What Is Covered In Virtual CFO Services? Do I Need One?
Many business owners are looking for help with financial management, and the first place they turn is to an accountant. The problem is that most accountants are only able to provide a limited range of services. This is because they may be specialized in one area like accounting or bookkeeping. If you need more than just basic financial management, then you should consider hiring virtual CFO services. A virtual CFO provides many different services, including company valuation, cash flow forecasting, and budgeting.
What Services Do Virtual CFO Offers?
Following are some of the key virtual CFO services:
1. A Virtual CFO Creates Budget For Your Business
Virtual CFO can help you create a budget for your business. This will be an important step in figuring out how to manage the finances of your company. Professional virtual CFO services know all about creating budgets, and they have access to software that helps them with it. The next thing is forecasting future expenses, which includes long-term liabilities, such as leases and loans. You will also need a budget for the future that is based on growth rates in your industry.
To be successful at creating budgets, you have to understand how they actually work with income statements that companies use. Income statements show three key measures: revenue or sales, expenses, and net income.
Virtual CFO services help in getting a handle on your company’s finances. So you can make better decisions in regard to budgeting, forecasting future expenses, and creating budgets.
2. A CFO Manages Cash Flow
One of the main purposes of a CFO is to manage a company’s cash flow. This includes the collection of money owed as well as ensuring that it can be paid out when needed. The job requires them to forecast and understand how much money will come in. This way they know just how much should go out for various expenses, payroll, and operating costs. This is an important job that a CFO can have because they ensure the company has enough money to function.
3. A Virtual CFO Tracks Budget Variances
As your business grows, it’s important to ensure that you don’t run out of cash. Your Virtual CFO can help with this by providing budget variance reports. They can also forecast future revenue based on past performance. This allows you to identify problem areas, so they are addressed before they become a major issue for your company. The Virtual CFO services will be able to identify if any areas of your business are experiencing problems. They do that by assessing past and existing performance to give you a better idea about the present business state.
4. A Virtual CFO Measures KPIs
A virtual CFO measures KPIs. For example, the manager may specify that one of your company’s KPI is to achieve a profit margin of 30%. The Virtual Chief Financial Officer will regularly track this progress and present it as part of an executive briefing. If you are unable to meet these targets, they can develop a plan to get the company back on track.
5. A Virtual CFO Helps Business Make Strategic Decisions
Virtual CFO services provide advice on the strategic direction of your company. They are not accountants and will never claim to be “the answers” for all your problems, but they can help you make better decisions by showing you how to use numbers in data analyses that identify trends and opportunities.
The key with a Virtual CFO is to decide what you want them to do. So, they can help with everything including:
- Setting up a budget
- Financial modeling, and planning projections
- Forecasting future cash flow needs
- Building scenarios such as an acquisition or divestiture of assets.
6. A Virtual CFO Liaise And Communicates With Third-Party Vendors
Virtual CFO will be a liaison between your company and vendors, handling any requests or payments. They’ll also handle the administrative tasks related to inventory management. These tasks include:
- Monitoring when items need reordering
- Communicating with suppliers on pricing changes
- Keeping records of purchases from each vendor
7. Growth Report by Virtual CFO
Virtual CFO will analyze the growth of your company and provide a report. The report includes data on any upcoming changes in expenses, cash flow, or inventory. Additionally, it also includes opportunities to cut unnecessary costs. Virtual CFO offers comprehensive, virtual solutions for small to medium-sized businesses and nonprofits. Virtual CFO services aim to help you focus on running your business rather than worrying about the finances. The professionals create timely reports that make sure your finances are contributing to the end goal.
8. Virtual CFO Helps in Reducing Debt
Debt, when not properly managed or reduced, has been known to wreak havoc in an individual’s life. A bad credit score will make it difficult for you to get loans and more importantly if you are already carrying a high amount of debt this can help to get you out of it.
If the debt is manageable but high, a virtual CFO can work with your lender and banks to restructure your payments into affordable monthly installments over an extended period of time. The idea behind this method is that if they make the process more accessible for their client then interest rates will go down as well.
