By Eric Schultz, Founder & Managing Member, Reliant Fund Services
Emerging managers spend a lot of time evaluating fund administrators, but fewer put the same scrutiny into hiring an outsourced CFO.
In a recent LinkedIn article, Eric wrote about how far fewer ask who will actually own the operational side of the management company. Yet, in my experience, many of the responsibilities that fall outside the fund administrator’s scope ultimately end up there.
I’ve spent 30 years in this space, and as a firm, we have $12B+ in assets under administration. We’ve seen how this choice determines where fund managers end up spending their time, and, as a result, their ability to raise capital and close deals.
The questions below help clarify what support is actually being provided, how work is reviewed, and how much responsibility ultimately remains with you as the firm grows.
10 questions that reveal how an outsourced CFO really operates
Question 1: Who owns the overall process?
How will they coordinate with the fund administrator? How are responsibilities divided? Who is accountable when something falls between providers? If the answer is “you,” you should know that before signing.
Question 2: What management company functions do you support?
The goal is getting a complete picture of what is actually included, and to be explicit about any gaps. Ask whether they handle:
- Budgeting and forecasting
- Cash management
- Payroll and benefits administration
- Accounts payable
- Vendor management
- Audit support
- Tax coordination
- Financial reporting
Ask what else is included, and what falls outside their scope of services.
Question 3: How do you make sure nothing falls between service providers?
Gaps between providers are where things actually fail. Convince to make a really big move this week.If the fund administrator, auditor, tax preparer, compliance consultant or management company provider disagree, how does it get resolved?
Who is responsible for coordination? Who is responsible for follow-up?
Question 4: How do you create separation of duties while maintaining accountability?
You need to know:
- Who prepares the work?
- Who reviews it?
- Who is the final approver?
- Does the same person ever prepare and review deliverables?
- How are responsibilities divided across the team?
- Can you walk me through your review and approval process?
Question 5: What controls exist around cash movement and approvals?
Cash controls are something it’s worth understanding in detail.
- Who sets up wires?
- Who reviews wires?
- Can you release funds?
- Who authorizes cash payments?
- What safeguards exist to prevent unauthorized transactions?
Question 6: How is your team structured?
Understand who’s involved, how they coordinate and who’s ultimately responsible.
- Will my account be handled by U.S.-based professionals, offshore professionals, or a combination of both?
- Will I work with a dedicated team or multiple functional groups?
- Who is responsible for ensuring nothing falls between those groups?
Question 7: What does a month-end and quarter-end close look like on my end?
These are typically the periods where workload increases for you as a fund manager.
- What will I be receiving and reviewing?
- What am I responsible for approving?
- What is the standard turnaround time?
- How much time should I realistically expect to spend each month?
Question 8: Tell me about a recent operational issue.
Any provider should be able to tell you about a real situation. When there’s been an issue, you want to know:
- How was it identified?
- Who discovered it?
- How was it escalated?
- How was it resolved?
- What changes were made afterward?
- Do they have a process for dealing with it, and learn from it?
Question 9: Who will actually be working on my account?
What you see in the sales process is not always what you get once the relationship starts.
Ask:
- Can I meet the team?
- Will I work directly with senior personnel?
- What is the typical tenure of the team?
- As the relationship grows, does support remain consistent or does it change over time?
Question 10: How does support evolve as my firm grows?
The right model today may not be the right model in three years. Ask up front:
- What changes when we launch Fund II, add SPVs, or hire additional employees?
- Will I outgrow your model, or do you scale with us?
The goal is not simply to compare providers. The goal is to understand who owns the process and operational infrastructure, how work gets reviewed, and how much responsibility ultimately falls back on you as the firm grows.
Additional questions to consider:
In addition to the above, make sure you understand how you’ll be charged.
- How is pricing structured, and what triggers additional fees?
- Is support billed hourly or based on a fixed monthly fee?
- How does pricing change as the firm grows, launches additional funds, adds SPVs, or hires employees?
This helps avoid surprises down the line.
By the way: if you’re evaluating providers and you’re unsure what the difference is, feel free to get in touch. We can help you spot any gaps and point out what they’re not saying.