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To Outsource Or In-house Your CFO, That’s The Question

min read •
April 26, 2022
April 24, 2024

By Kelvin Gieck, CFA

Running your business is hard work.

Managing the finances for any business can be daunting. I spent nearly 20 years as both an in-house and outsourced CFO, and let me tell you, it can be a real mind-f--k.

I’ve dealt with seasonal cash flows, unknown cost spikes, duplicate bills and invoices, lack of funding, and poor financial insights. Whether you’re a dentist with a growing practice, or a boutique engineering consulting firm, the same financial issues keep everyone up at night. And honestly, that pisses me off, because entrepreneurs should be free to build their dream, not get tangled in the weeds.

If you're a small business doing $1M in revenue or more, it’s time to consider letting a CFO help manage this headache for you. You may think I’m biased because our team here at Twenty Eighty is bringing a very human approach to helping owners find a new level of success and personal freedom – but believe me, I’ve been on both sides of the equation and the choice is ultimately yours to make.

If you’ve got a few minutes, grab a coffee and let’s explore the question: should your CFO be in-house or outsourced?

In this article, I’ve spent some time outlining the key differences, responsibilities, and roles a CFO will play in your business. And the plus/minus of having one in-house on your payroll versus a fractional arrangement. Let’s get into it with the basics.

What Is An In-house CFO?

An in-house CFO is a senior executive who takes charge of financial decisions.

They’re a full-time employee of your business and take responsibility for owning and overseeing the execution of your financial strategy.

An in-house CFO helps to:

• Strategically manage the finances of your business

• Ensure that your strategic goals are being properly targeted and tracked

• Create alignment across divisions and groups in your business

• Build an environment of accountability from the top down

• Drive the general business vision and growth

What Is An Outsourced CFO?

It’s pretty straight forward. An outsourced CFO is an external finance consultant who leads financial operations in all the same ways that an in-house CFO would. They just aren’t employed by your business.

You can hire an outsourced CFO in an interim, full-time, on-contract, or part-time role, depending on the budget and requirements of your business.

This is where the buzzword “Fractional CFO” comes from. And being able to scale the amount of time you use them up or down can make outsourcing CFO services much more cost-efficient than hiring an in-house CFO.

What Is The Scope Of A CFO’s Role In Your Business?

In my experience on both sides of the fence, having a CFO for your business is a no-brainer.

Here are some of the things they’ll help with and take off your plate:

Financial Forecasting

A CFO is responsible for developing and maintaining financial forecasts for the company. They analyze:

• Historical financial data

• Market trends

• Business projections to predict future financial performance

This is super important because accurate forecasting helps with:

• Strategic decision-making

• Resource allocation

• Identifying potential financial risks and opportunities

Budgeting And Cash Flow Management

Constantly watching your bank and worrying about having enough cash to pay for things or invest in future growth, e.g. acquisitions?

Budgeting and cash flow management can help. With a CFO in place, and depending on other company resources (i.e. you may or may not have a Controller), they will:

• Oversee the budgeting process

• Work closely with department heads to develop budgets aligned with the company’s strategic goals

• Monitor actual financial performance against the budget

• Identify variances and implement corrective actions

• Help with effective cash flow management

• Ensure enough funds are available to run operations and invest in growth assets

Guide System Efficiencies

Having the right systems in place to effectively manage your finance function is important. You can’t effectively manage cash and create up to date budgets and forecasts if you’re stuck using desktop accounting software like Sage 50 (well, that’s not totally fair in all honesty, but it is certainly harder using older, desktop-based tools).

A CFO will come in and help to guide what your finance function tech-stack should look like and help to build that system, creating efficiencies in day-to-day tasks as well as giving you more visibility in your business.

Asset Management

The CFO is responsible for managing your company's assets. This includes working capital, fixed assets, and investments.

They’ll help you to:

• Optimize asset allocation

• Monitor asset performance

• Implement strategies to maximize returns and minimize risks

• Build stronger cash and working capital positions

Effective asset management builds out the “base” of your business and can greatly contribute to improved profitability and long-term financial stability.

Audits And Financial Reporting

A CFO ensures the accuracy and integrity of financial information.

They manage the things required for any future audits so that you don’t need to worry about it.

They also help to ensure:

• Compliance with accounting principles and regulations

• Accurate and transparent financial reporting enhances credibility with stakeholders

• A clear view of the company's financial position

Plan Mergers and Acquisitions

Acquisitions are a crucial part of an energy service company's growth strategy and something we’ve been helping with lately.

Your CFO deals with due diligence during M&A. They perform financial analysis and valuation of target companies. They assess the financial impact of M&A transactions. They’ll also develop integration plans and negotiates financial terms.

