Local CPA Firm VS Outsourced CFO

Last Updated on March 13, 2021 by MoneyVisual

A business can only thrive and scale up if its finance team is beefed. However, business owners are usually left confused because they don’t know if they should seek the services of a local CPA or outsource CFO firm.

Running a business and successfully attaining certain milestones is not easy. There are times you will need to seek new funding, prepare comprehensive business financial reports for investors, find ways to maximize profits, budget, and forecast, among others.

It is difficult enough to decide which metrics matter the most, and then how do you effectively track them. In time, you will find that very draining. That is why it is important for business owners to supplement their finance teams. Outsourced CFOs and local CPA firms are the most used finance services. But how do they fare in comparison to one another?

What is a Local CPA Firm?

A local CPA firm is simply a certified public accounting firm that provides services such as auditing, accounting, financial, as well as consulting services to different business organizations. The firm should have a state-licensed certificate for public accounting. Besides that, it should have at least one senior executive who is the head of accounting.

What is an Online Outsourced CFO?

This is a senior executive chief financial offer that’s responsible for managing various financial actions of a business. CFO’s tasks include financial planning and tracking of cash flow. They are also responsible for analyzing the financial weaknesses and strengths of a business entity and offering the best possible solutions.

From the above definition, it’s clear that the services of a local CPA firm and a virtual CFO overlap. That’s why most business owners usually find it hard to determine which service suits them the most.

When Businesses Will Benefit From A Local CPA Firm vs When They Would Benefit from an Outsourced CFO

There are certain instances when a business might need to employ the services of a local CPA firm. On the other hand, a business might be forced to outsource the services of a CFO. But how do we distinguish when a business needs either service?

When a Business Might Need a Local CPA Firm

While a CPA firm cannot make business decisions for you, they can offer the best advice to ensure that you make the right decision. Some of the possible instances when a business might need the services of a local CPA firm include:

  • Audit and Assurance: if you need help in resolving your tax returns before the IRS takes over.
  • Tax Planning and Advice: if you need assistance on how your business can save on taxes currently and plan effectively for tax situations in future
  • Management and Consulting: the firm helps you with risk management, budgeting, and preparing financial statements for the benefit of shareholders.
  • Bookkeeping: the firm takes over in handling your invoices as well as account receivables. This is important in making sure that your bills and other utilities are paid on time. Besides that, the firm ensures that you pay your vendors without delays.
  • Payroll Administration: ensure that everyone on the payroll is paid on time. Besides that, the firm ensures that all the business’s payroll withholdings are correctly handled.
  • Forensic Accounting: the local CPA firm comprehensively searches your record books to discover or prevent embezzlement of funds.

When a Business Might Need an Online Outsourced CFO

Online outsourced CFO services add great value to the business. Your business might need outsourced CFO services for the following reasons:

  • Analyzing Cost Structures and Pricing: if you are keen on your business to improve its profit margins
  • Analysis of Financial State: this normally includes the overall financial state including weaknesses and strengths. Additionally, the CFO will suggest possible effective improvement options.
  • Ongoing Financial Analysis and Planning: this includes forecasting, budgeting, and assessing the short-term and long-term financing needs of the business.
  • Analysis of Various M& a Opportunities: this normally includes financial forecasts of post-acquisition and BAU operations.
  • Financial Reporting: the outsourced CFO can help with quarterly financial reporting
  • Evaluation of Financial Reporting Systems and Data Capture: the CFO will also offer the best recommendations for improvements.
  • Financial Assistance Techniques: this is in relation to advice on equity mix or tax and raising capital
  • Financial Presentations: your business can get assistance when it comes to board or investor financial presentations.

Generally, an online outsourced CFO offers a wide range of services. However, CFOs are mainly known to provide businesses with the following 6 services:

  • Budgeting and forecasting
  • Accounting reviews
  • Raising capital
  • Reviewing and improving cash flow
  • Improving growth in addition to developing a scalable model
  • Maximizing profits

What Business Sizes Need Year Round Support from a Local CPA?

By the time a business entity hits the $10MM annual revenue, they would have sought the services of a local CPA. It should be noted that there are still companies that use the services of CPA firms while they are earning an annual revenue between $500K and$1MM.

