Benefits of an Outsourced CFO

July 20th, 2012

Over the past few years, the world’s economies have been like a roller coaster ride. The same may be said for your company—one minute you’re up, the next you’re down. Between cost concerns, the U.S. economy’s instability, and internal staffing issues, preparing yourself to meet those challenges head on is the best way to plan for your company’s future growth, profit, and security.

Implementing an outsourced Chief Financial Officer (CFO) strategy makes sense when considering your internal team’s workload, expertise, and ability to meet the ever-changing needs of your business. Below are some of the benefits of having an outsourced CFO on your team, as well as when to consider using such a service.

What Is an Outsourced CFO?

Outsourcing, in the basic sense, is extracting a company or organization’s internal process to an independent, external company or individual. Specifically, CFO services, such as analyzing and crafting financial statements, balance sheets, income statement and cash flow reports are common services conducted by independent professionals. Additional services may include analyzing and interpreting a company’s financial history or helping with future growth models, profit increases, planning for retirement, and more.

Benefits of an Outsourced CFO

  • Independent and Objective viewpoint: Unlike internal staff, an external consultant has no pre-conceptions or agendas in relation to the business agenda.
  • Creative solutions: Since many consultants have a breadth of experience in a variety of industries, they often bring a new perspective to operations that could be beneficial in the long run.
  • Networks: In many cases, an external CFO has connections in a variety of fields and industries that may benefit you, particularly for business growth.
  • Efficiency: Leveraging an external resource liberates internal staff’s time from annual planning meetings, rolling forecasts, monthly budgeting, etc., giving them the time needed to complete day-to-day activities.

When do you need an Outsourced CFO?

  • Start Up: Utilizing the knowledge of an experienced CFO to help you build the proper financial structure initially will pay off in the long run.
  • Business Growth: As the bookkeeping function starts to morph into something more than payroll, accounts payable, collections, billing, etc. a CFO is necessary to help the company with more advanced activities, such as financial statements and compliance.
  • Full-timer Is Unnecessary: There comes a time in every business when the financial portion of the company becomes more complex and begins to take up more and more time. However, there is also a gap between this period and the need for a full-time CFO. It’s during that gap when outsourcing CFO services makes the most sense.
  • Preparing Business Plans: Unless you have experience in this area, it’s best to work with a professional who knows how to prepare the documentation needed by funding sources.
  • Sounding Board: When a business owner seeks an objective, independent review of his/her business, having a dependable consultant to speak with may be invaluable, especially if it helps you to avoid a costly mistake later.

In the end, to determine if this model is right for your business, weigh the benefits against potential risks. Do your homework. Be diligent about keeping your finger on the pulse of your business and engaging with the chosen CFO through open and frequent communication.

What tips would you share about outsourcing CFO services?

Need Help?

Are you looking for a remote CFO or do you have questions about working with one? Contact us to learn more about this business strategy.

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    DCAA Compliance – What it means to you. Part II

    April 22nd, 2012

    Part 2 of a two-part series on DCAA compliance.

    Below are a few checklists to help you organize your DCAA pre-awarded contract process, as well as post-award and internal controls needs.

    Before you begin the request for proposal (RFP) process for a DCAA-engagement, it’s important to have all your documentation and processes in place prior to submitting the proposal. These items will become must-haves prior to beginning work on the DCAA project; so, why not have them in place beforehand? For assistance, contact us or visit the web site.

    Prior to the RFP process, consider this these elements—several of which were covered in more detail in our DCAA Part I blog article from December 2011.

    • Set up a Chart of Accounts to segregate Direct and Indirect Costs
    • Establish a Job Cost Accounting process
    • Account for Indirect Cost Pools and Allocation Bases
    • Determine Indirect Rate Computations
    • Purchase or have a good Timekeeping System and understand the Labor Distribution Requirements
    • Account for Un-allowable Costs

    Once you have been awarded the contract, consider these items in your Action List:

    • Re-evaluate previously identified differences in tax expenses
    • Identify significant changes in management or staff since the contract has been awarded
    • Be familiar with the audit type (FAO)
    • List recent guidance or audit program changes
    • Question transactions that resulted in a high number of dollars, but aligned with a low number of hours

    Finally, having the right DCAA-compliant software is an invaluable part of your project’s success.