Tax Compliance

Your CFO ensures the company's compliance with tax regulations. This includes timely filing of tax returns and payment of taxes. They stay updated on tax laws and interpret their implications.

They’ll also help to implement strategies to optimize the tax efficiency of the firm, complying with legal requirements. Effective tax compliance helps in avoiding penalties.

Difference Between An In-House CFO vs Outsourced CFO

Sounds like a CFO is going to take a whole load of trouble off your plate?

You got it.

So, should you choose to hire in-house or outsource?

Here’s a bit more info to help you decide:

Employment Structure

In-House CFO

An in-house CFO is a full-time employee of the company. They are directly hired and work exclusively for the organization. Hiring people full-time has its benefits but also challenges.

Outsourced CFO

An outsourced CFO is not a permanent employee of the company but is hired through a third-party (like Twenty Eighty). They work on a fractional or part-time basis, providing financial expertise and services as needed. In our case, they integrate seamlessly into your business (i.e. you don’t hear from them only at month end).

Cost and Resource Allocation

In-House CFO

Hiring an in-house CFO involves the cost of a full-time executive. This includes salary, benefits, and other associated expenses. You’re going to be looking at a minimum of $200K per year to bring a decent CFO in-house (if you’re between 0-$5M in revenue that will eat into a good portion of your net profits).

It requires a long-term commitment and investment from the company. However, it allows for:

• Dedicated member of the senior leadership team

• Real-time decision-making

• Daily integration with the company's operations

Outsourced CFO

An outsourced CFO is often a more flexible and cost-effective solution. It can be tailored based on the required level of involvement and the duration of the engagement. An outsourced CFO provides high-level financial expertise without the commitment of a full-time hire.

Both in-house and outsourced CFOs can provide valuable financial expertise and contribute to the success of a company. The choice between the two depends on factors such as:

• Your size

• Budget

• Long-term objectives

• Level of financial support and expertise required

What’s Right For Your Company: In-House CFO vs Outsourced CFO?

I’ve served as a CFO for 20 years and have helped many entrepreneurs and start-ups take shape and grow.

It depends on size, but if your revenues are between $1M-$20M per year, you should consider an outsourced CFO.

Hiring one internally at this stage is likely to incur too much cost, which should be instead focused on building out other aspects of the business and investing in further revenue growth.

Making My Case For The Outsourced CFO:

Here are some reasons why I believe you should consider outsourcing CFO services:

It’s a cost-effective solution. If you’re between $1M-$20M in revenue, an outsourced CFO will be a more cost-effective option.

Get expertise with industry experience. An outsourced CFO will often bring perspective and experience from working with other businesses like yours. Even more so if you choose one that works with a team that gives them greater depth and breadth (I know a guy here… hehe… yes, it’s me)

You can focus on business expansion. This one is huge. Outsourcing your CFO function frees up a huge amount of headspace for you to focus on revenue and profit growth. Working hand in hand with the CFO will give you the solid finance foundations you need to grow, fast.

Access to a wider finance team. Alluded to above, some outsourced CFOs won’t come alone. They tend to come as part of a fully outsourced finance team, including accountants, controllers, tax advisors, and bookkeepers. In my case, our bench at Twenty Eighty provides you with access to an entire finance team for less than the cost of an in-house CFO.

Want to explore if hiring an outsourced CFO makes sense for your business?

Let’s connect today and get rolling. In our initial conversation, we will discuss where you are at, where you want to be, some of things that are blocking you… and ways we can change that.

(Kelvin is the founder of Twenty Eighty, passionate about helping the people behind the business, and often writes his best blogs at 2:15 AM when the house is quiet)

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You might have heard these grim statistics before: more than 80% of all small businesses fail within 10 years, and more than 80% of those businesses fail due to cash flow issues. While some dispute the exact numbers, the underlying issue can't be. Cash flow is important. Period.

One would think that one of the most important business areas would be well understood. That isn't the case though. Cash flow is still one of the most ill-understood topics within the small business community. And forecasting cash flow? Even though it is just as important, it is even more misunderstood.

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Cash flow and cash flow forecasting is still very misunderstood.

In this post we will shine light on these misunderstandings, talking about what cash flow is, what cash flow forecasting is, the different types of cash flow forecasting there are, and how forecasting your cash flow can greatly benefit your small business whether you're a founder of a startup or a web3 company, or a professional that has ventured out on their own (say a veterinarian, dentist, chiropractor, optometrist or lawyer).


So, let's start with the basics: what is cash flow?

Cash flow is simply the movement of money in and out of your business. Money coming in is called inflow, while money going out is called outflow. Your business' cash flows can be positive (more cash inflows than outflows), negative (more cash outflows than inflows), or neutral (equal cash inflows and cash outflows).


