Virtual CFO A Smart Choice for Small Businesses

Consulting Services
June 1, 2022
Taping packages for delivery in a small business.

Virtual CFO A Smart Choice for Small Businesses  

Why Use a Virtual CFO  

Every small business owner needs the support that a CFO can provide. Business owners need assistance with how to best structure their company, planning taxes, planning for how to set up their General Ledgers, financial reporting, and other issues like personnel and payroll services. While all small businesses need these services, not all businesses can afford a full-time CFO.

A Virtual CFO can be engaged for a fixed scope of work or fixed number of hours per month. The business owner pays only a fraction of the cost for the CFO because they are working part-time. This allows the business to get the support it requires for a compelling cost.

What is a Virtual CFO  

A virtual Chief Financial Officer (vCFO) is typically a practicing Certified Public Accountant (CPA) who offers high level financial consultation. Utilizing a vCFO is a cost effective way for smaller businesses to access the services of a CFO without bearing the full cost. A CFO is a strategic hire for businesses of any size to consider. It should be considered an investment, not a cost, as the true CFO will always provide a high degree of return on your investment.  

What are the Benefits of hiring a Virtual CFO  

The purpose of a virtual CFO is to provide expert services at an affordable price.

While virtual CFOs may not always be present on-site, they will always be available when you need them most. Having a virtual CFO will protect you against financial crises.

Direct Benefits  

Direct benefits of receiving and following a vCFO's advice are improved margins, cash flow, sustainable growth, and efficient and effective operations. vCFO can act as a true C-level executive as a part of your team to enhance vendor contracts and relationships, plan for and manage debt,  strategic planning, and tax risk mitigation.

A vCFO can focus on small businesses and their accounting and bookkeeping complexities when filing taxes. Generally, small business owners are unaware that their daily decisions can, directly and indirectly impact their taxes.

Indirect Benefits  

A vCFO will open doors of opportunity for your business. These professionals have extensive networks with other business owners that could benefit your company. They can advise on the competitive landscape and untapped opportunities and open doors to improve banking and capital raising potentials.

Having a vCFO as part of your leadership team can raise the bar of performance for the team you have in place. Working with an experienced professional will challenge your team to improve their skills and apply best practices to your operations.

A study by U.S. Bank reported that over 82% of small businesses fail due to poor cash flow management. The advice and guidance from a vCFO can prove to be the difference between success and failure.

Critical Drivers for Requiring a CFO 

When deciding whether you need a vCFO, business owners should consider the following four scenarios. If you are experiencing these conditions, you are ready to engage a vCFO.

  1. Managing business finances is a struggle. While most small business owners possess a robust set of business skills, financial management is not always part of their skillset. Focusing on the areas of the business you are skilled or more comfortable with can sometimes leave the financial requiring attention. If you find you cannot budget, plan, or detail your P&L performance monthly, it's time to engage a professional vCFO.
  1. The organization is rapidly growing. Despite the current control, you may have over your operations, if you are experiencing rapid growth, managing decisions day to day can quickly get out of hand. Engaging a vCFO to drive high-impact choices will assist in steady development. Don't avoid getting the help you need to prevent a fast-growth business from failing.
  1. Your organization generates more than $1 million in revenue. Financial operations and management will be highly complex once your business reaches this level of sales. Transaction volumes, cash flow, debt planning, budgeting, and tax management are all much more complicated for a company at this scale.
  1. Selling your business is on the near horizon. Deciding to put your business up for sale requires a higher level of diligence and financial management. A vCFO will assist in preparing the required diligence reports, demonstrate operational controls, and support a higher potential sale price. Having control over financial management and reporting will keep a high price for your business. A business that cannot provide accurate financial details for its operations will not sell at a premium but at a discount.

Conclusion  

As business owners look at their day-to-day operations, focusing on expense management is critical. On occasion, expense management needs to be balanced with making investments in the business. No business has ever cost-cut its way to greatness. Controlling expenses and making wise business investments is the key to success.

Investing in a vCFO will give you a leg up on managing the financial operations of your business, as well as forecasting and planning for future growth. Making decisions before the need arises is always easier. Being proactive versus reactive is a cost-effective way to run your business.

Take the time to consider adding a vCFO to your team. It could prove the best investment you have made in your business.

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