If the debt is unmanageable and high, a virtual CFO can work to negotiate with your lenders or creditors for lower interest rates on your debts so that you are able to pay them off more quickly. They will also lay out a strict plan of attack which makes it easier for you to take control of this time in your financial life.
Does Your Business Need A Virtual CFO?
A Virtual CFO offers a wide range of services that cater to your business objectives. But does your company need virtual CFO services? The answer is “yes” if you are doing the following:
● Your Business Operations Have Become Complex
If your business has grown to the point where you have employees, managers, and multiple departments all working on various projects at once, it can be hard to see how each project is doing. The Virtual CFO services provides a way for you or another manager in your company to keep track of these operations by providing reports that provide insight into what’s going on.
A Virtual CFO helps the business make strategic decisions, is not an accountant or “the answer” for all problems, and can help you with everything from setting up a budget to forecasting future cash flow needs- so deciding what they do will be key.
● Your Business Lack Financial Understanding
If you have a business, whether large or small, the chances are that there is more to running it than meets the eye. As your company grows and expands, so does the need for financial understanding and guidance. A virtual CFO can provide this service by taking over tasks such as budgeting, forecasting budgets and spending patterns, managing bills from companies and vendors, monitoring receivables and payables, understanding the financial impact of decisions such as new products or marketing campaigns.
● Your Business Is Experiencing Growth
The problem with growth is that it often comes at the cost of a sustainable cash flow. A Virtual CFO can help you save money by identifying where your most expensive departments are and make sure you have enough funds to pay for them without having too much debt or equity (ownership) in the company. They will also keep track of expenses and capital expenditures in order to predict when the company will need more funds, which is important if you’re a startup or have been around for a while.
● You Want to Save Money
One of the main reasons for hiring a Virtual CFO is that they can anticipate your company’s future cash flow needs and make sure you save money by keeping track of expenses. This way, if there are any changes in business operations or growth, such as an acquisition or divestiture of assets, it will be easy to know when your company will need more funds.
● You Wish To Identify And Exploit Opportunities
Virtual CFO services allow business to determine and exploit opportunities by:
- Financial forecasting and planning, tracking cash flow, identifying opportunities for capital investments.
- Helping to develop financial models that will be used in the strategic decision-making process of your company. This may include things like cost-benefit analysis or a breakdown of how much revenue you can expect from potential new clients or products.
- Assisting in creating budgets and analyzing budget performance.
- Working with senior management to help evaluate purchase decisions that will impact the company’s financial performance, such as acquisitions or investments.
- Developing policies for the use of cash, borrowing money, pledging assets; ensuring these are aligned with your strategic goals.
● Your Business Financial Are Unfavorable
If your business is struggling with financial issues, you may be considering hiring a virtual CFO. A Virtual CFO can handle all of the day-to-day bookkeeping and accounting work so that you can focus on running your company instead of handling these tasks.
How To Choose The Right Virtual CFO For Your Business?
Following are the steps to choose the right virtual CFO services for your business:
- A virtual CFO should be able to help you with the day-to-day tasks of running your business. If they can’t, then you might not need a service like theirs.
- They should also have experience working in finance departments for large corporations and small businesses – this will give them a breadth of knowledge that is invaluable to your business.
- You should also make sure that they have a solid understanding of the government’s tax laws and regulations, as well as how accounting works for small businesses, in order to ensure you are meeting all requirements and obligations.
- A virtual CFO may not be able to fill an accountant position if there is no one on staff who has the required skill set.
- A virtual CFO is there to help a business owner – their experience and expertise don’t necessarily mean they are able to do your accounting for you, but it does give them the knowledge that may be useful in many other ways.
A CFO is an extremely important position in any company. For many, it isn’t feasible to have a full-time onsite employee for this role. A virtual CFO can provide the same service without taking up valuable office space or requiring you to hire and train someone from scratch. They will also save your business money by creating cost-effective solutions to your company’s financial needs.