The movement of money within, and through, any business is extremely important. At a basic level, every entrepreneur sets out to make money. So stripping everything down, each business' ability to generate positive cash flow, consistently over time, determines just how good that business is performing.

The more cash flow a business can make, the better it is doing.

The more cash flow your business make, the better you are doing.


Now, the above discussion on the importance of cash flow might seem overly simplified, and it is, but most small business owners don't have a great handle on this basic construct.

And there are two reasons for this:

  1. The concept of double entry accounting
  2. The concept of accrual accounting

Why Double Entry Accounting Makes Cash Flow Hard To Measure

Double entry accounting underpins all accounting as we know it. It requires that every financial transaction to be recorded in at least two different accounts. For example, when you make a sale, you would record this transaction both in your sales account on your income statement and your cash account on your balance sheet.

While this system provides greater accuracy and transparency around business finances, it also makes measuring cash flow more difficult. And that's because changes in cash can occur in two places: your income statement or your balance sheet.


  • You collect on an outstanding customer payment. Your accounts receivable account decreases and your cash balance increases, but your net income hasn't changed at all
  • You buy new equipment during the year. These capital expenditures increase your fixed assets and decrease your actual cash, but don't affect your net income
  • You make loan payments each month. Your cash balance decreases, your loan account decreases and your net income is decreased by your interest payments (so here you actually affect both statements at the same time)

Why Accrual Accounting Makes Cash Flow Hard To Measure

There are two basic methods of accounting: cash accounting and accrual accounting.

Cash accounting only records transactions when the actual cash changes hands. So if you make a sale and the customer pays later, you wouldn't record that transaction until you collect payment from the customer.

Accrual accounting records income and expenses as they are earned or incurred, regardless of when any actual cash is received or paid out. Using our same example, if you make a sale and the customer pays later, accrual accounting would record the sale right away and create an accounts receivable. It would then eliminate that receivable and increase your cash balance when you collected payment.

Accrual accounting is a double edged sword. It creates financial statements that are more accurate and reliable for various users, but also creates timing differences, estimates and other complexities that aren't necessarily well understood by business owners.


  • Depreciation is an estimate of wear and tear on your equipment. It is on your financial statements yet has no actual cash impact
  • Prepaid expenses, like an annual insurance payment, are recorded with the money spent, but are smoothed out and realized over time to more accurately reflect their utilization
  • Sales could be made on account to customers who ultimately have bad credit. Sales and accounts receivable are recorded even though no cash is received
Accounting can create to a lot of questions around cash flow for small business owners.


The cash flow statement is the report that helps overcome the shortcomings that accrual accounting and double entry accounting processes make. This report ties the balance sheet and income statement together within your typical financial reporting. It measures all cash inflows, all cash outflows and eliminates any non-cash estimates that are also contained within your financials. And ultimately it reconciles all of this information to the cash balance contained within all of your bank accounts.

The Difference Between The Direct Method And Indirect Method

You can see two different forms of cash flow statements: those using the direct method and those using the indirect method.

Cash flow statements using the direct method are considered by some to be more accurate. This method reports all cash inflows and cash outflows from your business operations separately from any other inflows or outflows. This could include things like customer payments, vendor payments, interest income, dividends and other operational items.

The indirect method is a bit more simplified. It adjusts your net income for any timing differences between when you record accrual based items and when the actual cash is paid or received. This reconciles your net income to your actual cash. While this method isn't as detailed as the direct method, it's also not as susceptible to error.

Why Cash Flow Statements Are Less Useful Than They Appear

Regardless of the method used, cash flow statements are a very important piece of your financial picture. As mentioned previously, they show how cash moves through your business. That said, cash flow statements are historical in nature. They show you what your business did, but not where your business is going. To see that kind of information, you will want to use a cash flow forecast.


A cash flow forecast is a projection of all of your future cash flows. It is a best guess, based on all available information, of what you expect to happen in the future. This includes things like expected:

  • Sales
  • Expenses
  • Collections on accounts receivable
  • Payments of accounts payable
  • Asset purchases
  • Loan payments debt repayments
  • Sales taxes
  • Corporate tax refunds or tax payments

A good cash flow forecast will show you:

  • All of your cash receipts
  • All of your cash payments
  • And their precise timing

This will give you a clear picture of where your business is heading, and how much cash you will have on hand at any point in time.

Knowing where your business is going with a cash flow forecast is something to celebrate.

