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 can only 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 essential financial management, you should consider hiring virtual CFO services. A virtual CFO provides many services, including company valuation, cash flow forecasting, and budgeting.
What Services Do Virtual CFOs Offer?
Following are some of the critical virtual CFO services:
1. A Virtual CFO Creates Budget For Your Business
A Virtual CFO is a finance professional who can help you create a budget for your business. This will be an essential step in figuring out how to manage your company’s finances.
Many business owners think that CFOs services offered include cloud based accounting. This is incorrect. In fact, in the world of finance, there is a very famous quote that says “Finance begins, where accounting ends”.
Professional virtual CFO services are offered by financial professional who know all about creating budgets, internal control, and MIS reports and have access to software that helps them with it. The next thing is forecasting future expenses, which include 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 successfully create budgets for small businesses and startups, you must understand how they work with companies’ income statements. Income statements show three key measures: revenue or sales, expenses, and net income.
CFO support services help small businesses, cloud accountants, and startups manage its finances. So, you can make better budgeting decisions, forecast future expenses, and create budgets.
2. A CFO Manages Cash Flow
One of the primary purposes of a full time CFO is analyzing financial information. This includes financial planning and execution, setting up business processes and systems, and helping the management take informed decisions. The job requires them to forecast and understand how much money will come in. This way, they know how much should go out for various expenses, payroll, and operating costs. This is an essential 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, you must ensure you don’t run out of cash. Your Virtual CFO can help with this by providing budget variance reports. They can also setup financial reporting systems to help you forecast future revenues and costs. This allows you to identify and address problem areas before they become significant issues for your company. The Virtual CFO services will be able to determine if any areas of your business are experiencing problems. They do that by assessing past and existing performance to understand the present business state better.
4. A Virtual CFO Measures KPIs
A virtual CFO measures KPIs. For example, the manager may specify that one of your company’s KPIs is to achieve a profit margin of 30%. The Virtual Chief Financial Officer will regularly track and present this progress during an executive briefing. If you cannot 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 your company’s strategic direction. They are not accountants and will never claim to be “the answers” to all your problems. However, 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
The virtual CFO will liaise between your company and vendors, handling requests or payments. They’ll also address 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
The virtual CFO will analyze your company’s growth and provide a report. The report includes data on upcoming expenses, cash flow, or inventory changes. Additionally, it also provides opportunities to cut unnecessary costs. Virtual CFO offers comprehensive, virtual solutions for small to medium-sized businesses and nonprofits. Virtual CFO services help you focus on running your business rather than worrying about the finances. The professionals create timely reports that ensure your finances contribute to the end goal.
8. Virtual CFO Helps in Reducing Debt
Debt, when not adequately 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 already carry a high amount of Debt, this can help 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. The idea behind this method is that if they make the process more accessible for their client, interest rates will also go down.
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 can pay them off more quickly. They will also lay out a strict attack plan, making 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
Suppose your business has grown to the point where you have employees, managers, and multiple departments working on various projects simultaneously. In that case, seeing how each project is doing can be challenging. The Virtual CFO services provide a way for you or another manager in your company to keep track of these operations by providing reports that give 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 critical.
● 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, and 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 your most expensive departments and ensuring 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 to predict when the company will need more funds, which is essential 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 businesses to determine and exploit opportunities by:
- Financial forecasting and planning, tracking cash flow, and identifying opportunities for capital investments.
- Help develop financial models that will be used in your company’s strategic decision-making process. This may include a 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 impacting the company’s financial performance, such as acquisitions or investments.
- Develop policies for using cash, borrowing money, and pledging assets, ensuring these are aligned with your strategic goals.
● Your Business Financial Are Unfavorable
You may consider hiring a virtual CFO if your business struggles with financial issues. 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 do you 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, 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 invaluable to your business.
- You should also ensure that they have a solid understanding of the government’s tax laws and regulations and how accounting works for small businesses to ensure you are meeting all requirements and obligations.
- A virtual CFO may be unable to fill an accountant position if no staff member has the required skill set.
- A virtual CFO is there to help a business owner – their experience and expertise don’t necessarily mean they can do your accounting for you. Still, it does give them the knowledge that may be useful in many other ways.
A CFO is a significant position in any company. For many, having a full-time onsite employee for this role isn’t feasible. 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.
