The Benefits of Outsourcing Your COO, CFO or CIO

Meeting the Needs of Your Small Business with a “Fractional” Employee

When you’re trying to run a small business, you’re forced to take on a number of a roles simultaneously—Chief Financial Officer (CFO), Chief Operations Officer (COO), Chief Information or Technology Officer (CIO), and more. It can wear you out, leaving less time than you need to do the important things. But if your profits or market position make it unrealistic to hire a full time employee for any of those needs, you may feel like you have no choice. There’s good news—outsourcing some or all of those tasks may help you accomplish your goals.

The Outsourced, or Fractional, Company Officer

You are most likely familiar with the concept of outsourcing. That’s where you take some aspect of your business and contract it out to a third party. Outsourcing offers a wide range of benefits:

  • You can usually improve efficiency—By outsourcing to an entity that specializes in the functions you need, you can typically accomplish them with better quality, more efficiency and at a lower cost.
  • Outsourcing allows you to focus on what you do best—Whether it’s sales and marketing, process engineering or new product development, you’ll be more efficient if you can concentrate your efforts on utilizing your strengths
  • You can leverage someone else’s skill and knowledge—Outsourcing allows you access to skilled and knowledgeable personnel without some of the costs of labor. It can also be an affordable way to learn new skills.
  • Outsourcing may give you access to facilities or capabilities that you wouldn’t be able to afford
  • Outsourcing can allow you to redirect investment to other aspects of your business
  • Outsourcing can give you a fresh perspective on your business operation

With most outsourcing relationships, the fractional employee either functions on a limited schedule or on an as-needed basis. If the outsourced employee is an independent contractor, you won’t have any payroll responsibilities, including tax withholdings, as that will be handled directly by the company from whom you secure the outsourced worker.

The Fractional CFO

An outsourced CFO will typically work collaboratively with executive management, board members or business owners to develop, implement and monitor financial strategy and analysis. You should expect the chief financial officer to have the skills and knowledge to identify the key factors that drive value in your business. Those factors can only be measured if they have been determined. If you lack the requisite skills to identify or manage those value drivers, you may find it extremely difficult to maximize the value of your business. By working with a fractional CFO, someone with a high level of financial expertise, you’ll find it easier to formulate and introduce initiatives that improve your bottom line.

Among the many tasks you can outsource to a fractional CFO are:

  • Oversight of all financial and accounting functions
  • Responsibility for training accounting staff on best practices or new technology
  • Management of capital to maximize productivity
  • Improvement of cash flow
  • Production of timely, accurate and relevant financial statements

A fractional CFO can also serve as your liaison with potential investors, lenders and other sources of capital.

Outsourcing Your Chief Operations Officer

As a general rule, you look to your chief operating officer for vision and strategic leadership. You expect that your COO will be intimately familiar with processes, as well as organizational structure, and will work to maximizes efficiency in both. By bringing on a fractional COO, you can take advantage of the same operational expertise that large, multinational corporations do.

An outsourced COO will typically work with all members of your management team, identifying the needs of your company, so that you can effectively manage all components of your business. Critical functions that you can expect an outsourced COO to handle include risk management, inventory control, program development and improvement, cost reductions, process management and change management. More specifically, a fractional COO should help you:

  • Develop and track KPIs (key performance indicators)—This includes not only the creation and preparation of useful reports on KPIs, but the direction of specific operational initiatives to address and enhance KPIs
  • Efficiently organize processes and operational structure—A fractional COO should help you identify departmental structure and allocate functions within specific divisions. The outsourced COO may also appoint department leaders and assign responsibilities.

The Benefits of a Fractional Chief Information Officer (CIO)

Your chief information officer (also known as a chief technology officer) will have responsibility for leading and coordinating all of your company’s technology needs and initiatives. That will typically involve data security, as well as the utilization of cutting edge technology to increase efficiencies and enhance your profitability. An outsourced CIO offers a number of concrete benefits:

  • Better cost management—Data breaches come with considerable cost, not only with respect to proprietary information, but also with regard to customer or vendor confidence. One study found that the average cost of a single stolen digital record is approximately $150. The money you save by protecting your date will more than cover the costs of hiring a fractional CIO.
  • A broader perspective—Technology changes every day. To keep up with the dynamic nature of technology and information, it’s extremely beneficial to have input from someone outside of your company and your management circle.
  • Immediate and effective understanding of key issues—With a fractional CIO, you can bring in someone with the knowledge, skill and experience to immediately identify problematic issues and implement measures to address them.
  • Quicker access to new technologies—Most outsourced CIOs are on the cutting edge of new breakthroughs and applications of technology. Bringing in a fractional CIO can give you a competitive advantage.

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