CFO vs. CPA: Differences Between Fractional CFOs and CPAs

One of the most frequent questions I receive as a virtual CFO is “How is what you do any different than my CPA?” Or maybe a bit more generally “What is the difference between a CFO and a CPA?”  “Do I need both?”

The answer is similar to a football game. In a football game, you have the referee and scorekeeper, but you also have offensive and defensive coordinators. You need each of these roles for a successful game. The referee keeps players sticking to the rules, while the scorekeeper keeps an accurate record of points won. The offensive and defensive coordinators help their team navigate the field and get to their end goal.

A CPA (what many people refer to as an accountant) can take the role of a referee and a scorekeeper. CPAs make sure the points are recorded, leading to an accurate score. They also make sure all rules of the game are followed. But a traditional accountant is working with historical data found in your financial statements. Essentially, they use accounting rules to analyze the historical data found in these statements to generate historical findings.

A CFO, on the other hand, acts as the offensive and defensive coordinator. A CFO works directly with your “team” -- most closely with the head coach (the business owner). Think of your CFO as an individual helping guide your team down the field (seeking opportunities) and keeping the other team from crossing the end zone (managing risks). They may use historical data, but they also use different metrics such as profit drivers to infer what could happen in the future. It's similar to how an offensive or defensive coordinator uses knowledge of different plays AND historical data of the opposite team’s past games to come up with new strategies.

Your CFO is in your team meetings every week. They are truly a part of your team and will work with your team to define short and long-term goals, then devise plans to meet them. This might include changes like purchasing equipment, hiring/terminating employees, and expanding certain parts of your business. A CPA, on the other hand, only meets with you a few times a year, especially during tax season. It's similar to how a referee or scorekeeper is only at the game and not practice sessions. Think of a CPA as a generalist while a CFO is your go-to for industry and business specific knowledge. Since they attend each of your meetings, a CFO can give you more detailed answers on how to navigate certain problem areas or opportunities coming your way whereas a CPA can fill you in on tax rules that have changed in the past year.

What is a Virtual CFO (VCFO)?

Many businesses may not have the budget to hire a full-time CFO, as it can be quite expensive. A seasoned CFO with industry expertise can cost upwards of $200K to $250K annually, including benefits. So, what can you do if you need someone in a CFO role but can’t afford the cost?

A virtual CFO (VCFO), also known as a fractional CFO or outsourced CFO, offers the expertise of a seasoned CFO at a fraction of the cost. This can be an ideal solution for businesses looking to take the next step in their growth journey and needing expert financial guidance to support their management team through key financial challenges. A virtual CFO will help you with financial planning, financial reporting, financial strategy, forecasting, cash flow problems, and other tasks that will help you reach business goals.

It may be ideal to engage the help of an accountant (CPA) for projects such as tax returns, tax law updates, tax strategy, and tax preparation.

A VCFO becomes an integral part of your management team, fully engaged in your business, helping you navigate financial challenges with ease while a CPA can keep your tax strategy on course.

If you’d like to learn more about our virtual CFO services, you can sign up for a free VCFO consultation below. You can also view our tax services here.