As a small business owner, you've no doubt put blood sweat and tears into your business to make sure it grows. When your business does grow in size and revenue it is a beautiful thing. Hitting a financial goal, hiring employees for the first time, there is no feeling quite like it.
However, when your company does grow, this brings an entirely different type of challenge. Reaching a new level can often bring growing pains. You may think you have a tight grip on your financials, and you may do up to a certain point. You can't keep wearing all those hats though.
Without the necessary expertise, time, and visibility, you’ll likely run into serious problems later on down the line. But what do you do if you can’t afford a full-time CFO to help? Well, that's where a virtual CFO could be your knight in shining armour.
Read on to find out exactly what a virtual CFO is and if your business needs one.
What exactly is a Virtual CFO?
If you were to spend the money and time hiring a Chief Financial Officer their primary role would be to oversee financial planning. Keeping an eye on and managing the financial risk of the business, and reporting on financial activities.
A virtual CFO will perform those duties exactly the same, just remotely and not as a full-time employee. So, a virtual CFO can provide you with the same services and expertise as an in-house CFO, at a fraction of the cost. They will only provide you with their services as and when you need them.
What does an outsourced or virtual CFO do?
A virtual CFO will oversee the accounting transactions and financial statement preparation. A CFO can also serve as your trusted financial advisor.
An effective CFO helps a business owner by creating budgets and forecasts, and advising the owner on major financial decisions. As mentioned above they will typically perform the exact same role as an in-house, so you can expect them to help with the below:
● Handling of all the duties of a traditional CFO, but working remotely and on a part-time basis.
● Monitors the financial health and well-being of the business, usually with cloud technology.
● Offers financial insight and guidance on all company decisions and issues.
● Provides back-office functions such as managing accounts ledgers, depending on the client and their needs
● Financial planning, like cash flow forecasting
● Financial risk management
● Cost management, including helping you reduce corporation tax.
● Debt reduction
The full scope of the Virtual CFO will be down to you and your specific requirements.
Do I need a virtual CFO?
So now we understand what a virtual CFO is, and what they can do for you, the next natural question is, do I need one? It's a big decision to make, and will be unique to each and every business. It has to be said that a virtual CFO is not a good solution for all businesses. It really depends where you're at in terms of your financial or accounting department. In some cases, it's just not simply necessary yet.
Finally, and most importantly, if your financial house is not yet in order, you need to take care of that first. In order to be able to strategize your finances, you must first have a clear and stable understanding of what they look like. For example, if you have a bookkeeper and an accountant already on staff and you're planning, or want to grow further a virtual CFO could be a great fit.
Below are some other examples where you may potentially need a virtual CFO to help.
Your business is a lot more complex
If you started off on your own, in your bedroom or home office, things would have been a lot simpler financially speaking. But the aim is to grow, and as you grow you need more employees, suppliers, vendors, contracts and loads of other things you didn’t before. If you feel things have got to the point where a bookkeeper or an accountant isn't enough anymore a virtual CFO could be the answer.
It went from just you to 20+ employees really quickly…
If things are going really well you may find you have a lot of employees really quickly. Rapid growth will feel amazing for you as your hard work is paying off. But this can also put your financials into a tailspin, especially if you didn't expect the growth. Again, this is a situation a virtual CFO can help. They will be able to effectively navigate you through this period of accelerated growth. Putting in place new systems for the next phase of your business and ensuring you can continue to grow.
As another example, let’s say you currently own 5 retail shops and are planning to open another 10. You may feel a virtual CFO is needed to help you manage all your stores effectively. They will also be able to advise on whether you should open another 10 at all. If it should just be 5, or if you should purchase or lease the building etc.
Your financials need some TLC
It's never nice when you’re going through an unfavourable period, it's even worse when you're not sure why. It’s vital you do understand so you can take corrective action as quickly as possible. So, if you're struggling to maintain or grow profitably, and are not sure where to go next, a virtual CFO might be the right person to speak to.
You don't feel comfortable making big financial decisions
If you're struggling to make decisions, no matter how big or small and feel you need some extra insight a virtual CFO could be exactly what you need. They will be able to provide you with a clear picture of the impact financial decisions can have, and advise on the best course of action.
So, as you can see from above there are some clear benefits to hiring a virtual CFO. The biggest benefit though is that you don't have to keep into hiring a full time CFO. There are no recruitment charges, or time spent interviewing, negotiating etc.
With any executive hire there are always pros and cons, whether internal or outsourced. Linked to the above, another big benefit of a virtual CFO is it gives you time. Time to set up systems and test your financial methods. Time to organize and vision for your company’s future. Time to test whether a CFO is what you actually needed.
Of course, it's not all positive, there will be downsides but the pros far outweigh the cons. One downside could be management effectiveness is limited. You need to ensure your staff embrace them, and don't view them as an "outsider".
Hiring a virtual CFO is not a decision that should be taken lightly. Make sure you research your options thoroughly. The right person will take your business to the next level.