Pros and Cons of an Internal CFO
Internal CFO:
Pros:
#1 Internal CFOs have more time for your business
Internal CFOs are there all the time. This is one of their biggest advantages. They don’t have any other clients. They don’t have any other distractions. They are there focused purely on your business. They have all the time possible to give you insights into your business. Their investment in time is far greater than someone not working in the business outsourced or an external basis and they can put daily focus into your business.
#2 Internal CFOs can push your people easier
This is especially true when your internal CFO is dealing with non-finance team members. For example, in the case of an outsourced CFO or a tax accountant, it’s easier for your team members to smile at them and agree with them on how operational-related strategies should be implement, but as soon as the outsourced CFO or tax accountant leaves, they go back to the old ways (or not embracing the new way) of accomplishing things.
Internal CFOs can monitor team members virtually all the time. Yes, that may sound like they are baby-sitting and handholding, so to speak, but that degree of accountability is better than when you have an external party overseeing this area of your business.
#3 You can get an industry superstar
Whatever industry you're in, whether it's construction, wholesale, manufacturing or even more specific than that, you can get someone with ten, 20, 30 years of experience working for a competitor or like industry. When you have succeeded in getting him or her to work for you, they will bring this information and knowledge across to your business. For an internal CFO, you can get someone who is elite in your industry.
#4 Size Matters
This is a practical concern especially at a certain point in your business's growth, evolution and journey. There will be a certain point in your journey where it's more practical to have an internal CFO there all the time due to the workload.
Cons:
#1 They can get lazy
That is the bluntest way to put it. This can happen especially for people who have been with your business for a long period of time. One of the factors for this is, unlike an external provider you cannot easily fire internal CFOs because of the laws governing their employment status in most countries. You can easily end your engagement with consultants even in just a matter of days’ notice and you will not be penalized, but with internal CFOs, even if you are dissatisfied with their performance, you must go through law-mandated processes of letting go of them.
#2 Workload versus high-level salary
Is there enough workload at a high level to justify the high salary? Or are you risking certain tasks being completed by somebody who is very expensive relative to the task? You don’t want to pay CFO rates for a 50% of the time role.
#3 They can be more expensive
Like the workload raised in point 2, the pure cost is high. An internal CFO does not come cheap at most likely over $200,000 per year.
