What is a Virtual CFO?
A Virtual Chief Financial Officer (VCFO) may be an individual or an agency that handles all the financial duties of a traditional CFO while working remotely or on a part-time basis for the business.
What’s covered in the article
Virtual CFOs are beneficial for small businesses and start-ups as they can help manage various financial aspects that many founders and business owners lack the abilities and skills to do so.
Large organizations having full-time CFO can also hire virtual CFOs and use their resources for their joint ventures or subsidiaries for improved financial data and strategic planning.
Virtual CFO Services, Roles, and Responsibilities for Clients
Some VCFO services offered to clients include;
- Creating budgets
- Identifying market trends
- Offering deeper level insights on business finances
- Raising Funds (debt or equity)
- Identifying financial trends, issues, and opportunities for the business
- Communicating with external parties – auditors, banks, and investors regarding the financial health of the business
- Periodic financial reporting
- Present debt management strategies
- Preparing financial forecasts
- Cash flow management
- Bookkeeping and reconciliation
- Tax and other compliances
Virtual CFO services can help businesses access the benefits of having an experienced financial professional in aligning business strategy with their financial strategy to achieve goals without the high costs associated with offering them an in-house position.
How Does a Virtual CFO Work?
Hiring a virtual CFO brings in the same contribution as expected from a full-time CFO, with some added benefits for the business owner. Businesses can leverage data provided through accounting, advisory, in-depth reporting, and forecasting services at a fraction of the cost for future growth.
Virtual CFO offers the latest cloud-based accounting system technologies to automate financial systems, improving their effectiveness and efficiency. Accounting staff can capitalize on real-time data and insights to provide timely operational advice. With this flexibility and available real-time intel, businesses can invest in valuable initiatives.
It is vital to note that virtual CFOs are independent financial contractors who help businesses become more profitable by managing their business projects and assets. However, they do not provide the following:
- Legal support.
- In-person participation with corporate teams.
- One-stop solutions for investor relations.
What are the Benefits of Onboarding a Virtual CFO?
Onboarding virtual CFO service offers several advantages for the business. Some of these include;
- Customized financial services: Virtual CFO can customize their services to provide skills and scope of work to fit your business needs and doesn’t charge you for anything else.
- Flexibility: Business owners can decide whether to employ them on a fixed or hourly basis. Working hours can be scaled up or down depending on the business’s changing needs.
- Diverse industry experience and skillset: Virtual CFO works with multiple companies from different industries and sizes. This diverse industry experience can provide the business with a wider variety of expertise and networks that would otherwise not be possible via the limited knowledge of an in-house CFO. Since virtual CFOs work with diverse organizations and their financial planning, they constantly upskill themselves to meet their virtual CFO responsibilities.
- Enhanced Cash flow management: A proficient virtual CFO service will analyze your business’s financial structure and spending patterns and recommend workable solutions to increase the cash flow.
- Instrumental in raising capital: A virtual CFO can be critical in preparing the company to raise funds. They offer assistance in valuation analysis, getting appropriate KPIs in order, negotiation and deal structuring, and providing guidance on intelligently spending money to make the company a more profitable business.
- Technological Integration: Virtual CFO services apply modern technology, including AI, cloud-based applications, and advanced data analytics, into its accounting services to ensure accounting compliance and create reliable financial reporting projections.
When is the Ideal Time to Hire a Virtual CFO?
Here are a few signs to know that you need to hire a virtual CFO for your company:
- Business experiencing significant growth: If a business sees a rapid increase in growth, it may not have the internal resources to keep up with the demand. In this case, hiring a virtual CFO is recommended to lead the financial side of things so they can continue to grow without any roadblocks.
- Business is undergoing new changes: A small business going through changes like new product launches, expansion into new market segments, etc., can benefit from having a virtual CFO who can help oversee the financial risks, impact, and decision-making related to these changes.
- Revenue beyond one million: A business that has touched a million-dollar revenue mark is no longer a small business. At this point, it requires professionals that can solely dedicate themselves to managing the company’s finances.Virtual CFO services can offer support by drafting accurate financial statements, executing financial strategy, and other services for the company’s continued growth and expansion.
- Operations are becoming more complex: When firms scale up, their operations become more complex. So, it is important to have financial professionals who can manage the finances and highlight weaknesses in the supply chain operations for companies.
How to Choose a Virtual CFO Service?
To hire an individual or a service provider offering virtual CFO services, you must ensure that they align with your business goals. This could mean looking at their;
- Cost-breakdown: Providers of virtual CFO services should be clear about all costs and fees of the services from the beginning. Any add-ons should be discussed before the contract is signed. Transparency is important as you need a business that you can trust with your finances.
- Expectations: Find out what your virtual CFO needs for its operations. For example, access to digital records, connections, resources, or even a full onboarding with your current financial team. Work out how to make the transition smoother and encourage an atmosphere of collaboration for all.
- Industry experience: It could be useful to research and investigate virtual CFOs with experience in your field. Every industry has its specialties and quirks. So, onboarding one with appropriate skills, experience, and connections with other professionals like tax consultants, lawyers, and insurance specialists will provide access to a stronger network and more helpful strategic advice for your company.
Find a candidate who understands and truly embraces the success you foresee and knows how to get you there.
Whether you’re looking to upscale your business or have accurate financial reports for decision-making. Virtual CFOs can bring value to your company with their diverse experiences and skills.
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