What is Virtual CFO

Virtual CFO

 

A Virtual Chief Financial Officer (CFO) is a highly experienced executive working remotely with organizations to provide professional financial advice and expertise. Virtual CFOs typically have years of experience working in the C-suite of corporate finance, accounting, and business strategy. They partner with businesses to provide monthly analyses of their financial performance, developing short and long-term financial plans and budgets, and other services necessary to ensure the company runs smoothly.

 

The financial industry environment has drastically changed in the last few years. As a result, technology dominates the market through its applications available on the internet. In addition, all the small business financial services such as taxation, legal drafting, accounting, financial analysis, and bookkeeping are going virtual. Special design programs, such as cloud programs help evaluate accurate company data and perform analysis without employee involvement. 

 

Online mode allows financial professionals to work remotely or in a hybrid working model, creating opportunities for tech-savvy professionals. Bookkeepers and accountants monitor and manage their client’s cash flow systems. 

 

Virtual roles saves time and limits the number of employees saving costs. The entire communication method is changing. And it is more efficient and productive.

 

However, some companies still need to be ready for this evolution. They are comfortable dealing with their clients in the old-fashioned way. However, this change is disrupting their business in various ways. 

 

What Does a Virtual CFO Do?

A virtual CFO is a finance expert working remotely with years of experience handling a company’s capital system. This job is a new addition to the economic field for companies that cannot afford an on-site CFO. A virtual CFO has the same roles and responsibilities as an on-site CFO. The difference is the digitalization of the job. 

 

Virtual CFOs work from home with limited visits to the office. As a result, they can handle all the duties an on-site CFO performs. In addition, they offer their insights on investment decisions and provide specific solutions to the company’s problems. 

 

A virtual CFO can create business strategies accordingly with the data available online. Moreover, such data is accessible anytime, giving virtual CFOs an edge over traditional methods. In addition, financial analysis is now more accessible and more reliable with artificial intelligence. 

 

Virtual CFO services include working part-time or full-time, depending on the nature of the contract. They can also work on a project basis for small companies or new startups. Furthermore, they help improve financial performance and boost a company’s revenue streams. 

 

The market for virtual CFOs is growing, and you can find professional virtual CFOs online right here

The Role of Virtual CFOs after the Pandemic

Thousand of businesses shut down after the pandemic. Laying off employees was the only option to save costs. This disruption became the grounds for a virtual CFO role. Meanwhile, small businesses were looking for a more affordable and accessible way to manage their accounts. These companies were also looking for technologically advanced finance officers to provide them with accurate future insights. 

 

Today, virtual CFOs work not only for small businesses but also for multinational giants. Companies are shifting their entire sales, marketing, and financial operations online. Small to midsize ventures need experts to develop more significant goals and strategies, but they need help to afford a CFO.

 

Virtual CFOs are developing to fulfill the requirements of an affordable financial expert. These companies’ conditions vary from needing a skilled accountant to manage their books to an advanced specialist who can create strategies and long-term investment decisions. 

 

A senior virtual CFO provides the same level of expertise as a traditional CFO. They are heads of the finance department in a company with many employees working under them. There is a level of rapid growth in their services.

Technological Improvements and Virtual CFOs

Virtual CFOs usually work for an umbrella company. This company connects virtual CFOs to enterprises and provides package plans according to their requirements. Payment for a virtual CFO can differ depending on their experience, skillset, education, and technological competencies. 

 

After the hiring process, virtual CFOs start working under the company’s CEO. First, the CEO provides them with necessary information about the company’s financial performance. After that, vCFOs start their process to develop plans and policies for the company’s betterment.

 

Furthermore, they are responsible for providing cost-saving measures and forecasting budgets regularly. The entire cash flow provided by the company to the vCFO generates a financial analysis. This financial analysis improves the company’s condition even in the worst-case scenario. 

Virtual CFO keeps all the board meetings, summits, and conferences online. They provide their insights to senior management and the board of directors. Finally, they also regularly connect on conference calls with the finance department for updates.

In-house CFO vs. Virtual CFO

There are specific differences between a traditional in-house CFO and a virtual CFO. 

In-house CFO:

 

  • Available in the office premises physically
  • Meets clients and management in person
  • Works full-time
  • Expensive for small businesses
  • Are experts in the financial system of a particular industry
  • Usually have more than ten years of experience
  • Works through traditional methods of financial analysis

Virtual CFO:

  • Available online on given hours as hired (part-time or full-time)
  • Meets virtually with every member of the company
  • Can work on a project basis
  • Payment structures vary depending on the nature of the work
  • Cheaper and affordable version of CFOs for small to mid-size enterprises
  • Are experts in various industries due to connections with an extensive network of virtual professionals
  • Experience can be as low as three years
  • Use technology in creating business strategies.

Job Description

The job description of a virtual CFO includes all the work of a traditional CFO. However, the technological element is the crucial difference between them. Many companies hire an additional Virtual CFO alongside a traditional CFO to assist them with online operations. 

 

When startups want a rapid increase in their sales/revenue, they need experts to handle the cash flows. Therefore, such companies hire Virtual CFOs to manage their capital so the cash flow can move smoothly without obstacles.