    Also, working with a certified DCAA accounting team who knows the ins-and-outs of the contract process, document-recording procedures, unallowable costs identification, and regulations around DCAA-contracts will help make the process easier.

    Take your time when considering the requirements of a DCAA contract. Do your homework and talk to contractors with experience in this area. Keeping all the steps, details, and processes top of mind will help to make your DCAA contract experience run that much smoother.

    If you have questions about a DCAA audit, contact us. We’d be happy to walk you through the nuance, regulations, and set-up procedures.

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    DCAA Compliance – What it means to you. Part I

    December 23rd, 2011

    Part 1 of a two-part series on DCAA compliance.

    If you’re a small business owner with a strong desire to work as a government contractor, there are a few accounting requirements you should to be aware of before you begin. Understanding and abiding by these principles and others may reduce the amount of tension you feel when asked to participate in a Defense Contract Audit Agency (DCAA) audit.

    Adhering to these Top 10 DCAA Audit Triggers and the many other specific DCAA accounting requirements may be time consuming in the beginning, but will save you a tremendous amount of effort—not to mention headaches—in the end.

    Working with a knowledgeable accounting team, up front, that understands the regulations, can save you a lot of time later when a DCAA audit approaches. You will want to have all your ducks in a row before the audit.

    Below are a few accounting details to contemplate as you consider becoming a government contractor.

    What you should look for and pay attention to:

    • A knowledgeable accounting staff: Take into consideration the degree of knowledge you and/or your staff must have in relation to DCAA regulations. It takes experience, attention to detail, and a strong strategic focus to adhere to these regulations. Working with an accounting firm with experience in this area is paramount.
    • Cost Account Standards (CAS): In general, DCAA does not approve of job cost accounting software packages, but rather puts good faith in the contractor job cost accounting practices found in the Federal CAS method. In fact there are many chapters written about what needs to go into this cost-accounting method, some of which include:
      • Long-range planning for indirect rates
      • General ledger postings
      • Overhead and General and Administrative (G&A) structure
      • Accounting for government contracts on a separate spreadsheet from commercial work
      • Unallowable costs that cannot be charged to government contracts
    • Timekeeping System and Labor Distribution Requirements: If your software is set up correctly, your DCAA audit will go much smoother than if it’s not. If you choose not to use DCAA-compliant software, a detailed review of your current system will take place, resulting in more time, effort, and resources on your part.
    • Un-allowable Costs: Certain costs are not allowed in the pricing structure, cost reimbursements, or settlements under a government contract. To allow for these types of costs, separate accounts need to be established and they must not be priced into the contract during the request for proposal (RFP) process.
    • Expense Reports, Purchase Orders, and more: Detailed time records are required. The same goes for expense reports, purchase orders, and much more.
    • Check your math: When government proposals are written, a great deal of effort goes into the proposal review. In fact, immense scrutiny is paid toward direct and indirect rates against long-range plans, labor category pricing, hiring agreements, vendor quotes, and more. Accuracy is key.
    • Billing: Another area of interest is in the area of costs, plus time and materials billing. Time and materials billing must have all the supporting detail—at the transaction level—or it will not be paid. Working with an accounting firm or staff with this level of detail in mind is crucial.
    • Managing Data Volume: If you’re working on a government contract that lasts several months or even years, data volume can be overwhelming for one staff person to oversee. Working with an accounting team helps to alleviate the burden of managing the large amounts of data needed to effectively oversee the categorization, transaction detail, and regulations needed.

    For more information on how to begin working as a government-contracted vendor and the accounting principles needed to be successful, consider downloading this free book “Small Business Federal Government Contracting.”

    When you have questions about the accounting-related practices, contact us. We’d be happy to walk you through the nuances needed to be DCAA compliant.

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