CFO Outsourcing In Singapore – Why Do You Need It?

Now that we have lived more than a year in the pandemic, we have some vital lessons to take from it. 

As businesses prepare for the new normal, the emphasis on upskilling and cross-skilling is at an all-time high.

There has also been a renewed focus on flexibility, forcing brands to think about the feasibility of having an outsourced CFO. This trend has been especially prominent in Singapore.

A flexible employee model is the need of the hour for most businesses. We have come across companies that are unable to seamlessly transition to a remote model, facing significant challenges across the board. It has led to entities, especially start-ups, questioning their need for a full-time CFO.

A CFO is instrumental in managing the financial reporting and accounting of an organization. But often, businesses, especially those starting, do not find the costs attached with it the most feasible. So they opt for an outsourced CFO model. But is it any better than having a full-time CFO or no CFO at all?

This article discusses the reasons why businesses need CFO outsourcing in Singapore.

What is an outsourced CFO?

During the classic old days, there was no way for you to hire a finance expert on a project or part-time basis in Singapore. So businesses had to either hire someone on their payroll or depend on others to fill the void.

Outsourced CFOs are financial experts who provide their expertise to the company on a part-time or project basis. The modern-day business landscape has evolved into a much more flexible one. As a result, it has helped inculcate the idea of having an outsourced CFO with utmost ease.

In addition, businesses receive all the services they would otherwise expect from hiring a full-time CFO. These include setting up strategies to resolve cash flow challenges, raising capital, resolving tight margin issues, and undertaking major revamps to make the entire system more efficient and prepared for growth.

Instead of charging a full-time salary, these professionals or the agency charge hourly or are on a subscription-based payment basis.  

What is the size of the business that can benefit from outsourcing CFO services?

The position of a CFO requires a highly experienced professional with robust experience and a proven track record of handling finances well. 

Even though most large businesses have a CFO, the cost of hiring a c-suite executive can be cost-prohibitive for start-ups and SMEs. Add to that the need for annual raises and the company’s restricted cash flow probably won’t allow another addition.

Instead, outsourcing a CFO and paying the individual/group on a contract basis bodes well for the business and its finances. They can now avail of the services of a seasoned CFO without having to worry about incurring fixed monthly salary outflows and other perquisites. 

So, irrespective of the size of the business, inculcating a CFO can help businesses streamline their finances.

It also means that businesses of any size, specifically medium and small ones, can benefit more from hiring a part-time CFO for their financial endeavours.   

Benefits of CFO outsourcing

The finance sector is used to looking outside for resources to help it get back in line. However,  this elongated pandemic period has been one of the most gruesome, if not the most, especially for small businesses. They need desperate and calculated measures to strike a turnaround.

In their attempt to revamp their existing business model and make it more cost-efficient, having an outsourced CFO service is a must-have for their business. 

Here is how companies will benefit from collaborating with an outsourced CFO –

Financial planning

Most start-ups fail in financial planning and end up splurging money, or they may face difficulties in managing a smooth flow of funds. A CFO can help figure out chokepoints that restrict the smooth flow of cash, such as slow payers, credit overextensions, inefficient accounts, and other factors. 

It would then allow the entity to improve the pain points, and the business will slowly see an improvement in cash flow.

Less expensive

An in-house CFO is a c-suite executive, and you will have to incur monthly salaries to keep them in your office. Plus, there are other costs, such as taxes, perquisites, and office space throughout the year.

Getting someone on a project basis would further enable you to streamline the costs attached to the CFO’s position.

When the primary job of a CFO is to manage your finances, it makes little sense to have one on your payroll when you can outsource it for a far lesser price.

Better security

Having an outsourced CFO helps to keep your sensitive data secure. How exactly? 

Well, when you have a full-time individual working in-house, there are chances of confidential information getting spilled or accidentally accessed by unscrupulous people.

When you use outsourced CFO services in Singapore, it entails your business to keep sensitive data off-site and only share on a need to know basis, instead of readily making it available to an individual. 

Thus, it keeps the data integrity intact and also reduces the chances of fraud or financial mismanagement.  

Garnering an outsider’s perspective

When you have an insider handling your finances, they often can miss out on analyzing situations from a neutral perspective. Because they are so engrossed with the business and its happenings, they find it difficult to segregate themselves from the rest.

When you get an outsourced CFO service in Singapore, it brings in a person who has an outsider’s perspective and is not shy of voicing their opinions. Therefore the individual will help the organization take the hard steps to bring things back into control.

How to choose the right CFO outsourced service provider?

A CFO is a highly specialized job in Singapore and requires someone with the requisite experience to handle it well. Here are the things to keep in mind while selecting the ideal outsourced CFO service for your business –

Experience is the key

As we said, the job of a CFO is a critical one and requires someone with experience. Every company has its own KPIs to gauge the viability of an individual in fulfilling the c-suite position. Apart from these indicators, look for someone who has had prior experience dealing with companies similar to yours. 

It will give them a head start and make it easier to assimilate.

The individual vs. service team

In Singapore, you can hire an individual as your organization’s CFO, or you can get a group of independent consultants who work together to help you attain your goals. 

Depending on your needs and TAT (turnaround time), an individual can be cost-efficient, whereas a group can give you faster results but at a relatively higher cost. 

The latter also entails the advantage of having multiple minds at play looking to forge a strategy that would work best.

Understanding your needs

Not every company will have the same set of problems they are looking to address or the exact expectations from an incoming individual (or a group). 

For example, Company X may suffer from low cash movement or higher indirect costs, whereas Company Y may need help with budgeting and forecasting.

So look for a CFO who has relevant expertise in solving your problems in their previous assignments. It would enable the individual to understand your pain points better and offer better guidance to the workforce to streamline their processes further.  

How to align your expectations with that of the outsourced CFO provider?

Whenever we decide to hire a third party to handle our tasks, it is imperative for us to understand that there is a need to align the expectations of both parties from the very onset. It would minimize misunderstandings and unnecessary differences of opinions.

Here are some activities that can help align the expectations of both parties during the onboarding process –

• Communicate your business’ short-term and long goals and the milestones that you are looking to achieve
• Make sure that the software that the third-party proposes to use works seamlessly with your existing software bundle
• Inform the KPIs that your business thinks are crucial for its success. It will help the outsourced CFO service to better present the results that they achieve for you
• If the third party demands current financial statements to be reworked, you can ask your finance team to do the same. It would help them get a better idea of where your business presently stands
• It is imperative for you to understand that you are borrowing the outsourced CFO services to see an improvement in your processes. So you can use the onboarding time to make relevant changes to the existing methods if necessary.

Conclusion: An outsourced CFO makes a lot of sense

Using an outsourced CFO service in Singapore is like hiring a CFO but without the commitment of full-time payment throughout the year. Hiring a third-party provider also leverages your scaling abilities and ensures that you will have the relevant expertise irrespective of the size of your business.