Research from The Telegraph shows that around 60% of startups fail within the first three years of their launch. There are numerous reasons why young companies fold so easily, but one of the most profound reasons for failure is the inability to create a profitable business model.
Right from the start, you should be able to get your financial strategy right. Cash flow is the lifeblood of your business, and having a constant stream of capital flowing in and out of your business is imperative.
For small businesses and young startups, hiring an In-House CFO can be very costly. In comes the Virtual CFO or a vCFO.
In today’s blog, we will discuss everything there is to know about a Virtual CFO and how you can benefit by hiring one.
What Is A CFO?
A Chief Financial Officer is the person responsible for managing your companies books, finances, investment plans, compliance planning, and major corporate decisions.
The role of a traditional CFO used to revolve around basic financial reporting tasks, but the modern CFO is expected to drive the success of their organization. They use financial data to influence operational decision-making.
A CFO plays a critical role that will have a major impact on your company’s development, culture, and growth. And now that we have covered the basics, let us discuss what a vCFO does.
What Is A Virtual CFO?
A Virtual CFO or a vCFO is an outsourced form of a traditional In-House CFO. They handle all the duties of a CFO but work part-time on a remote basis. Simply put, you are outsourcing the head of your finance department for a few hours.
Virtual CFOs are perfect for small companies that do not possess enough capital to hire a full-time CFO. This is beneficial for businesses that want expert-level guidance with regard to their finances.
Virtual CFOs have the ability to handle a wide range of financial tasks. As a founder, you may not have the right skill set to both run a business and handle your finances efficiently. But if you hire a vCFO, you can expect them to deal with trends in the market, acquire capital, draw up financial forecasts and even handle the most basic tasks such as bookkeeping and reconciliation.
10 Benefits Of Having A Virtual CFO
Flexibility
Having a virtual CFO allows you to have complete control over the number of hours, nature of work, expertise, experience, type of engagement (hourly, fixed retainer), etc. Moreover, you do not have to provide office space, benefits, or travel expenses.
You also have the flexibility to hire different individuals based on the level of their experience in a particular area.
Save The Extra Cost
The biggest reason small businesses hire a vCFO is to save the extra cost. Hiring an In-House CFO will cause a major dent in your budget. Let us suppose you hire a CFO to manage your ongoing compliances. This task is estimated to take around 30-40 hours per week.
For such a menial task, it does not make sense to hire a full-time employee. The best thing to do in this scenario is to hire a virtual CFO. Decide the hours that they will work and pay for their services. If you need them to work more, you can always request more hours depending on your needs.
Expert Services
A vCFO will have diverse work experience. Since vCFOs are used to working with multiple businesses at one time, using a vCFO will allow you to tap into the expertise of these CFOs at only a fraction of the cost of a full-time CFO.
Besides this, a vCFO will come equipped with their staff. These entities are experts at what they do so you do not have to lend your entire accounting department to them. While hiring a traditional CFO, you will have to put in extra resources to accommodate them.
So save yourself the extra cost and hire an entire entity to benefit your business in the long run.
Networking With Successful Businesses
Virtual CFOs are acquainted with multiple clients in different fields. These successful individuals can be beneficial to your budding business. If needed, they can leverage this to help your business.
In the case of entities, you can benefit from a wider network that would otherwise not be available to you. A vCFO can liaison with eternal stakeholders and provide additional reassurance to reporting and analysis. They can provide the due diligence and expert oversight that will boost your confidence.
Financial Forecasting
With their diverse experience in business and finance. vCFOs are fully equipped to take on the financial leadership role in your company. They can effectively plan and execute financial decisions.
Additionally, they will be able to forecast the financial numbers and budgets of your company. We are not saying a traditional CFO will not be able to do the same job, but a vCFO who is in and out of multiple businesses regularly will have the necessary experience to make better forecasts.
Integration With Teams
A vCFO is used to integrate with existing teams. They have been able to work with multiple teams at once, so it will not be a problem for them to gel with yours. vCFOs come equipped with their own teams as well.
In addition to that, they provide on-demand services, so there is no need for introductions. Interactions can be limited to a minimum and work can be enhanced to a maximum.
Delegate Your Responsibilities
As your business starts to grow, the responsibilities start to grow. Being the owner, you do not have to do all the work yourself. Delegate your tasks to the experts and create a team that can run itself.
Allowing your vCFO to handle all your financial responsibilities is going to be one of the wisest decisions you can make in your business. Why? Well, let the expert handle your finances and focus on running the business.
Your vCFO knows their domain and is likely to make decisions that you may not be able to make on your own.
Compliance Measures
A business is liable for compliance measures. These are technical and require expert insight. vCFOs will take of all regulatory compliances. They will handle your internal filing as well.
Additionally, a virtual CFO will create customize templates for report submission. They know exactly how to streamline reporting. This is a valuable skill that will define your brand.
Process Building
As your business grows, your finances will grow as well. There will be a constant influx and outflux of money. Without an expert on your side, it will become very hard for you to scale your business.
Hopefully, as your business grows, you may want to hire an expert to create the right processes for you. A simple bookkeeper or accountant is not going to provide the same service as a virtual CFO would.
Letting your vCFO handle the processes will take a lot of burden off of your shoulders.
Increased Cash Flow
Any organization would like to increase its cash flow. This is the main reason why businesses are inclined to hire vCFOs. With an expert on your side, you can gain awareness of the business areas that require improvement.
Your vCFO will allow you to identify untapped sources of growth. Moreover, they will guide your business to ensure adequate financial savings. All of this will result in increased cash flow and increased revenue.
Who does not like more cash on their hands?
To Conclude
From preparing budget reports to financial forecasting. Management reporting to cash flow modeling and process building. Hiring a vCFO will benefit you in tremendous ways. It will not only increase the capability of your financial functions but also provide overall technical and administrative support for your business.
We at Intrepedium provide the best services your small business needs. Whether it may be related to hiring a Virtual CFO, bookkeeping, or taking care of your accounts. We have it all covered. Contact us to find out how we can empower your business.
We hope that this article has educated you on the benefits of hiring a Virtual CFO. If you have any questions for us, send us an email at info@intrepidium.com. Be sure to check out other blogs on our website. Until the next one!