The Benefits Of Forecasting Cash Flow

We touched on some of the high level benefits of cash flow forecasting in our Definitive Guide To Managerial Accounting For Small Businesses. Simply put, knowing the future net cash flow of your business, and your estimated cash balance at any point in time gives you a lot of power as a business owner. You will be able to:

Predict Cash Shortages

By forecasting cash flow, you can see when your business might have a shortfall of cash. This allows you to take steps to avoid or mitigate the effects of a cash shortage, such as delaying expenditures, extending payments on accounts payable or shoring up working capital with short term debt.

Better Manage Your Cash Flows

Cash flow forecasting will give you a better understanding of how money moves within your business allowing you to more effectively manage your activities with operating cash. This can be particularly helpful if your business:

  • Is growing
  • Has seasonal trends
  • Is project based, with large and irregular inflows
  • Provides a lot of customer credit

Knowing when and how you will get paid, and how and when you will make payments will make you a lot less reliant on debt and lines of credit.

Make Better Business Decisions With More Confidence

A cash flow forecast will give you a better understanding of your business's financial health. This information can then be used to make better informed decisions about how to best use your resources.

Do you have enough cash to buy the equipment you need to grow and hit your sales targets? Can you afford to hire that stellar employee you interviewed? If you open a new location how will that impact your bank account in the short and long term?

Whether you have negative cash flow or a host of cash surpluses, thinking through exactly how you will progress your business, and knowing the effects of these decisions is an extremely helpful exercise. It will surely boost your confidence.

Track Your Progress

A cash flow forecast will help you track your progress towards your strategic business and financial goals. The information gleaned from the cash flow forecasting process itself can be used to adjust your budgets and your business plans, making these documents dynamic and more relevant as your operations change.

Being able to track business performance using cash flow forecasts will make you pretty excited.

The Different Types Of Cash Flow Forecasts

There are a number of different types of cash flow forecasts. Just like cash flow statements there are different methods you can use to create a cash flow forecast. And depending on your goals, the time frame you use in your cash flow projection should change.

Direct Versus Indirect Method

Similar to its cash flow statement counterpart, a direct forecasting shows the exact cash inflows and outflows that result from your business' operations. This is the more straightforward approach to cash flow forecasting as it directly ties to all incoming cash receipts and outgoing cash payments.

Indirect forecasting does not start with your business' operational cash inflow and cash outflows. Rather, it begins with your company's net income figure. From there, non-cash items and changes in working capital are added back into or deducted from the bottom line to get to a net cash flow figure.

Three Way Cash Flow Forecasting

Indirect cash flow forecasting is more common associated with three way cash flow forecasting. This cash flow projection method forecasts your income statement, balance sheet and cash flow statement and ties them altogether. Hence the term three way forecasting.

Three way cash flow forecasting is sometimes viewed as the most robust way to cash flow forecast. It eliminates a lot of possibility for errors, especially when using a spreadsheet, and also presents bank ready financial statement projections that can be used for lending purposes. This method is typically a lot more customized however, can take a lot more time to create and maintain, and sometimes isn't as easily understood by entrepreneurs.

Long Term Cash Flow Forecast

Long term cash flow projections are typically forecast from one year to five years out, with most going to three years in range. This type of cash flow forecast is most often associated with strategic planning and indirect/three way cash flow forecasts. These types of estimates are often used to:

  • Validate and test business ideas
  • Supplement business plans
  • Raise equity
  • Acquire bank financing

Short Term Cash Flow Forecast

A short term cash flow forecast is much more operational in nature. It can range from days to months in terms of time frame, and often does not go beyond a year. This type of forecast is much more granular in nature, and has much more accurate information in terms of timing. It is often updated quite frequently, as regular as weekly forecasts or daily, and is ultimately used to answer the question "do I have enough cash to do X?" in the near term.

The Key Difference Between Long And Short Term Cash Flow Forecasts

The biggest difference between a short term and long term cash flow forecast is its use. Long term forecasts are more strategic, while short term forecasts are more operational.

The best analogy is a road trip using a map. A long term cash flow forecast determines exactly where you are going and loosely determines how you will get there. A short term cash flow forecast is used while you are driving to that destination, constantly shifting due to traffic, construction and road closures.

It is often a best practice to use both a long term strategic and a short term operational cash flow forecast.

Using both a long and short term cash flow forecast means you know exactly where your business is going.


An accurate cash flow forecast can be a game changer. Whether you're a professional, such as a veterinarian, dentist, chiropractor, optometrist or lawyer, or a founder of a startup or a web3 company, you will experience cash flow issues. Studies show that the vast majority of business owners have at least once in their lives.

Knowing exactly when that cash flow issue will come, and what you are able to do to mitigate the problem is a definite advantage. One that will let you sleep a whole lot better at night. And that's exactly why cash flow forecasting is a must-have tool.

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