To Outsource or Not to Outsource CFO Services…That Is The Question!

Whether you are a start-up company or a company listed on the TSX, TSX Venture or the CSE, there is no question that having a Chief Financial Officer (CFO) is essential and required. But at what cost? In addition to back-office accounting expenses, retaining a CFO full-time is very expensive. Yes, the in-house CFO will oversee financial reporting, accounting, audit prep, and other financial-related business tasks, but it’s certainly not a full-time job especially for start-ups or pre-revenue companies. In this case, an outsourced CFO solution may be the right option.

There are a number of benefits of retaining outsourced CFO services. To help illustrate the benefits, we will put them in the context of a CSE-listed biotech company. We’ll call the company Canadian Biotech Inc.

Benefits of Outsourced CFO Services for Canadian Biotech Inc.

1. Saves Money…A Lot!

Canadian Biotech Inc. is in the research and development stage, has no revenues and does not expect to generate revenues in at least 3-5 years. However, they are required by securities regulations to have a CFO as part of their C-suite team. For any biotech company, money is precious and most of their budget will need to go into R&D. CFO’s generally demand a high salary, benefits and annual raises. Small R&D firms may not be able to afford an in-house CFO nor can they justify hiring one. Hence, a company like Canadian Biotech Inc. would benefit greatly from an outsourced CFO service that would oversee quarterly financial statements, MD&A’s, tax reporting and audits at a fraction of the cost. In most cases, the cost of an outsourced CFO along with its accounting team will be way below the cost of a dedicated, full-time CFO.

2. Efficient Resources

A full-time CFO will no doubt either inject him or herself or get pulled into other projects or tasks that do not necessarily require their attention. This may be the result of either the CFO or other members of the company trying to justify the CFO’s salary and/or to fill the large gap of time that is afforded working at Canadian Biotech Inc. More importantly, the in-house CFO being distracted and pulled away from their important duties may lead to lower quality of work. Rather, having an outsourced CFO, their focus can be solely directed to their responsibilities in financial reporting, budgeting, bill payment and cash flow forecasting. Also, with the ongoing challenges of raising capital for a small Canadian biotech company, an outsourced CFO can leverage their own experiences in raising capital by providing strategy, assisting in due diligence and negotiating term sheets.

3. Leveraging Experience and Network

A full-time CFO will only rely on their previous experience with other employers that may or may not be relevant for Canadian Biotech Inc. The learning curve may be steep. An outsourced CFO will more likely have vast experience and knowledge to draw from a variety of current and previous clients who are at many stages of growth and in multiple industries. Strong outsourced CFO’s will have access to a full range of finance and accounting talent to efficiently solve problems and avoid potential pitfalls, and allowing them to assemble teams to achieve key objectives for their clients. More importantly, an outsourced CFO will have a direct pulse on the financial regulations that are continually changing for publicly-traded companies.

4. System Are In Place

An in-house CFO may bring a personal bias on implementing systems and processes that will serve to benefit the in-house CFO. This may cause issues in the future should a new in-house CFO be hired. Rather, an outsourced CFO brings a non-bias approach and will implement a simple and efficient accounting system in place that not only lays a solid foundation for when an in-house CFO hire is required, but also, will be scalable to handle growth and added complexity, including financial, sales, operational, or business systems. For Canadian Biotech Inc., this is very important since there will be a day when the hockey stick sale growth curve arrives and an in-house CFO will be required to join the company on the ground running.

THE MSSI OUTSOURCED CFO SOLUTION

Here at Marrelli Support Services Inc. (MSSI), we have been offering outsourced CFO services for over 30 years to a number of privately-held and publicly-listed companies on the TSX, TSX Venture, the CSE and the OTCQX. Our outsourced CFO solution allows our clients to appoint one of our senior team members on a select basis to act as its CFO, which can be retained alone, or complemented by MSSI’s bookkeeping and financial reporting services, representing an opportunity to substantially cut overhead costs.

We save you money!

After switching to MSSI, our clients often see a reduction of 40% to 70% (or more) in their back-office costs. We make it a practice not to assume a CFO role beyond what our time, expertise or qualifications reasonably permit. Our MSSI part-time CFO will work with clients to ensure they remain compliant with their financial disclosure requirements, becoming an integral part of our client’s executive team.

Take advantage of our system and our learning curve!

Our new clients never skip a beat! Our outsourced CFO will use the bookkeeping and financial reporting division of MSSI, utilizing cost efficiencies within our network. MSSI provides day-to-day banking, monthly bank reconciliations, payroll processing/tax reporting, invoice processing

and cash disbursements, cash receipts, general bookkeeping, financial statement preparation and information technology general controls to reporting issuers in Canada. No guesswork. No time lost.

We Take Internal Controls and FINTRAC Seriously

Today’s regulatory environment demands robust internal controls. In recognition of this, MSSI engages an audit firm to report annually on our internal control environment. The internal control report is called the “Report on Suitability of Design and Operating Effectiveness of Controls in Accordance with Canadian Standards for Assurance Engagements 3416″. This report provides assurance to our clients about the existence and effectiveness of the internal controls used by MSSI. By choosing an outsourced CFO you benefit from audited internal controls.

Technological advancements create new challenges in preventing money laundering and terrorist financing. Globally, money laundering and terrorist financing involve trillions of dollars and finance serious criminal activities. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) provides the regulatory oversight and enforcement of Canada’s anti-money laundering and counter-terrorist financing (AML/CTF) regime. FINTRAC ensures compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations, and has issued a set of guidelines for organizations to fulfill.

MSSI is fully compliant with FINTRAC guidelines, demonstrating our commitment to preventing the illegal flow of money. A global audit firm annually audits our compliance with the PCMLTFA, which provides assurance to our clients that we maintain effective AML/CTF controls to prevent money laundering or terrorist financing. By choosing an outsourced CFO, you benefit from routinely audited AML/CTF controls that meet the FINTRAC standard.

Our responsibility is to ensure, to the fullest extent possible, that those who use our products and services are reputable and their business purposes and funds are legitimate. By doing so, MSSI allows its clients to sustain quality earnings.

Need a Cost-Effective Outsourced CFO Solution for Your Business?

For more information and a custom-tailored service package, please contact Carmelo Marrelli at 416-848-0106 or Robert Suttie at 416-848-6865.