The market dynamics, corporate strategies, and operational structures are evolving daily, and so is the role of outsourcing finance functions in determining and directing a company’s strategic direction. Along with eliminating the expense of buying and maintaining a cost accounting system, outsourcing helps with business growth, legal compliance, and hiring. These factors are driving the development and assisting the global Finance and Accounting Outsourcing market to reach a revised size of US$53.4 Billion by 2026, growing at a CAGR of 5.9% over the analysis period. This article deals with why Indian SMEs outsource CFO services for financial success.
Outsourcing CFO
An outsourcing CFO is an outside financial expert who offers element-time or mission-based financial advisory offerings to corporations. These experts have specialized expertise and knowledge in economic planning, budgeting, cash glide management, threat evaluation, compliance, and strategic monetary-making plans.
Accounting Outsourcing – SMEs’ go-to metric
Many small businesses, startups, and entrepreneurs are outsourcing to prepare their company’s financial statements, manage bank account operations, analyze financial data, and prepare outgoing invoices. Today, more than 1/3 of small businesses are outsourcing their accounting to outsource real CFOs to help them navigate their routes to success, see the broader picture, and comprehend the inner workings of their organization’s.
Unfortunately, most SMEs struggle to achieve exceptional performance and sustainable growth in the competitive business environment. This is where the relief of consulting experts on accounting practices can significantly improve SMEs’ performance and sustain their competitive advantage. By outsourcing accounting, SMEs can gain competence, thus enabling effective and efficient cost-reduction, improved responsiveness to rampant changes in the business environment, and reduced risks from technological advances.
Most, if not all, small and medium enterprises may need more monetary resources to hire in-house staff to stay compliant and effectively monitor financial performance, thus raising the need for support from external accounting and finance experts year by year. Furthermore, along with eliminating significant investments in human resources, equipment, software, and infrastructure of an internal accounting department, outsourcing accounting systems allows SMEs to allot the saved capital to other value-added revenue-generating activities. This strategic option can give SMEs a financial advantage and help them achieve a higher profit level with smaller capital. Eventually, they enhanced the financial performance metrics of the SMEs.
Outsource CFO Services in India: How does it improve SMEs?
Outsourcing financial management to CFOs empowers SMEs to make informed decisions, fostering a sense of confidence and control. These outsourced CFOs handle critical economic functions, providing accurate insights and strategic guidance. They streamline operations, optimize resource allocation, and ensure regulatory compliance, mitigating risks and improving financial matters. This partnership enables SMEs to navigate challenges efficiently, fostering sustainable growth and scalability and empowering the owners to take proactive steps in their business.
Outsource CFO for SMEs
The emergence of outsourcing CFOs is transformative. These CFOs operate remotely, leveraging digital tools and cloud-based systems to provide financial guidance and support without a physical presence in the office.
This remote setup allows SMEs access to experienced financial expertise. This expertise might otherwise be financially prohibitive on a full-time. These outsourced CFOs bring a breadth of industry knowledge. Also, they can cater to the specific needs of SMEs. It offers tailored financial strategies and insights.
Services provided by outsourced CFOs
Outsourced CFOs deliver similar strategic services to traditional CFOs in limited or specialized capacities customized to client needs and budgets. Typical areas of support include:
- Accounting oversight: VCFOs establish accounting frameworks, policies, and reporting structures without daily accounting management.
- Investor relations: VCFOs produce reporting artefacts and presentations without direct investor interactions.
- Risk mitigation: VCFOs pinpoint critical financial vulnerabilities instead of extensive audits.
- Strategic guidance: VCFOs translate growth ideas into financial plans and models.
- Compliance support: VCFOs designing processes for regulatory adherence rather than internal policy setting.
- Cash flow optimization: VCFOs guidance on strategic liquidity planning rather than routine cash flow tracking.
- Capital planning: VCFOs evaluate funding options at critical junctures without continuous capital structure maintenance.
- Financial planning and analysis: VCFOs provide planning forecast models, competitive benchmarking, risk assessment and growth projections without day-to-day trend tracking.
Outsourcing Statutory Compliances
If you are an SME, outsourcing your Statutory Compliances to an experienced accounting and finance expert is one of the best decisions you can make. As per a study, 53% of SMEs need help tracking, calculating and making compliance payments, and 45% spend too much time on input collection, often extending business hours. However, the annual average loss of INR 67 lakh per SME is more alarming for financially bound SMEs. Plus, the long list of compliances that include the Local Shop and Establishments Act, Payment of Gratuity Act, Minimum Wages Act, Payment Wages and many more, frequent amendments, high penalties, and strict enforcement are making outsourcing statutory compliance an essential and needful conversation in the SMEs circle.
SMEs need to know the know-how of the various compliances, which is time, effort, and maybe even money. The complex and intimidating compliances halt the business startup plan and present challenging tasks. By taking the help of a proven outsourcing accounting partner, SMEs can get through this step easily and quickly with a good ‘value for money’.
Outsourcing compliance functions to professional SMEs can save their precious time, better understand the law, prevent legal troubles, and give businesses a professional reputation and Scalability options. This can provide SMEs with a sense of security and peace of mind, knowing that experts are handling their compliance needs. So, whether your organization is a team of 50 or 500+ employees, outsourcing compliance functions to the right professional is critical to becoming law-compliant.
Winding Up Note
Accounting and statutory compliance are some of the most critical facets of SMEs, so it becomes imperative for SMEs to avoid accounting errors to retain their progression curve and steer clear of any legal problems. Additionally, having a dedicated financial and compliance solution can take charge of this complicated process and give them more time to focus on the business and people strategy for accelerated expansion and growth.
Are you ready to take advantage of financial management in future? Contact Startup Fino now to explore how our outsourcing CFO services.
FAQs
Who is an outsourcing CFO?
An outsourcing CFO is a seasoned financial professional. The person who provides strategic insights and financial guidance to businesses. After all, the services are on a part-time or project basis.
How does having a financial strategy and planning help SMEs secure funding from investors?
Investors are likelier to invest in SMEs with a well-thought-out financial strategy and planning. It demonstrates the company’s commitment to success and sustainability.
Increase profitability. It can be done by creating a clear financial strategy and planning.
How do financial strategy and planning help SMEs with budgeting?
Financial strategy and planning can help SMEs create realistic financial projections.
How can financial strategy and planning help SMEs with business expansion?
A financial strategy and planning can help SMEs assess their financial capabilities. It identifies expansion opportunities. It also develops a roadmap for growth.
How do financial strategy and planning give SMEs an advantage in tax planning and compliance?
SMEs can optimize their tax structure, minimize tax liabilities, and ensure compliance with tax regulations. It can be done by creating a financial strategy and planning.
Do outsourcing CFOs provide financial guidance?
Yes, outsourcing CFOs specialize in offering strategic financial guidance. It is tailored to your business’s unique needs. It also helps in growth and improves profit.
Tell me the elements of outsourcing CFO services.
Outsourcing CFO services typically includes financial planning and analysis. It also involves strategic guidance, financial reporting, etc. They’re designed to provide comprehensive financial oversight.
How can I choose an outsourcing CFO service provider?
Choose a provider with proven expertise in your industry, customisable service offerings, etc. That may match your needs. After all, a strong track record of helping businesses achieve their financial goals.
How can an outsourcing CFO help my business?
An outsourcing CFO can leverage their expertise in Indian financial regulations. They also know tax laws, market trends, etc. This knowledge helps your business make informed financial decisions.
