• Luke Loescher

Why Your Business Needs a Virtual CFO

Eight out of ten businesses will fail. Statistics show that the leading reason these businesses will collapse is financial mismanagement. How a company handles its finances influences much of your success or failure, so it's important to closely monitor them and avoid any hidden financial liabilities for as long as possible.

Many businesses will hire bookkeepers or accountants when they grow as a company. They might be able to get by with one person, but at certain levels of growth even more financial strategy is needed, which is where a chief financial officer comes in. Because of the cost of a full time CFO, there's been an increase in virtual CFOs (VCFO).

What Is a Virtual CFO?

An online CFO who can offer the same services as a traditional one without the costs of full-time employment.

How Does a Remote CFO Differ From an Accountant?

It’s important to understand the difference between an accountant and a vCFO.

A financial accountant may be tasked with either giving an expert opinion about a company's financial position or designing an audit to track and help maintain the accuracy of companies accounting systems.

A vCFO, on the other hand, typically oversees managerial components such as managing budgets to ensure honesty in reporting is maintained throughout the organization.

A certified public account (CPA), is someone who maintains, audits, and inspects the firm’s financial records. A CPA has a unique knowledge of tax law that makes them one of the most sought after professionals in this field.

On the other hand, a vCFO focuses on crafting and executing a high-level financial strategy. As such, savvy vCFO hires people with experience in industry, corporate and professional business. A vCFO will adjust their workflow to focus on the future of a company, not just at historical information. Building a strong financial forecast and negotiating with investors are two areas where vCFO's excel at more than CPAs. The reason for this is because the vCFO brings the forecast together and advises on the appropriate capital structure to support growth.

Why Does Your Business Need a Remote CFO?

Here we highlight five operational benefits of hiring a vCFO for your business.

A Strong Sounding Board

Entrepreneurs need a sounding board to help them think about major decisions that will shape their company. Having a CFO is one way of doing this, since they have experience in different positions which can produce invaluable insights.

More Accuracy in Your Financials

Issues critical to business, such as budgeting and cash flow forecasting call for accuracy. A vCFO has the knowledge necessary to provide this, ensuring you are working with more precise data that will improve your chances of succeeding.

Risk Management

The functions of a vCFO include organizational risk mitigation. To maximize your vCFO, you will need to empower them to alter the structure of your organization for the purpose of reducing risks and maximizing opportunities.

Cost-Effective Expertise

Hiring a vCFO will save you money because they are cheaper than a full-time CFO and benefits do not come into play.

Wide Expertise Range

Remote CFOs offer a diverse perspective. They may have access to insights that you would not see as you are focused on your own industry.

How Do You Onboard a Remote CFO?

It often takes businesses at least three months to fully onboard their new vCFO, so it's important to have weekly meetings with them and help set goals during this period.

Some of the things you can do during this time include:

Goal Setting

Before working with clients, vCFOs will first learn the company's short and long-term goals. It is these goals that set their priorities for each day and overall strategy.

Report Design

Once the vCFO sets the report design, it should be tailored to work with how your organization interprets information.

Technology Adoption

The vCFO will assess your financial software for its ability to provide you security, stability and effective performance. The goal is a system that balances those three features so they are always available when you need them.

Balance Sheet Rebuilding

A veteran CFO will evaluate the company's balance sheet when first onboard. They may then adjust it if needed for a more accurate picture of finances, which helps them assess your job ahead and deliver better results.

Streamline Financial Processes

Working with a vCFO is beneficial in two ways; you tap into their financial expertise and they help streamline your finances. The vCFO has cross-industry experience, which gives them insight on best practices that can positively improve your operational efficiency.

Beef up Your Financial Management

Bookkeepers and accountants are important in the earlier stages of a business. However, once you grow to the point where you need high-level financial management, it’s time to bring in a CFO who can help with strategizing. Those CFOs don't come cheap though, so it's necessary to hire an affordable virtual CFO that can tap into high-level financial expertise relatively affordably even though they're not physically there.

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