What is a Virtual CFO and do I Need One?
Small businesses have multiple financial experts to choose from these days. The growing popularity of online businesses means many of these professionals are available virtually on a fractional basis. This means small businesses have access to high-level expertise without the cost of a full-time employee.
What is a virtual CFO?
A virtual Chief Financial Officer (“CFO”) works with businesses online so owners do not have to take time out of their day to travel. By hiring a virtual CFO, a business has access to a larger pool of qualified applicants.
What is a fractional CFO or CFO for hire?
A fractional CFO (or CFO for hire) works for small businesses on a part-time basis. Many small businesses need a CFO but not many can afford a full-time employee. A full-time CFO in a mid-sized corporation can cost roughly $200,000. By hiring a fractional CFO, a business gets access to executive-level expertise without the cost of a full-time employee.
What does a CFO do?
A CFO is responsible for the current and future financial state of the business. This person has a high-level view of the company and helps the CEO make critical decisions regarding the workforce, marketing, and strategic direction of the business. This person will utilize data to forecast the performance of the business and advise on the appropriate action (ex: hire, open another location, cut costs, streamline operations, etc.).
Do I need a CFO?
If your business is growing, if you need to make a critical decision, or if you’re losing money, then it’s time to hire a CFO.
You can take this free assessment to determine whether a CFO is the best hire for your current situation.
What’s the difference between a CFO and a….
In most cases, I recommend a small business start with hiring their first financial professional on a part-time basis to be cost-efficient. If the business grows, this part-time employee can convert to a full-time employee. I also recommend small businesses hire their financial professionals in the following order:
Bookkeeper
A bookkeeper will categorize your transactions. A good bookkeeper should also create your chart of accounts, enter journal entries, reconcile your accounting system to bank statements, and should publish your Profit & Loss Statement, as well as your Balance Sheet. Bookkeepers do not need a college degree or certification. However, if your bookkeeper doesn’t understand accounting, your financial statements will be inaccurate. Most accounting systems like QuickBooks offer bookkeeping. You can also find a virtual bookkeeper online so you don’t have to spend time traveling to a physical location or dropping off physical paperwork.
Accountant or Certified Public Accountant (“CPA”)
Accountants within mid to large-sized companies will manage accounts receivable, accounts payable, and payroll. They reconcile all financial data. Accountants typically have a four-year degree. Starting out, a small business most likely does not need a full-time internal accountant. A business should consider hiring an internal accountant once there is more than 20 hours/week of accounts payable and accounts receivable tasks. Not all accountants are CPAs and a business does not need a CPA to do internal accounting. (A CPA will be more expensive too.) A CPA is certified to work with the public. I recommend small businesses hire a CPA to file their federal and state income taxes.
Controller
Sometimes mid-sized companies will have a controller instead of a CFO. The controller oversees the accountants, as well as the daily accounting operations. If a company has both a controller and a CFO, the controller will report to the CFO. The controller is responsible for the tactical tasks like reporting, whereas the CFO is responsible for the strategic tasks such as forecasting and planning.
CFO
The CEO relies on their CFO to make profitable decisions and be their strategic partner.
Return on investment
A good CFO will help you increase your profits and this positive margin should cover their fee. Therefore, a CFO should not be considered a cost, but rather an investment.
Use this free quiz to determine whether a CFO would help your business achieve sustainable profitability!
Separation of duties
I do not advise business owners to hire one person to do all three functions. It’s always a good idea to have separation of duties to ensure there is a checks and balances approach to the business’ finances. By hiring 3 different individuals to fill these roles, the business owner can be rest assured their financial data is accurate and they are receiving unbiased recommendations.
How my CFO approach differs
Every professional has different skills and approaches. I would recommend hiring someone who has a different skillset than your own and has an approach that aligns to your personality and values.
My background: asset management, marketing, human resources
My skills: creative tax planning and business strategy
My approach: collaborative and comprehensive
If you want to maximize your wealth and time and make profitable decisions with confidence, schedule a complimentary consultation today!