The Pros and Cons to Hiring a Part-Time versus an In-house CFO
There are pros and cons to consider when choosing between hiring a Part-Time versus In-house CFO.
A CFO sits at the intersection of where all the numbers roll into a business (HR, Sales, Inventory, Contracts, and more). They provide strategic financial direction to the business.
At this point you may have already determined that you need a CFO for your business to tackle current or future business needs. You are considering your options, and are not sure whether you need a dedicated, full-time, in-house CFO (In-house) or a fractional or part-time CFO (Part-Time). Consider these factors when deciding which is right for your business.
KPIs, Dashboards, and Cashflow Management
A critical component of the role of a CFO is ensuring that the right metrics and key performance indicators (KPIs) are in place for the organization, and that they are easily understood and accessible by way of a dashboard. Same thing with managing and forecasting cash flow and financial scenario planning. Both In-house and Part-Time CFOs should be able to do this equally well.
Advantage: Neither, it’s a tie
Experience with Financing Options
Both In-house and Part-Time CFOs should have experience with strategic financing options. This could include finding and attracting investors, raising capital, navigating special programs (e.g. government funding and grants), and tax planning. A Part-Time CFO may have more experience because they work with more companies and often have broader experience, but it will depend on the individual.
Advantage: It depends
Cost
Cost is the clearest advantage to a Part-Time versus In-house CFO. A full-time In-house CFO could easily cost between $200-400K per year fully loaded (with recruitment costs, variable compensation and benefits, and overhead allocation) and in fact CFOs at large publicly traded companies are often paid many times that. On the other hand, with a Part-Time CFO you are only paying for a portion of their time. They require no employee benefit costs, bonuses or overhead (e.g. dedicated office space). Additionally, no turnover means no costs associated with lost time, knowledge or expertise in replacing individuals and no recruiting or ongoing professional development training costs for high-level accounting and finance staff.
Advantage: Part-Time CFO
Focused Work Time
Since you are only paying for a portion of their time, you are not paying for any additional wasted time. In many cases, in-house CFOs end up filling their time with meetings, transactional or administrative work that adds little value and which could often be eliminated or completed by less expensive resources.
Advantage: Part-Time CFO
Flexibility
With a Part-Time CFO your support can be flexible and scalable depending on your business needs. You may start out with a smaller time commitment and then look at increasing the time your Part-Time CFO spends with you as your business grows. Conversely, you have more flexibility to immediately reduce time and costs in challenging times without having to deal with issues like Constructive Dismissal or severances.
Advantage: Part-Time CFO
Breadth of Experience
Part-Time CFOs tend to have broad experience with multiple firms, and often times across multiple industries. It can be difficult to match this breadth of experience with an In-house CFO. Part-Time CFOs work with a variety of clients and are able to bring best practices and fresh ideas to your organization on a consistent basis.
Advantage: Part-Time CFO
Managing / Oversight
A Part-Time CFO is self-managing. They will allow you to focus on your core competencies as a business, compared to having to hire, train, manage and develop an entire accounting team on your own. An In-house CFO is still a staff member and you will need to ensure that performance plans, along with regular coaching / feedback is in place.
Advantage: Part-Time CFO
Availability
If you are working with a Part-Time CFO, that individual is likely working with other clients as well. If you need an immediate response or action on something you may have to wait for their response. It is important to have Service Level Agreements (SLAs) in place, but even then it may be difficult to get a quick response if they are busy with another client.
Advantage: In-house CFO
Familiarity with Your Company and Industry
This is often a key concern with deciding to hire a Part-Time CFO versus hiring a CFO In-house. A dedicated In-house CFO who spends all day with your organization will obviously be in a better position to become more familiar with your company. When it comes to industry experience you may be able to find a Part-Time CFO that has deep experience in your industry, possibly more than what you may find with an In-house CFO, but it will depend on the individual.
Advantage: It depends (familiarity with your industry)
Start with a Business Insights Assessment to Determine Your Needs
As you can see, there are pros and cons to hiring a Part-Time CFO versus an In-house CFO. Deciding which is the best fit for you will depend on your business needs, now and in the future. The best place to start is with a Business Insights Assessment which lays out your current business situation, challenges, and key opportunities.