traditional CFO may be a better fit if your business needs daily financial oversight or is undergoing rapid growth that requires constant attention.
Expertise and insight
Both CFOs and outsourced FDs bring a wealth of financial expertise to the table. With the right hire, both can offer valuable insights into your business’s financial health and growth strategy. That said, there are some differences in how their roles are structured.
A full-time CFO will generally deeply understand your business over time. Their daily involvement means they’ll have a granular insight into every financial detail, allowing them to make informed, data-driven decisions. They are also likely to have stronger relationships with key stakeholders within the company, which can make it easier to implement strategic financial initiatives.
On the other hand, an outsourced FD often brings a fresh perspective. Because they work with multiple clients across different industries, they can provide more varied insights and best practices, giving your business access to strategies that might not be on your radar. Their experience across a wide range of sectors can offer new ideas and innovative approaches that could benefit your business.
Which is right for your business?
Choosing between a traditional CFO and an outsourced FD depends on the specific needs of your business. A traditional CFO may be the best choice if you are a larger company that requires full-time financial management and constant oversight. However, an outsourced FD could be the right fit if you are a small to medium-sized business or only need financial expertise on a part-time basis.
One key advantage of an outsourced FD is the ability to scale their involvement to match your needs. This is especially valuable for growing businesses that need expert financial guidance but aren’t ready to commit to the expense of a full-time executive. The ability to tap into top-level expertise at a fraction of the cost makes outsourcing a viable option for many businesses.
At Wells Associates we understand that each business has unique financial needs. Our outsourced finance director services provide expert guidance on a flexible, scalable basis tailored to your company’s goals.
Get in touch to learn how we can support your business’s growth with professional financial management.