CFOs warm to outsourcing

By Grace Noto for CFODive.com

Many companies have turned their eye to outsourcing as a cost-effective way to conduct critical audits or other financial processes. However, to do so effectively, executives must first define the scope of what they want out of the outsourcing relationship: figure out up front what specific roles or tasks that engagement represents, Jeff Stomski, a partner in EisnerAmper’s financial services group, advised in an interview.

Stomski is a seven-year veteran of the New York-based business advisory firm, which provides accounting, audit and tax services. Its EisnerAmper LLP group is a licensed independent CPA firm which offers client attest services.

“I think the less successful outsourcing relationships are always the ones where it’s like, ‘Oh well, be my CFO,’” he said. “Saying that can have a lot of different meanings to a lot of people, so defining that and what that means to management at a particular fund or organization, I think is kind of essential to even be able to start off the relationship and to get things moving in the right direction.”

Many finance leaders have already turned to outsourcing to address critical gaps in their finance and accounting functions — with a persistent shortage of qualified accountants, many firms have headed overseas to find key talent in the space, CFO Dive has previously reported. 

The accounting shortage has also started to affect companies’ financial statements: certain companies, including Advance Auto Parts have announced efforts to address material weaknesses in their financials that may arise in part due to a shortage of accounting staff, The Wall Street Journal recently reported.

To be sure, a rise in layoffs, some even in accounting sector, have begun to change the labor market dynamic since employers grappled with the “Great Resignation” during the COVID-19 pandemic. Yet many companies are still trying to fill “more specialized” kinds of roles, Stomski said. Filling those more technical positions can get expensive for companies, many of which are facing pressure to “do more with less.”

Going to an outsource provider that has the bandwidth to fill those roles can help to reduce costs in this area, he said, and tapping such a provider could also help to ease some of the responsibilities that are increasingly being heaped on CFOs’ shoulders. 

Many of EisnerAmper’s clients are in the mid-market range Stomski said, with an “overworked CFO, an over-leveraged CFO that needs capacity” on anything from helping out with the audit support side to reviewing financial statements, he said. Working with an outsource provider can ease those pressures, with the CFO still “the main driver,” he said. 

CFOs’ swelling responsibilities could do more than simply turn their attention to outsourcing’s potential benefits: it could also persuade finance chiefs to leave internal CFO roles behind in favor of fractional or external CFO work. Such roles have become more attractive to finance chiefs in recent months, CFO Dive previously reported. 

Stomski — who previously served as CFO of several funds including Blue Helm Capital Management and Spring Mountain Capital — pointed to a CFO friend of his who recently retired from his position citing burnout, including from constant compliance work.

“The internal CFO has to always do more with less constantly,” Stomski said. Financial leaders today have more regulatory responsibilities, and “the hours in the day don’t change…so you’re constantly forced to just take on more and more roles. And outsourcing helps augment it.”

CFOs today have also cast their eye on another potential tool that could help them to ease the myriad financial pressures they are facing — artificial intelligence and automation. With the dawn of generative AI tools like ChatGPT, finance chiefs are looking at automation not only as a way to reduce costs but also as a way to entice and retain the financial talent they need.

 

The technology’s potential is a source of both anticipation and anxiety among CFOs, but it is likely that AI’s role in the accounting and audit spaces will follow that of other historic trends, Stomski said. Just as different financial and accounting roles were consolidated into the broader CFO position, the increasing usage of AI and automation will consolidate the CFOs’ responsibilities into those that play a more strategic role in the business.

“I do think that you eliminate some of the data entry and lower level repetitive type tasks, and automation or AI whatever you want to call it takes over there,” Stomski said of AI’s impact on the CFO position and finance function more broadly. “But I think that allows just the overall role to be a little bit elevated.”

To effectively use the technology, however, finance leaders will need to keep their eye on data: “I think no matter what, you can guarantee that there’s going to be more regulatory reporting requirements, and all of those are going to be somehow driven by how you report data that you have,” Stomski said.