But by the time a business has reached $10MM, the employed CPA firm will already be handling complex transactions while the bookkeeper will be on the “down-low”.

At this point, the firm will be positively serving as the chief advisor for the bookkeeper. They will be responsible for overseeing basic financial processes as well as reports. The COA will be playing a significant role in ensuring that financial reports are effectively interpreted. Besides that, they will be issuing the business with sound warnings.

A $10MM business needs a CPA firm that will be efficient in managing its internal controls, report generation, and closing processes. Understand that these tasks are usually demanding and so, the bookkeeper cannot do it without some form of external help.

What Business Size Needs All-year Support from an Online Outsourced CFO?

The size of a business that can benefit from online outsourced CFO matters. That is why it’s important for businesses to weigh both the pros and cons of CFO services to determine if it can result in a positive ROI.

A small business, for instance, will need to first grow and attain a specified financial milestone before it can benefit from the services offered by a CFO.

For starters, a company that can benefit from CFO’s insights needs to have an existing solid revenue stream. This is because a CFO advisor needs to comprehensively analyze the established revenue streams in order to effectively furnish you with the right directional insights regarding your positive. This is essential in the development of positives returns in the long run.

Generally, the best sizes of companies that can benefit from CFO services are those that have a $1 MM in annual revenue. We can use this as a minimum threshold. However, there is still some other business that can still benefit from these services even though they have a $500K annual revenue.

However, you need to know that the $500K companies are usually in a hurry to get and use the relevant financial insights for growth. Some of the $500K Professional-services company that can benefit from these services include those that are:

  • Experimenting with the various variable compensation programs for their employees
  • Opening up a second business location
  • Looking to focus on acquisitions
  • Completing a current buyout of previous owners
  • Are keen on customer or offering profitability in order to effectively identify the best customer profile

On the high end, we have companies with around $50 MM when it comes to annual revenue. This is an extremely high amount, and they might decide to use the full-time services of an online outsourced CFO rather than the services of a CFO who is on contract.

When it comes to age, there is no limit. Or at least we can say that there’s no strict age rule so it doesn’t matter how long a business has been operating before they can seek CFO services.

There are incidences where new ventures seek one-time services of CFO. This usually happens when these ventures are looking for a way to define their business models when it comes to pricing and the projections of their budget.

Generally, we can confidently state that a business of any age can use these services. So, does this make CFO great for startup companies?

Well, we would like to advise start-up founders to use other alternatives. It’s best for them to handle the accounting books themselves. While this is something that may take a couple of months only, it may span and reach a couple of years.

It’s important that they have hands-on experience when it comes to working with the available numbers. This is also important for the founders when it comes to understanding the financial aspect of the business. It ensures that they develop a financial tune for the business.

What Makes a Good Local CPA Firm and an Outsourced CFO?

There are certain qualities that both an online outsourced CFO and local CPA firms need to have. These traits are the basis of their service delivery and what makes them stand out.

What Makes a Good Local CPA Firm?

A good local CPA firm is an entity that understands its responsibilities. Businesses what to operate smoothly and make good profits while operating on limited resources. So, it’s up to the accounting firm to find a way to help it in order to accurately manage its financial records.

Characteristics of a good local CPA firm include:

  • Should Possess the Necessary Certifications
  • While the firm may have employees with the CPA certification, there are still vital credentials that must be considered, and they include:
    • A chartered global management account certification
    • Certified financial analyst certification
    • Certified Financial Forensics certification
    • Accredited Business Valuation

Has Customized Services

Generally, accounting firms come in different services. So, if your business is small then you should also choose a relatively small company to ensure that you work within your budget.

For instance, you do not need to seek the services of a multinational firm when your business is small and mainly serves locals. On the other hand, you can employ the services of a small company when you are running an international business. Your business and the accounting firm need to complement each other for things to work.

Has A Defined Process of Operation

A good local CPA firm should have a well-defined mode of operation. A well-planned process is important in handling critical financial statements from different business organizations. This helps to eliminate the chances of mixing information that may lead to data loss.

