Virtual CFO – Meaning, Benefits & Need for Business
Increasing your company’s revenue is the most satisfying thing for any passionate entrepreneur. There’s no feeling quite like the one that comes with hitting a financial goal that’s long been on your horizon. But reaching new revenue levels also comes with growing pains.
If you’ve hit this point, one big question on your mind might be, what is a virtual CFO? And more importantly, does my business need one? Read on to learn about the services a virtual CFO provides, the benefits of having one, and how to determine whether virtual CFO services are a good fit for your business.
Virtual CFO - Meaning
A virtual CFO or vCFO stand for virtual chief financial officer. A virtual CFO is an outsourced service provider offering high skill assistance in financial requirements of an organization, just like a chief financial officer does for large organizations. Instead of going to the trouble (and expense) of hiring, training and bringing someone with these qualifications into your organization, you’re getting access to someone who can handle all of this remotely on a schedule that works best for all involved.
The number of startups has ballooned in the past decade, with technology paving the way for more entrepreneurial activity than ever before. Limited capital and a lean operation are typically some of the defining characteristics of startups; as such, the need has grown for a way to work with niche professionals, like marketers, strategists and accountants, at an affordable cost.
Enter the world of outsourcing.
Here are just a few of the services a virtual CFO might provide:
Accounting Services
Treasury Management
- Compliance Management
- Fixed Asset Management
- Payroll Management
- Financial Planning & Analysis
- Financial Reporting
Virtual CFO - Benefits
There are many benefits to hiring a virtual CFO to help manage your growing company’s financial posture.
Control costs
Perhaps the biggest benefit of a virtual CFO is the ability to control costs.
The major reason why smaller organizations in particular are finding vCFOs so helpful is that they’re a viable way to control costs almost immediately. Rather than paying the salary to hire your own CFO in a full-time capacity (which can easily balloon into the hundreds of thousands of money per year once experience and benefits are accounted for), you get the services you need, in an on-demand way, for a fraction of the cost.
Rather than paying someone for a lifetime’s worth of education, you’re only paying for the skills needed to perform the tasks at hand.
Customize based on your needs and budget
Every business work in their unique style and the requirements differ from one company to another. A virtual CFO service can customize the skills and scope of work necessary to fit the company at hand, without paying for anything that’s not needed. These services can also be shifted as needed as your business grows and evolve. All of this provides you with almost unprecedented access to a wealth of knowledge that used to be out of your budget.
Consider the types of challenges that you’re likely to experience over the course of just five years. Your business will naturally get more complex as you add not only more employees but also suppliers, vendors and all the contracts that come with them. If you go through a period of rapid growth, it can quickly cause your financials to grow out of control … unless you’re prepared for it.
A good virtual CFO also recognizes that he or she is, most likely, a temporary solution. A virtual CFO who does his job well will ultimately become redundant as the company grows into a position to hire an actual full-time CFO. A virtual CFO can help transition your company from an outsourced to an in-house chief financial officer position when the time comes.
Diverse expertise
Most virtual CFOs work with a handful of different clients, enabling them to maintain affordable rates for each one. As a client, you’ll benefit from this diverse pool of experience and expertise.
A virtual CFO sees countless different financial situations and resolves a number of diverse financial conundrums. Chances are, whatever your unique situation, your virtual CFO will have seen it—or something similar—before and can advise you accordingly.
Virtual CFO – Need for a Business
Now that you understand what a virtual CFO is and some of the benefits to be gained from hiring one, the next question you’re naturally asking yourself is, is it the right solution for me?
Well, the first thing to know is that a virtual CFO is not a good solution for all businesses. In some cases it’s simply not yet necessary, while in others an outsourced arrangement is not the best fit. Finally, and most importantly, if your financial house is not yet in order, you need to take care of that first. In order to be able to strategize your finances, you must first have a clear and stable understanding of what they look like.
Here are a few scenarios when it might be a good time to hire a virtual CFO for your business.
Your business is becoming more complex
When it’s just you working in your basement at midnight, things are usually pretty simple, financially speaking. They get more complex as you add employees, suppliers, vendors, contracts, and other components to the business.
If your growth has complicated things to where a bookkeeper alone doesn’t feel like a sufficient financial solution, it might be time to hire a virtual CFO.
You’re experiencing rapid growth
Growing quickly is a good thing!…until suddenly it’s not. Rapid growth can put your financials into a tailspin, especially if you are not prepared for it. A virtual CFO can help you navigate periods of accelerated growth and put the appropriate systems in place for the next phase of your business.
Your financials are unfavourable… and you’re not sure why
Nearly all companies go through unfavorable periods at some point. It’s part of doing business. The key is understanding why they’re happening so you can take the necessary steps to right the financial ship.
If you’re struggling to maintain or grow profitability and you don’t know why, a virtual CFO may be the right person to add to your team.
You lack the detailed financial understanding needed to make decisions
For Virtual CFO, it is all about informed decision making. One of the main priorities to work with virtual CFO is to give you clarity around your finances so you can make sound business decisions.
If you’re struggling to make decisions—both big and small—in your business because you have a foggy idea of your numbers, working with a virtual CFO may be a good idea.
