Statistics show that eight out of ten businesses will fail. What’s one of the leading reasons these businesses will collapse? Financial mismanagement. Your firm’s finances lie at the heart of much of your success or failure.Businesses will first hire bookkeepers and accountants to manage their growth. At a certain level, though, you need more excellent financial strategizing and management, and that’s where a chief financial officer comes in. However, full-time CFOs can be costly, and that’s given birth to the virtual CFO (VCFO). Here is a look at five reasons vCFOs can make your operations more efficient.
What Is a Virtual CFO?
An online chief financial officer is a CFO who works on a remote basis to deliver the same services and benefits as a traditional CFO.
At the core, a vCFO’s intrinsic value is the ability to offer reliable financial guidance to a business without the attached cost of full-time executive employment.
How Does a Remote CFO Differ From an Accountant?
You already have an accountant (who is a CPA professional). Why would you need to bring on a vCFO?
It’s critical to recognize that these two types of professionals are not interchangeable. They perform vital but different roles within the firm.
At the core, an accountant specializes in tax matters and makes a great addition when looking for a tax professional. On the other hand, a vCFO will dedicate themselves to the organization’s long-term financial strategy.
A CPA will maintain, audit, and inspect the firm’s financial records. A CPA’s role also includes using this information to put together tax and financial reports.
While there are other things a CPA can handle for you, their expertise in tax law and compliance is a primary draw.
On the other hand, a vCFO focuses on crafting and executing a high-level financial strategy. As such, practical vCFO needs a wide range of industry, corporate, and professional business experiences.
Any vCFO you bring on board will attune their workflow around focusing on future cash flow over historical information.
A vCFO is an expert at ensuring every department of your firm is operating at peak performance. Hence, the focus will always be on long-range operation planning.
Fundraising is another area where vCFO’s excel at compared to CPAs. Most investors want to go beyond a sound compliance and tax strategy and see the financial forecast for your firm.
The vCFO is the one who brings this forecast together, and that will become a central point in your negotiations with investors.
An experienced vCFO will also advise you on the ideal capital structure mix that can sustainably support the firm’s growth.
Why Does Your Business Need a Remote CFO?
There are several operational benefits to hiring a vCFO for your business. Here we highlight five of them.
A Strong Sounding Board
As an entrepreneur, your days are spent deep in the trenches of daily management. Often, you will need to come up for air and consider significant strategic decisions that alter the direction of your firm.
Having a vCFO helps you gain a sounding board, you can rely on to talk through these critical decisions. With their wealth of diverse experiences, vCFOs help you draw out meaningful insights you may not catch on your own that can make or break strategy.
More Accuracy in Your Financials
Critical issues such as budget planning and cash flow forecasts, among others, call for accuracy. A vCFO has the expertise to make your financials more accurate for you to work off better data that gives you higher chances of succeeding.
Risk Management
An oft-overlooked vCFO role is organizational risk mitigation. To get the most out of your vCFO, you will need to empower them to alter your firm’s structure to reduce risk and enhance opportunities.
Cost-Effective Expertise
A vCFO is cheaper than a full-time CFO. You don’t spend more on extra costs, such as benefits, while receiving high-level financial assistance when you need it.
Wide Expertise Range
Remote CFOs work with different clients who operate in diverse industries. As such, they gain visibility into adjacent insights that can better assist your organization, which you’d likely miss out on as you only focus on your industry.
How Do You Onboard a Remote CFO?
For many businesses that see the need to bring on a vCFO, onboarding might be an issue.
On average, it will take you three to four months to onboard a vCFO. As such, it is instituting weekly meetings during this period is the optimal pace to help them settle in. Some of the things that should take place during this onboarding period include:
Goal Setting
The first thing the vCFO will do is understand your firm’s short and long term goals. It’s these goals that will set the pace and direction for their day-to-day tasks and overall strategy.
Report Design
The vCFO will, at this stage, set the report design that can best work with how your organization interprets information.
Technology Adoption
The vCFO will also assess the technology you use to run your financial needs and make any necessary adjustments. The goal here is to help you develop a platform that balances performance, price stability, and security when handling your finances.
Balance Sheet Rebuilding
A vCFO worth their salt will take stock of your balance sheet when they first come on board. If need be, they will rework it for a more accurate financial picture. That then helps them assess the true nature of the job ahead for them to deliver better.
Streamline Financial Processes
The beauty of working with a vCFO is that you not only gain from their financial expertise but also tap into their overall experience. Part of the process at this stage for the vCFO will be helping you develop and streamline your financial operations.
Since the vCFO will have worked with various clients across different industries, they have insight into operational improvements you may not know about, which can positively impact your efficiency.
Beef up Your Financial Management
Bookkeepers and accountants are useful in the earlier stages of your business. However, once you grow to the point where you need high-level financial management and strategizing, it’s time to bring in a CFO. However, CFOs don’t come cheap. Thus, you need to hire a virtual CFO that can more affordably tap into high-level financial expertise.
Stander & Company offers personalized financial guidance to organizations and individuals. Talk to us for quality operational and financial insights that help you get the most from your business.