If you are seeking the services of a local company, then make sure that they furnish your business accountant with their process of operation. This will make it easy for you to determine if the firm can meet your needs on time.

Has a Well-Defined Communication System

A firm that is dealing with your finances must have a dedicated communication system. So, while you are carrying out the interview, take time to analyze how eager the firm is to work with you. This is because the firm will be dealing with critical issues that affect the stability and growth of your business. So, a dedicated accounting firm is important.

There should be a team that is tasked with communication. Besides that, there should be multiple channels of communication to ensure that data flows easily. This is vital as well as in eliminating delays in the dissemination of information.

What Makes a Good Online Outsourced CFO?

The services that CFOs offer to businesses usually have a significant impact. It does not matter if you are dealing with payroll or tax compliance issues since a CFO will simply work to give you the most accurate reporting.

However, it is important that you find the services of the best CFO. This way, you can be assured that the advice and forecasting information you are getting is accurate. However, looking for an online outsourced CFO is not easy. There are lots of people who offer these services hence you must be careful about your selection process.

Some of the good qualities of a CFO include:

A CFO needs to work together with your finance team to deliver the best results. Your first point of engagement with a CFO should be used to determine how friendly they are in service delivery. Building great professional relationships is important.

So, are your interactions enjoyable and formal? Or are your interactions tense and you are worried that maybe your interactions will be limited? Take time to analyze because you do not want to have someone in the team who your accountant can’t comfortably face.

Besides that, they should be as helpful as possible. This comes in handy when they have to give you advice for decision making. Their aim should be to work with your business and offer as many solutions as possible.

Understand that if your online outsourced CFO isn’t friendly and ready to help you, then you are going to miss out on beneficial insights.

Good Communication Skills

Communication is an essential skill for any business partnership. This is a top skill that your virtual CFO should possess. You definitely don’t want to hire someone who is unreliable and when they communicate it’s just brief.

If you are paying for access, then you deserve to be fully informed about everything. It’s important that the CFO is direct and provides precise and beneficial answers.

Do you know how it’s frustrating to ask important questions and the expert you are depending on isn’t giving you answers? Or they are simply giving you vague answers.

If you have any question or nothing something cleated up, then the CFO must deliver prompt and clear answers as soon as possible.

Should be certified

You can only trust someone with your business’ finances if they have been certified. At a minimum level, a good CFO should have an accountancy degree.

Besides that, they need to have an accounting certification and a member of a reputable accounting organization. Make sure that you verify their background details and their certification should be up to date.

Ability to Handle Scaling

If the CFO is good and your business ends up thriving, chances are that you might need to scale it. So, this means that your CFO will have more complex tasks to handle. Its, therefore, important that you employ the services of a virtual CFO who can effectively handle scaling.

To determine their versatility, it’s important that you ask the CFO what type of business organizations they work with. This way, you will be able to determine if it’s possible to grow with them, and if you can fully rely on their services in the long run.

Conclusion: Online Outsourced CFOs vs Local CPA Firms

The truth is that both local CPA firms and CFOs play a crucial role in streamlining the finances of businesses. A business that wants to thrive needs to employ either of the two services. Both are important in identifying key metrics for growth and decision making in finance.

Luckily with Stamos & Stamos CPA Firm you get both. You get the comfort and security of a local CPA firm, with the power and experience of a complete CFO team.

I hope you see how important it is to be on top of your accounting, it could be the difference between you making or losing countless amounts of money. Business owners everywhere struggle with this, at Stamos & Stamos we see it every day with new clients. It makes sense though; you did not start your business to be an accountant.

That is the reason why we offer our Outsourced CFO Service. We are completely done for your accounting firm with clients in over 30 states and counting. We will completely streamline your accounting process by building and managing your full-scale accounting and finance system. From payroll and bookkeeping to tax and financial planning we have your back.

We focus on not only reducing how much you pay in taxes, but we also focus just as much on raising your monthly profit. If you click the button below it will take you to the Outsourced CFO page on our website where you can learn more about what we can do for you and your business as your Outsourced CFO! Click the button below, we cannot wait to speak with you further