Hire A Virtual CFO: Why Your Business Needs One?
The feeling of building your business from nothing is a rewarding yet overwhelming one. As your company expands, it is crucial to keep the financial side of things right. After all, cash flow is the backbone of all operations, and it’s fundamental to have a constantly flowing money stream.
This is where a chief financial officer (CFO) comes in. A CFO is a professional responsible for managing the financial aspects of your organization. This can include financial management, interpreting financial data for strategic planning, and preparing financial reports, among others.
In the past, the responsibilities of a traditional CFO revolved around basic financial reporting tasks. However, CFOs nowadays use monetary data to improve operational efficiency and decision-making.
Hiring a CFO is a big investment, which may not always be feasible for small businesses or startups. A good solution to this issue is hiring a virtual CFO. This is an expert who can take care of your organization’s liquidity in a much more reasonable manner.
Virtual CFO support can be a single person or an entity that acts like the CFO of big corporations. Such services are particularly valuable for startups, along with small to medium-sized businesses, since they can maintain low fixed costs. Additionally, they have the freedom to choose advance-skill assistance for their finance department when needed.
What is a Virtual CFO?
A virtual CFO is a finance professional that handles a company’s financial strategy, financial reports, and other money-related activities virtually. Virtual CFOs support the CEO and ensure that he/she is receiving the correct financial advance. Furthermore, they identify any potential financial opportunities or threats that may arise in the company.
What Does a Virtual CFO Do?
When you hire a virtual CFO, you can expect them to take care of the following responsibilities:
- Forecasting company’s cash flows, preparing yearly budgets, and developing cost-effective solutions to provide financial guidance.
- Managing financial risk and devising long-term goals to enhance the business’s financial standing.
- Preparing financial statements, such as balance sheets, cash flow statements, and profit & loss accounts; conducting financial analysis.
- Integrating payroll and accounting software in daily business functions to manage, automate, and keep track of the company’s transactions.
- Taking care of tax filings and regulatory compliance.
- Helping prepare an organization for financial challenges and recognizing and capitalizing on their streams of income
- Ensuring the business’s account books are updated according to the latest regulations.
Why should you hire a Virtual CFO?
Whether your company is new or has been operating for a long time, you can always benefit from outsourced CFO services. Below are some reasons why you should hire a virtual CFO.
Financial planning is a high-demand skill. It requires a solid understanding of different accounting software and knowledge of financial documents such as P&L and balance sheets.
If your business is new, there’s a possibility that your skills in financial management won’t be as well-rounded as you’d like.
For this reason, hiring a virtual CFO who can fill in the gaps is important.
Keep in mind that financial projections play a key role in your ability to win investment and progress further. Compromising in this area can hinder your business growth both in the short and long term.
In the beginning stages of a business, it is difficult to control spending patterns and stay within the assigned budgets. This happens due to unforeseen circumstances and unexpected expenses, which can take a dip in your savings and capital flow. To prevent excessive spending, it is critical to have clear business policies regarding expenses, purchases, and other costs.
Doing so will allow increased transparency and insight into your incoming earnings and outgoing expenses.
If too many purchases are being made at the same time, then your cash flow is going to be rattled. Additionally, you may not have sufficient money to make important purchases. A virtual CFO can ensure that you only invest in important purchases for your company.
Seeking virtual CFO services is a very cost-effective option since these are cheaper than full-time CFO services. That’s because full-time CFOS will charge depending on how many hours they work each day. They also require a separate office, employee benefits, and other employee-related costs.
On the other hand, you can outsource CFO services on a project basis, which means you can significantly minimize costs. You also won’t have to worry about providing them with space and other benefits.
Virtual CFOs enable companies to determine their work scope, nature of engagement, working hours, and experience depending on their needs. This means you can hire them on an hourly, weekly, monthly, and project basis.
Owners of small and medium-sized can seamlessly delegate all of their financial duties to a professional CFO. This allows them to focus on other important aspects of the business.
If your company is at a standstill or struggling financially, you can benefit from a reputable virtual CFO.
You can hire virtual CFO services on-demand without spending money hiring a full-time CFO.
Benefit from Specialized Expertise
Another benefit of hiring virtual CFOs is that they usually work in multiple companies at once. This means you get to collaborate with someone well-versed in solving various problems. Having that kind of exposure allows them to be more experienced and knowledgeable. Moreover, if you work with a virtual CFO company, you can access multiple minds depending on your needs and budget.
When Should You Hire Virtual CFO Services?
By now, you are aware of the benefits of hiring virtual CFO services to assist your business operations. However, if you are unsure about hiring one, here are some signs that can help you decide.
