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What Is A Virtual CFO?

Just as the title suggests, a virtual CFO is a person who performs the services of a CFO, or chief financial officer; however instead of providing those services in person, as a full-time employee, the virtual CFO does so remotely, typically on a less-than-full-time schedule.

The number of startups has ballooned in the past decade, with technology paving the way for more entrepreneurial activity than ever before. In the tech sector alone, the number of US startups grew 47 percent in the last ten years.

Limited capital and a lean operation are typically some of the defining characteristics of startups; as such, the need has grown for a way to work with niche professionals, like marketers, strategists and accountants, at an affordable cost.

Enter the world of outsourcing.

With outsourcing, young companies are able to harness the expertise of highly skilled professionals at a fraction of the cost of attracting and retaining a full-time employee. The party being outsourced (like a virtual CFO), on the other hand, is able to provide their expertise to a diverse set of clients, splitting their costs and time among them. It’s a win-win for both sides.

Here are just a few of the services a virtual CFO might provide:

Financial planning, like cash flow forecasting
Financial reporting
Financial risk management
Cost management
Debt reduction

A virtual CFO’s scope of work for a company typically depends on the company’s size and unique financial needs. He or she is usually paid by the hour or via a flat monthly rate.

Benefits Of A Virtual CFO

There are many benefits to hiring a virtual CFO to help manage your growing company’s financial posture.

Control costs

Perhaps the biggest benefit of a virtual CFO is the ability to control costs.

According to salary.com, the average salary for a chief financial officer in the United States is around $364,000. If you’re an entrepreneur, that number might make your eyes bug out! Pair it with other essentials, like benefits and bonuses, and you’re looking at a hefty price tag to hire a full-time CFO.

Hiring a virtual CFO allows you to control costs by getting only the services you need, when you need them, without the need to roll benefits and other terms of employment into the equation. And typically, your Virtual CFO offers suggestions throughout the year that will more than compensate for the annual fee, making it “virtually” a no-cost proposition.

Customize based on your needs and budget

An ecommerce apparel company has a very different set of financial needs than, say, a divorce lawyer. The reports, processes and forecasting that these two businesses need will be very unique.

A virtual CFO service can customize the skills and scope of work necessary to fit the company at hand, without paying for anything that’s not needed. These services can also be shifted as needed as your business grows and changes.

Grow with you

One of the best parts about using a virtual CFO solution is that it can grow with your business. Your needs at the $1 million revenue mark will be different than your needs at the $10 million mark, and so on. A virtual CFO can help you navigate through different growth phases from a financial perspective.

A good virtual CFO also recognizes that he or she is, most likely, a temporary solution. A virtual CFO who does his job well will ultimately become redundant as the company grows into a position to hire an actual full-time CFO. A virtual CFO can help transition your company from an outsourced to an in-house chief financial officer position when the time comes.

Diverse expertise

Most virtual CFOs work with a handful of different clients, enabling them to maintain affordable rates for each one. As a client, you’ll benefit from this diverse pool of experience and expertise.

A virtual CFO sees countless different financial situations and resolves a number of diverse financial conundrums. Chances are, whatever your unique situation, your virtual CFO will have seen it—or something similar—before and can advise you accordingly.

Does My Business Need A Virtual CFO?

Now that you understand what a virtual CFO is and some of the benefits to be gained from hiring one, the next question you’re naturally asking yourself is, is it the right solution for me?

Well, the first thing to know is that a virtual CFO is not a good solution for all businesses. In some cases, it’s simply not yet necessary, however, a Virtual CFO can help you build the infrastructure even in a start-up scenario which will provide your business the basic framework as scaling continues and operations become more complex. Providing a mission statement, Operating Agreement and the three primary functions of a business (Sales & Marketing, Operations and Finance & Adminstration) and establishing both roles & responsibilities as well as policies & procedures within each can be paramount to a new business and prepare them for what’s to come.

Here are a few scenarios when it might be a good time to hire a virtual CFO for your business.

Your business is becoming more complex

When it’s just you working in your basement at midnight, things are usually pretty simple, financially speaking. They get more complex as you add employees, suppliers, vendors, contracts, and other components to the business.

If your growth has complicated things to where a bookkeeper alone doesn’t feel like a sufficient financial solution, it might be time to hire a virtual CFO.

You’re experiencing rapid growth

Growing quickly is a good thing!...until suddenly it’s not. Rapid growth can put your financials into a tailspin, especially if you’re not prepared for it. A virtual CFO can help you navigate periods of accelerated growth and put the appropriate systems in place for the next phase of your business.

Your financials are unfavorable… and you’re not sure why

Nearly all companies go through unfavorable periods at some point. It’s part of doing business. The key is understanding why they’re happening so you can take the necessary steps to right the financial ship.

If you’re struggling to maintain or grow profitability and you don’t know why, a virtual CFO may be the right person to add to your team.

You lack the detailed financial understanding needed to make decisions

At ELO Consulting, we’re all about informed decision making. One of our main priorities as your financial partner is to give you clarity around your finances so you can make sound business decisions.

If you’re struggling to make decisions—both big and small—in your business because you have a foggy idea of your numbers, working with a virtual CFO may be a good idea.

Ready to take the next step in exploring a virtual CFO relationship?

Contact ELO at (609) 468-6277

Christopher Kuhn

President & CEO

ckuhn@eloconsultingllc.com