What is a Virtual CFO?

What is a Virtual CFO?

Business Tips, Ideas & Support Articles.

Have you ever wondered “What is a Virtual CFO?” 

As a business owner, have you asked yourself any of the following questions:

  • What is my profit this month or year to date? 
  • How does my profit compare to last year or last month?
  • I have made a profit, but why is there no cash in the bank? 
  • How can I create a budget for my business? 
  • I want to grow my business, where do I start? 
  • How can I get a better understanding of my business cash flow? 
  • What are the best Key Performance Indicators for the business and how can I measure and track them? 
  • The internal bookkeepers and accounts team could use some guidance, where can I go?
  • I feel like we could be doing things more efficently, where do I start?

What is a Virtual CFO? 

Most large and some medium sized companies have a full-time executive called a CFO (Chief Financial Officer). A CFO is the person responsible for managing the company’s finances. From bookkeeping and compliance through to tracking cash flow, financial planning and analysing the company’s financial positionThe CFO has a critical role in providing financial information to influence and support key operational decision making. 

A VCFO (Virtual CFO) is an external consultant usually contracted on a part time basis. The service provides the business with expertise and experience of an inhouse CFO without the significant cost. This service is a game changer for many smaller businesses who would not otherwise have access to this level of expertise.  Put simply; hiring a VCFO is like outsourcing the head of your finance department. 

What are the benefits of a VCFO? 

An expert opinion

Accuracy in reporting

VCFOs handle the business bookkeeping, cash flow management and financial reports.  A great VCFO will be able to provide you with up to date profit, cash flow and balance sheet numbers at any time.  The availability of cloud systems means that there should not be any delays in financial reporting.  Up to date and accurate financial reports are critical to making informed business decisions. 

Accuracy in reporting

VCFOs handle the business bookkeeping, cash flow management and financial reports.  A great VCFO will be able to provide you with up to date profit, cash flow and balance sheet numbers at any time.  The availability of cloud systems means that there should not be any delays in financial reporting.  Up to date and accurate financial reports are critical to making informed business decisions. 

Operational efficiency and processes

Many VCFOs will be able to look at your operations and be able to provide advice on how to make processes and procedures efficient. It could result in implementing a new system, documenting internal processes or eliminating unnecessary work.  

Goal Setting, Forecasting and Financial strategy

Have you read our article: Why Is The Business Failure Rate So High In Australia?. If so, you would find out that 60% of businesses will fail in the first three years. One of the reasons that businesses fail is poor planning.   A VCFO will assist in developing a financial strategy. Turn this strategy into a financial plan and forecast.  They will then set goals and have regular check ins to ensure the goals are being achieved.  

Cost

The 2019 CA ANZ Remuneration Survey found the average CFO earned A$306,862 (among those who took part in the survey). That’s $25,500 per month, before bonuses, holidays, workers compensation etc. In comparison. you can expect to pay a few thousand dollars a month for a VCFO service making it much more accessible to smaller and medium-sized businesses. 

Training and Development for your internal team

In my experience, in house bookkeepers generally do not have much support from a financial perspective inside the business.  They are expected to know what to do in various scenarios. As the business grows, they may not have the expertise to deal with more complex business scenarios.  A VCFO will be there to support the internal bookkeeper and provide expertise and guidance. 

Why do you need a VCFO?

We have answered the question, What is a Virtual CFO, so why do you actually need one? A VCFO can be useful to your business in a variety of circumstances. Even if you already have bookkeeper, Accountant, or both.

Depending on your current circumstances, see below for some of the reasons a VCFO will be useful to your business.

I have no finance support in my business… 

  • Take responsibility for bookkeeping  
  • Implement processes to streamline the accounting function 
  • Implement cloud accounting software to ensure up to date and accurate financial reporting 
  • Provide basic reporting to assist in making informed business decisions 

I already have a bookkeeper… 

  • Review current processes and procedures and suggest ways to be more efficient and effective 
  • Implement a reporting framework to suit the business 
  • Provide expert advice to the bookkeeper
  • Oversight of the work performed by the Bookkeeper 
  • Prepare an advanced cash flow forecasting model 
  • Develop and report on KPIs  

I already have a bookkeeper and an Accountant… 

  • Provide support and advice to support business growth  
  • Assist in developing financial strategic plan  
  • Advanced reporting including budgets and cash flow forecasting 
  • Scenario modelling  
  • Advanced reporting on other business operations such as Inventory, project reporting and profitability  
  • Review buying procedures and recommend best practices 

A few tips to finding a VCFO 

Ask your connections for referrals. But; make sure you do your homework as what works for their business may not suit your business.  

Be sure to ask the potential VCFO The following questions:

  • Do they have an accounting degree? 
  • Are they a memeber of one of the accounting professional bodies? Such as CAANZ or CPA
  • Do they have experience in your specific area? 
  • Does their values and personality align with your business and culture? 
  • What is their communication style? 
  • Do they work as an individual or part of a VCFO firm? Using a firm will mean that you will get breadth of experience and cover if your key contact is sick or on holidays.  

Be sure to read reviews and ask for references or current client testimonals. 

If you are interested in hearing more about the VCFO services we provide at Inline Partners, book a free consultation today.

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