1. You Struggle With Time-Management
Many business owners, especially new ones, are overburdened with a heavy workload. This leaves little to no time for keeping up with bookkeeping tasks – let alone focus on the more complicated stuff.
If you are struggling to focus on important business areas due to other financial duties, a virtual CFO can help.
2. You Require Funding
There comes a time in every company’s life lifespan when it requires additional funding. An experienced virtual CFO can help you raise funding by creating detailed financial analyses and completing cash flow forecasts.
3. You Feel Overwhelmed by Finances
Let’s face it – numbers can be overwhelming, and not everyone is born to be a financial expert. The good news is that working with a virtual CFO will give you a clearer picture of your company’s finances.
They will draw up financial reports to maintain your company’s performance and also offer insights about how to improve profitability. A virtual CFO will also answer any questions you may have and address concerns about your financial standing.
4. Your Company is Rapidly Expanding
If your company is rapidly expanding, there’s probably too much going on at once. Regardless of your experience and expertise, you may be having difficulty managing your financial obligations. During such an overwhelming time, you can hire a virtual CFO. Doing so will ensure that the company can keep up the pace and doesn’t end up with severe financial problems.
5. You have Financial Problems
Every company runs into financial problems once in a while. But if your business is consistently battling financial crunches and low liquidity, a virtual CFO can help. Virtual CFOs identify financial issues, address their root cause, and offer solutions to address them.
They may even detect potential problems before they worsen, helping you manage risks and protect your company’s future.
6. You Don’t Have the Budget to Hire a Full-Time CFO
Hiring a full-time CFO can be a costly investment, an option not viable for smaller businesses. With a virtual CFO, you can take advantage of the same expertise and services at a fraction of the cost. This will help you save much money related to the hiring process. Plus, you will only pay for services that you require.
7. Your Goal is to Grow
If growth is one of your primary business goals, you need tried-and-tested advice and financial reporting to meet it. A virtual CFO can create detailed budgets and advise on important business decisions to push you in the right direction.
8. You Want Flexibility
Perhaps you just want advice on managing your short-term finances. Or maybe you need a professional hand to help you with a specific project. A virtual CFO offers flexibility and can work around any budget and schedule to expertly meet your business needs.
9. You are Overwhelmed with Responsibilities
If you find yourself missing deadlines or constantly making mistakes, you may need to bring in a virtual CFO. You won’t have to worry about non-compliance fines with an experienced professional calculating and managing your returns on your behalf.
10. You want to Increase your Business Efficiency
When you better understand your company’s finances, you will be better able to make more well-informed decisions. Your virtual CFO can use their financial expertise to guide you regarding saving money and pushing your business forward.
11. You Plan to Sell Your Business
Contrary to popular belief, you cannot overlook the financial aspects of your business when planning to sell it. Selling a business requires comprehensive reporting, careful planning, and a change in your current company strategy. Virtual CFO services can help you handle these shifts and get your organization looking financially strong to attract potential buyers.
12. Your Annual Revenue is very high
Financial budgeting, planning, and reporting can become more difficult if your yearly income is high. As your company begins to hit the 8-digit income milestone, you should bring a virtual CFO. This will help avoid any omissions, errors, or other complications.
What should you look for in a Virtual CFO?
Without a doubt, the right virtual CFO can make a massive difference to your company’s success. However, that is only possible with someone reliable, experienced, within your budget, and compatible with your business. Before searching for the best virtual CFO, look for the following factors.
Experience and Certifications
The virtual CFO of your choice should have relevant degrees, experience, and training in accounting, finance, or business administration. It is preferred if they have obtained certification from credible facilities. Before you book their services, request a trial period and be sure to read their customer reviews in advance.
Experience in your Industry
All virtual CFOs can provide basic financial services, but the right one should be an expert in your specific industry. For instance, if your business is in the healthcare sector, it is advisable to hire someone with experience. For example, you should prioritize someone who has already worked with hospitals, clinics, and other industry-related clients.
When outsourcing CFO services, you must convey your requirements and expectations to the provider. In return, they should communicate with you often and transparently. Ensure the individual or entity you hire values communication and provides regular feedback.
A Strong Network
The virtual CFO you hire should be well-connected with other professionals. These include finance and corporate lawyers, tax consultants, company auditors, and insurance agents. This will allow you to obtain detailed financial guidance and insights.
If you’re unsure whether your business needs a virtual CFO, the answer is probably ‘yes’. Businesses of all sizes, experience levels, and services/products can benefit from a qualified virtual CFO at one point or another. Hiring one will allow you to focus more on other business-critical aspects while making your company more financially sound.
Do thorough research before hiring a virtual CFO, and carefully study their services, background, and client experience. Moreover, check if their personality and skills are compatible with your needs and business practices.