Virtual CFO services, provided by an agency or an independent virtual CFO, offer financial expertise and leadership for high-revenue, rapidly-growing companies on a contract basis, either remotely and part-time.
Virtual CFOs (VCFOs) are fairly new, but they’re becoming more popular, and companies have been reaping the benefits.
In this article, we explain what a virtual CFO does, how to know when it’s time for your company to hire one, and why, for the right businesses, they’re crucial to success.
When To Hire a Virtual CFO
Many businesses are too small for a full-time CFO and too big to leave their financial planning to the owner or an employee who doesn’t have the expertise to make major strategic decisions. In such situations, contracting virtual CFO services is the right call.
What’s the Difference Between CFOs and Virtual CFOs?
Not every business can afford to hire a Chief Financial Officer (CFO), and many of those that can afford to hire a CFO shouldn’t. For businesses with revenue under $10 million, a full-time CFO often just isn’t worth the cost.
So, how are virtual CFO services better than hiring a full-time CFO or relying on piecemeal accounting and bookkeeping tasks?
Here’s the short answer: For growth-stage businesses, a virtual CFO offers enterprise-level strategic planning, reporting, and financial leadership that is flexible, on-demand, and affordable.
What is a Virtual CFO?
A virtual CFO is a contractor who acts as a CFO without all the requirements that having a regular executive entails. That means no salary and no full-time responsibilities.
By definition, a VCFO fulfills a wide variety of functions. And since many offer “a la carte” services, each VCFO/business relationship will look a little different. But speaking broadly, virtual CFO services include:
- Accounting and Reporting
- 12-Month Forecasting
- Cash Flow and Strategic Planning
Virtual & Outsourced CFOs Are Leaders, Not Bookkeepers
It’s important to keep in mind that a virtual CFO is not the same thing as an accountant. If your business’s primary concern is tax planning or tax preparation, you should hire someone specialized to fulfill that role.
A virtual CFO harnesses data from bookkeeping, accounting, and reporting to provide a clear picture of your financials and actively help improve the function of your business.
CFO Services Ensure Stable, Long-Term Growth
Forecasting and strategic planning are crucial to ensure long-term growth. A VCFO will streamline processes, analyze financial results, and offer strategies to better manage cash flow.
VCFOs will also work with you to develop a key performance indicator (KPI) dashboard to monitor business performance versus targets or industry peers. And they can create forecasting models to project growth.
If your business already has a KPI dashboard and other analytics, a VCFO will help you re-work them, if necessary, to make sure you’re focused on the right metrics.
VCFOs Offer Businesses a Competitive Advantage
Each of a VCFO’s services is crucial for long-term success and are often overlooked by small or rapidly-growing companies that try to make do with only a bookkeeper. Growth-stage business owners are rightly focused on increasing revenue; financials take a back seat.
Businesses that lack a big picture perspective often struggle to maintain growth or simply fail. A VCFO will help you avoid pitfalls that occur when you’re overwhelmed by day-to-day responsibilities. In a competitive market, they can make a big difference.
Virtual CFOs Have Cross-Industry Experience
Because they work with across a range of industries, rather than for a single organization as a normal CFO does, virtual CFOs have a broad base of knowledge to draw from. If you have a problem, it’s safe to say that they’ve seen it before.
They can even sit in on planning and management meetings. The degree to which your VCFO is “virtual” depends on what your business is looking for.
They Are On Top Of Current Laws and Regulations
VCFOs are constantly shifting between new companies and taking on a slightly different role with each one. As a result, they are experts in federal and state laws concerning compliance. A VCFO will be able to handle complex matters like PPP loans or EIDL loans seamlessly.
Virtual CFO Services Can Save You Money and Grow Your Business
By contracting with a virtual CFO, you can save money simply by not paying a CFO full-time. But VCFOs’ value goes further than that: they will give you greater control over your business’s trajectory, allowing you to increase revenue and grow faster than you would otherwise.
Whatever your business’s goal is, whether it’s doubling revenue or expanding to a new market, a VCFO can work to help you achieve it. They can also offer suggestions for new goals if they feel you aren’t aimed in the right direction.
Virtual CFOs are experts in:
By letting them take the helm in these areas, your business is more likely to succeed.
Virtual CFOs are More Affordable Than CFOs
For many businesses, the high salaries of CFOs are the biggest reason to hire a virtual CFO.
As of May 2021, the average salary for a full-time, on-site CFO was over $393,000 a year. And it isn’t just a few high-earning CFOs bringing up the average. Those in the 25th percentile earned nearly $300,000.
A virtual CFO will cost significantly less since you only pay them for a part-time role as a contractor.
