The Chief Financial Officer (CFO) is the top-most management position in every organisation, and they are responsible for providing and following the best finance practises in the business from the top to lower levels, such as analysing financial statements, reporting the performance, cost and debt management, investment management, fulfilling regulatory compliance, etc.
In today’s time, having a CFO in any business is very important. According to the survey, 2023 brings a new era of working for the CFO in businesses amid the pandemic, wars, and uncertainty in the world economy.
Source: PwC Pulse Survey
The CFO’s role in changing the business world in 2023.
The work of the CFO in today’s world will include building trust among all stakeholders, be they customers, investors, or employees. They need to focus on enabling growth by achieving the near-term goals of the business. They have to hire and cultivate the best finance talent on the team.
The focus should be on accelerating digital transformation using AI, cloud computing, and data automation and analytics. They should be ready to navigate economic certainty by having the financial models and scenario analysis in hand. Lastly, they must work on the environmental, social, and governance (ESG) model by implementing ESG-related rules and policies in the business.
With such heavy tasks and responsibilities, you, as a business owner, might be thinking of hiring an in-house CFO. But you’ll be happy to know why going with the outsourcing CFO function of your business is so much more profitable, adaptable, and manageable. Also, the benefits of virtual CFO services are never-ending, and we’ll let you know what services they actually provide.
What does a virtual CFO do?
As it is clear that having a CFO is very important for the business, let’s see what a virtual CFO can do for your business and the various services they provide.
1.Provides Bookkeeping Services
A virtual CFO or an outsourcing CFO function is to provide firstly, the bookkeeping services to record the daily transactions of the business. They help you to record all your transactions in an automated way with the use of the best accounting software technologies.
2.Financial Statement Forecasting and Projections
A virtual CFO will not only provide the services to record transactions today but also help you with budgeting and forecasting financial statements, which will improve decision-making. They will give a distinct view on both short and long-term forecasting and thereby help you manage the uncertainty of the business.
3.Financial Reporting and Cash Flow Management Services
The outsourced CFO firm will create your company’s financial strategy, prepare reports, and provide an organized presentation for posting on websites or giving to investors. Along with that, they work with cash flow management and provide the best way to reduce debt and improve cash flow for the business.
4.Budget Preparation Services
As a business owner, you must be so busy with so much work that you are not concerned about how to prepare the budget and how to stick to it. An outsourced CFO service provider will help you with that, provide the budgets at the start of the financial year, and give updates on how much you are deviating from your actual budget.
Source: iStock
Virtual CFO Services
5.Work on Raising Capital
Capital raising is very difficult for any business, but an outsourced CFO firm will always have a list of financiers connected with them, and they can easily give you capital. These financiers are trusted and are backed by the outsourced firm’s guarantee.
6.Work along with the legal team
You must be thinking, what does a virtual CFO do in the legal work? The most important thing a virtual CFO does is to work alongside the legal team of your business and fulfil all the financials and tax regulatory and compliance work on time. They will also work on giving the updates on the best practices that are followed according to the law in the ESG work also.
7.Analysis of Corporate Restructuring
If any corporate restructuring occurs, such as mergers, acquisitions, or changes in the business’s capital ownership, the outsourced CFO services provide the analysis and potential profits and losses associated with that activity. Along with that, they also provide counselling to the board members and prepare important documents for that activity.
Benefits of virtual CFO
After learning, what does a virtual CFO do for your business? Let’s look at some of the benefits of hiring a virtual or outsourced CFO services provider for your company.
Expertise and cost-cutting
They provide the skills and expertise of a team of professionals, and they help you handle your finances at a much lower cost.
Analysing and Interpretation
They will help in analysing and interpreting annual or quarterly financial reports and provide scenario analysis to deal with different uncertain situations.
Scalability and Flexibility
The virtual CFO provides scalability in terms of services selected, as well as the flexibility to reduce or upgrade those services at any time.
Difference between in-house and outsourced CFO services
| Points of Difference | In-house CFO | Outsourced CFO services |
|---|---|---|
| Costing | Hiring an in-house CFO is very costly because the average salary of a CFO in the US is $170 per hour. | An outsourced CFO service comes at a much lower cost, with the payment on an hourly basis somewhere between $6 and $70 per hour. |
| Scalability | Once you hire an in-house CFO, you have to pay him a fixed monthly salary. | Outsourcing CFO function of your business primarily works on scalability, where you can easily adjust the number of services chosen as per your budget and needs. |
| Experience | A single in-house CFO will bring limited experience to your business. | As compared to this one, an outsourced CFO provides a team of professionals who have multiple industry experiences. |
| Infrastructure Requirement | One of the major issues with an in-house CFO is the need to set up an internal infrastructure and continuously manage it, such as the purchase of software, laptops, etc. | This issue is solved by an outsourced CFO service firm because they provide access to software technologies and the related infrastructure to their team, which you don’t have to manage internally. |
| Practices Followed | Every CFO works differently, and they add their personal bias to how they handle files, reports, and make analysis. | On the other hand, an outsourced CFO service provider will not add their personal bias and work purely on the basis of generally accepted industry practices. |
| Hiring Process | Hiring an in-house CFO will take time to find the right candidate and make him understand the culture, products, and solutions of the business. Also, there is a proper training process that must be given to the in-house CFO. | An outsourced virtual CFO is not difficult to find because there are companies that are working solely on that, and there is no need for the professionals to undergo training as they have experience in different industries. |
| Networking | As a top-level employee of the business, networking is a very basic characteristic in terms of banks, lenders, or any other suppliers. But an in-house CFO comes with much less networking than a virtual CFO. | An outsourced CFO firm will have a team with distinct industry experience and therefore have a lot more networking opportunities with bankers, peer CFOs, and others. |
| Virtual Meet | In a remote setup, overseeing the work of any employee or a CFO is difficult for a business owner. Also, the remote setup poses a problem with responsiveness from them as well. | This problem does not arise in the case of an outsourced CFO because they work on a virtual setup and virtual financial planners, you can easily contact them, and they are highly responsive. |
| Decisive | An in-house CFO’s decision-making is generally slower and relies much more on the other teams, such as the marketing team, and only takes internal factors into account when making decisions on investment and financial modelling. | An outsourced CFO team is much more decisive in nature and helps you with easy decision-making on financial and investment strategies, preparing financial models by taking into account the most probable external factors as well as any other business aspects. |
Conclusion
Therefore, the benefits of virtual CFO or hiring an outsourced CFO service provider will be of great help to your business, whatever its size. They are much more cost-effective, adaptable, secure, and transparent in terms of their services as compared to employing an in-house CFO.
You can choose IBN Tech as an outsourced CFO service provider, which has expertise for the last six years in providing different CFO services such as checking the accounting practises followed, cash flow management, preparing weekly and monthly cash forecasts, setting up budgets, comparing the actual expenses with the forecasted budget, financial forecasting, ratio analysis, and the preparation of financial statements for management.
FAQ
1.What is the role of a virtual CFO?
The role of a virtual CFO includes the preparation of financial reports, analysis and forecasting of financial statements, preparation of budgets, work on financial and strategic planning, transaction advisory and structuring services, business intelligence services, helping with working capital management, helping with capital raising, etc.
2.What do you look for in a virtual CFO before choosing one?
You should look for the certification and qualification of a virtual CFO provider’s team of professionals. You should also check on the industry expertise, security, and transparent communication of the service provider.
3.What are the five signs you need a CFO?
The five signs that your business needs a CFO are complex financials that are not understandable, cash shortages in recent quarters, vendors and suppliers not getting paid on time, acquisition and merger activity in the near future, and the need for financial modelling and scenario analysis.