The essential services a virtual CFO provides are:

Budgeting

Virtual CFOs create budgets after looking at the capital account of a company. Then, they analyze the necessary requirements to reduce costs. In addition, they also work on the marketing and sales budget needed to advertise the company’s products or services.

Forecasting

Forecasting uses financial information to find future trends. For example, businesses use forecasting measures to look for product or service flaws. A virtual CFO acquires all the necessary information and concludes directions for the future. These trends include financial updates, sales forecasts for products and services, and basic budget cuts.

Financial Analysis

An excellent financial analysis helps a company in preventing financial risks. Proper measures can reduce a company’s overhead costs and develop meaningful strategies to boost its sales. It is the quality of an excellent vCFO to enhance their company with an accurate analysis. 

 

A company uses the research to gain a deeper understanding of where it stands in its industry. The study also helps in comparison with competitors and the required improvements. 

Providing Knowledge

Apart from the business analysis, a virtual CFO contributes to the company by lecturing the finance department. In addition, a virtual CFO motivates and coaches the employee’s corporate in investment decisions in ance and financial management in investment.

Finally, virtual CFOs meet with investors to enlighten them on the company’s financial performance. Properly managed meetings help the company in getting funds from various investors.

Future Planning

Technology is part of every industry today. Companies that do not develop a bond with rapidly growing technology suffer in the long run. In addition, traditional methods are becoming useless, and new AI-powered ways are the future’s demand. 

 

To cater to these problems, virtual CFOs use technical programs that create trends for the future. These strategies help the companies in pattern-making for changes in their business structure. 

 

Virtual CFOs understand the importance of data analysts and data scientists. They need to understand the tech framework of their client’s company. With so much data available on the internet, virtual CFOs should be able to process large amounts of data. They do all this processing through technology to create a multilayered analysis. This analysis is complex and requires a strong understanding of financial technology. Therefore, virtual CFOs need to work on a broader skillset that includes business intelligence and data analysis.

Qualifications

Virtual CFO roles require a minimum bachelor’s degree in business, finance, or economics. Most virtual CFOs have a postgraduate degree in finance or business management. One can also pursue ACCA or CA qualification to start their journey toward becoming a virtual CFO. According to a survey, more than 56% of virtual CFOs had an MBA.

 

Students generally find internships in financial institutions such as 

 

  • commercial banks
  • private banks
  • hedge funds
  • mutual funds
  • rating agencies
  • mergers & acquisitions firms
  • venture capital firms, etc.,

 

Decision-making is an essential part of a virtual CFO’s job. Professionals work their way toward the designations such as financial manager or general manager, which leads them to senior management. After reaching senior management, employees join an umbrella company that allows them to start working as a virtual CFO.

Problems with a Virtual CFO

With all the benefits associated, there are some issues one should consider before hiring a virtual CFO. First, let’s see the significant problems connected to a virtual CFO.

Lack of Data Available

Virtual CFOs work with the limited data available. However, this data should be accurate and reliable. If the information is inaccurate, it will create false results and generate unsatisfactory strategies

 

The entire company relies on these financial decisions. Wrong decisions can cost the company a fortune, with no answers to justify such decisions. A further intense backlash can be the backing of an investor from the company.

Virtual CFOs, not Managing Time

Time management is a prerequisite for remote jobs. Delays in the tasks will upset the client. Therefore, companies that hire virtual CFOs find the lack of time management a critical problem.

Additionally, finance requires up-to-date data processing and financial analysis. To manage the company’s financial records, virtual CFOs must be proficient time managers.

Salary

The salaries of Virtual CFOs are less compared to full-time CFOs. According to Payscale, an average CFO working in startup companies gets paid $122,000 yearly, which can go up to a million dollars. A virtual CFO working remotely on a flexible part-time schedule gets paid only for the relevant job. On average, a small company’s virtual CFO gets paid $78,000 to $198,000. The salary ranges make a  virtual CFO more cost-efficient for the company. It also saves a company’s time and resources related to the finance department’s office.

How to Hire a Virtual CFO

Virtual CFOs are part of a large umbrella company that manages many virtual CFOs working in different industries. A company willing to hire a virtual CFO contacts the umbrella company via email or any other source available. After that, the umbrella company provides the contracting company with all the virtual CFOs according to the company’s requirements. The umbrella company also delivers all the relevant pricing packages. If the company finds the price and services exceptional, they initiate the hiring process.

 

Another way to hire a virtual CFO is through freelancing websites. Websites such as Upwork and Freelancer.com are filled with virtual working professionals. The company can also negotiate the prices on these online platforms. 

In Conclusion,  

Virtual CFOs are the future of the financial services industry. Technological growth is necessary for today’s businesses to survive in the market. With a virtual CFO by the side, a company can generate digitally exclusive patterns and decision-making structures to help in generating revenue. In addition, small companies can enjoy the benefits of all the CFO services at a discounted price. If a company finds it challenging to understand the economic conditions of today and the future, bringing in a virtual CFO can be a valuable addition.

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