An Outside Perspective Offers Numerous Financial Benefits
In many situations, it’s beneficial for a CFO to be virtual or outsourced. VCFOs have an easier time taking a step back and offering an outside perspective free of bias. They may be able to offer honest appraisal in a way that would be challenging for someone with a greater stake in the company.
How Do You Know When You Need a Virtual CFO?
VCFOs are most beneficial for growth-stage businesses that are becoming increasingly complex, with a rapid increase in employees, revenue, or contracts. They are positioned to manage cash flow and guide businesses during these often-dizzying periods of growth, setting them up for future success.
Need CFO Services? Here Are Some Basic Benchmarks:
- Revenue above $1 million
- Undergoing rapid growth
- Operations are becoming increasingly complex—with more employees, contracts, or suppliers
If a business only has a handful of employees and a revenue of under $1 million, it is less likely to see the benefits of a VCFO compared to a bookkeeper or accountant. And likewise, if revenue is greater than $10 to $20 million, it may be time to look into getting an in-house CFO.
Your Business Is Experiencing Rapid Revenue-Growth
For a growth-stage business, rapid and sudden increases in revenue lead to equally rapid and sudden financial growth in financial complexity. Virtual CFOs tame this complexity by bringing your in-house financial processes to scale.
Most importantly, access to virtual CFO services can hlprelieve the burden of financial management from key decision-makers, allowing your c-suite to focus on operations, personnel, and marketing.
Your Business is Facing a Merger or Acquisition
Fast-growing businesses may face the prospect of a merger or acquisition, depending on the industry; Virtual CFOs can be contracted as consultants or leaders in these processes.
Experience goes a long way in avoiding pitfalls and negotiating lucrative deals for your business.
Your Business Needs the Financial Detail to Make Good Decisions
Even if your business employs a bookkeeper, accountant, or even a robust in-house team, growth complicates finances and decision-making. CFO services keep your business stable and agile during periods of revenue growth and increasing complexity.
High-level financial leadership leverages accounting, bookkeeping, forecasting, and auditing to improve decision-making in matters fundamental to the operation and growth of your business.
But You’re Not Ready To Hire a Full-Time CFO
Good virtual CFOs get themselves fired. How? Because outsourced CFO services are designed to help you grow your business to the point that hiring a full-time CFO is the best option—typically when revenue reaches $20 million.
What to Look For in a Virtual CFO
Once you’ve decided that you need virtual CFO services, it’s time to find a qualified candidate. In this article, we’ve described the numerous benefits of hiring a virtual CFO. However, that doesn’t mean that every VCFO is created equal.
Here are some qualities to keep in mind when searching for the virtual CFO that’s right for your business.
Responsiveness & Availability
If you hire a virtual CFO, you are putting trust in someone outside your company. It’s important to work with a VCFO who is reliable and available during the times you have pre-arranged.
With a growth-stage business, things happen fast. If you have to wait hours or days to hear back from your VCFO, you may lose out on a valuable opportunity with a client or harm your bottom line in some other way. Go with a VCFO who will get back to you in short order.
Communication Skills Are Also Key
You want someone who can communicate clearly and effectively. VCFOs are financial experts, but they should be able to speak and write in ways that a layperson can understand. Look for someone who can make themselves understood, whoever their audience is.
What Results Have They Had in the Past?
Hire someone who has a demonstrated ability to effectively influence growth-stage businesses, specifically as a VFCO rather than in some other capacity. You should feel confident that the advice they are giving is based on tangible experience built up over many years. It’s also a good idea to find a VCFO who has worked in your industry. You want someone you can trust and hold you accountable.
Look for Transparency
Your VCFO needs to be clear on what exactly their role with your company will be. Not every VCFO will occupy the same space within an organization, so it’s important that you know the service they’re expecting to provide and how they handle specific scenarios.
A VCFO should also be transparent about how long their working relationships tend to last and how scalable their services are. It’s best to have someone who will be able to remain with your company as it grows.
Choose a Certified Public Accountant
Experienced Certified Public Accountants (CPAs) offer superior virtual CFO services. They have a fundamental understanding of accounting, and they use that knowledge to provide businesses with thorough, pragmatic advice and strategies.
CPAs are equipped with analytical and research skills and can immerse themselves in data to find financial opportunities that others won’t see. They can also advocate on behalf of your company to the IRS.
Jeremy A. Johnson, CPA Offers Virtual CFO Services
Jeremy A. Johnson, CPA, will work aggressively to grow your business. He and his staff know how to utilize their knowledge and experience to offer the best possible counsel with your interest in mind.
Along with his expertise as a Virtual CFO, Jeremy A. Johnson is eager and available to help when you need him. With an easy-to-use client portal and a responsive team, he’s the on-demand CFO for growth-stage businesses that want to thrive.
Click here to schedule an appointment with us, or call (888) 623-2915.