The Virtual CFO (Chief Financial Officer) is a modern concept that is seeing rapid adoption, particularly in small and medium-sized businesses that practice remote working. In particular, virtual CFOS helps nurture growth that may otherwise have been unattainable.
In this article, we will consider how virtual CFOs provide strategic financial guidance outside of a traditional office environment, the types of services offered, and how they can contribute to business growth and key decision-making. We will also explore how virtual CFOs can be seamlessly integrated into remote working models and the benefits compared to having an in-house CFO.
What is a Virtual CFO?
In simple terms, a virtual CFO is a dedicated professional who provides a range of outsourced financial services to businesses. Businesses usually hire virtual CFOs part-time, benefitting from the same services offered by an in-house CFO but typically at a lower cost.
Virtual CFOs (VCFOs) will often work with several clients rather than being tied to just one. This allows them to offer a tailored service, focusing on just the core needs of each client and providing bespoke financial strategies. This is beneficial for businesses that require assistance but don’t have the budget for a full-time CFO.
As an advisor, virtual CFOs play an active role in the business by outlining business goals, creating forecasts, devising long-term financial strategies, and processing documents. In modern business environments, CFOs are vital for achieving both short-term and long-term growth, utilizing their experience and analytical skills to provide valuable insights.
Virtual CFO Services
CFOs are not to be confused with accountants. The role of an accountant is to prepare and file taxes, typically meeting with their clients just once a year. CFOs provide a much more hands-on and varied service. The overall role of a virtual CFO is to help clients achieve their business goals and boost profits.
A VCFO is much more than the person signing off purchases. Not only do they have to take care of employee costs, but they must also be knowledgeable about everything from cloud cost management tools to the top CRMs, making it possible to better calculate ROI and achieve targeted goals.
A VCFO will conduct tax planning and use that data to create detailed financial forecasts. This helps clients plan for the year ahead by taking into account their tax obligations and it impacts the overall budget. This analysis will also prevent any unexpected tax bills that could prevent a business from hitting its short-term or annual targets.
Once a clear pathway has been established, the VCFO will carry out the following tasks:
- Budgeting
- Forecasting
- Cash flow management
- Creating a financial strategy
- Setting KPIs
- Arranging regular/ weekly financial meetings
- Publishing financial reports
- Liaising with banks
- And other financial tasks that ensure the smooth running of the business
How Virtual CFOs Can Help Small Businesses Grow
Alright—now that we’ve outlined the general ways in which VCFOs operate, let’s hone in on the more detailed and practical ways in which they can benefit businesses.
1. Efficiency and Cost Management
Business efficiency and cost management are key priorities for VCFOs, helping businesses implement more control with minimal investment. By identifying key insights and making accurate forecasts, VCFOs can help eradicate unnecessary costs that may be hindrances to operations.
Virtual CFOs handle the dual responsibility of figuring out what investments give the best return for businesses while also finding ways to preserve existing capital. In terms of the former, having a comprehensive sit-down with management and team leaders is the best way to get a feel for what could improve operations—for the latter, a wide-ranging financial audit, pivoting to a higher APY business savings account, renegotiating contracts, identifying non-essential cost and outsourcing are good places to start.
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2. Financial Planning, Reporting, and Analysis
Strategizing is at the core of the VCFO role, planning each detail of business expenditure to reduce the administrative burden. Dealing with finances can be very complex and time-consuming. A VCFO helps to reduce this burden massively.
VCFOs have years of expertise that allow them to provide detailed analytics and reporting for a more wide-ranging overview of a business’s financial standing. This makes it possible to determine a business's financial health, evaluate any limitations that may be preventing growth, and limit the development of certain aspects of the organization.
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3. Business Scalability
Only a stable business can become scalable, and VCFOs help promote stability by creating a more controlled financial environment. By acting on key market and competitor insights, businesses can make decisions that impact future success, improving scalability.
“The creditworthiness of a business is a constant consideration when planning for future growth and expansion opportunities. The average credit score of a business owner in the US is roughly 721—roughly on par with the consumer average of 716, so expecting the C-suite to automatically have a better handle on finances when compared to the general public isn’t really reasonable. “
Credit ratings for businesses use a different scale—either from 1 to 100 per Experian and PAYDEX, or 1 to 300 per FICO. It’s an entirely different ball game—and understanding this to the fullest extent (and explaining it to other stakeholders) will be a running priority.
4. Savings and Compliance
A VCFO is often much more cost-effective than having a full-time, in-house CFO. Furthermore, businesses can also pick and choose the services they need, allowing them to tap into the expertise and skills the organization needs without having to pay for the ones they don’t.
Compliance in terms of taxes, data privacy, and environmental commitments is essential in the world of modern business. Failing to comply or missing deadlines can potentially result in significant penalties and fines. This is why many businesses turn to VCFOs to manage compliance, ensuring any costly penalties are avoided.
How VCFOs Can Be Integrated Remotely
The benefits of remote staff are well-known, with reducing costs at the forefront of the model. This is achieved by having minimal or no office space, vastly reducing operation costs. Remote working is also proven to contribute to better employee well-being, and providing a better work/ life balance that can boost productivity.
When Virtual CFOs are seamlessly integrated into a remote working environment, they effectively become another important team member rather than an outside consultant. With an array of virtual conferencing and collaboration software available, a remote setup has no real limitations when compared to a traditional office.
Conclusion
Virtual CFOs play a critical role in businesses that adopt a remote working model, particularly for smaller businesses that may not have the budget to employ a full-time CFO. The services provided by a VCFO can be customized for each business, meaning businesses are only required to pay for the services they need.
A VCFO's services can range from creating a financial strategy to identifying areas of growth. However, a VCFO's capabilities can be applied to almost any area of the business, from assisting with compliance to identifying investment opportunities and even cybersecurity.
