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A virtual CFO (aka virtual Chief Financial Officer, outsourced CFO, or part-time CFO) is a financial professional that provides outsourced CFO services . A virtual CFO performs the same functions as a full-time, traditional CFO and their team -- but at the fraction of the cost.
Perhaps the biggest distinction is that a virtual CFO usually works with multiple clients rather than working full-time for one employer. Often, businesses will seek out a virtual CFO if they have a need for the tasks and strategic advice a CFO would normally complete while not yet having the budget or enough work to hire a full-time employee.
You might be wondering about the difference between a virtual CFO and a traditional bookkeeper or CPA firm. That difference is a consultant relationship. Virtual CFOs don’t just meet with you once a year to do your taxes. Virtual CFOs offer advisory services and help you make informed business decisions. They help you plan for business goals by using cash flow forecasts and financial documents to run scenarios and make strategic plans to achieve said goals.
Fractional CFO vs. Virtual CFO
In many ways, Virtual CFOs are fractional CFOs. Fractional CFOs are more known to service a client in person by attending meetings at their headquarters and working on-site in other ways. Virtual CFOs usually provide the same services as fractional CFOs but in a remote environment. Both roles provide financial health reporting and financial insights that you’d expect from an in-house Chief Financial Officer.
Being a distributed CPA firm that offers VCFO services allows financial professionals to be flexible, guiding each client through every phase of their business journey.
Services Offered
A traditional CPA firm might just meet with you once a year to prepare your taxes. A virtual CFO takes things several steps further. Remember, a virtual CFO is on a mission to help you achieve all your business goals and increase profitability. That means that even tax planning becomes a strategy.
The best virtual CFOs work in a team that includes a tax expert, as well as other accounting support, such as a staff accountant. With the help of their team, a VCFO will take on tax planning and input that information into a financial forecast. Why? Informing clients about their tax obligation helps them plan ahead by finding ways to reduce that tax burden and preventing surprises that will put unnecessary strain on a small business and sideline business goals.
While virtual CFOs can elevate standard services like tax planning to ensure a client's financial success, these financial professionals also provide support in ways not typically seen by CPA firms.
One example is through road mapping. VCFOs use their financial expertise -- as well as industry KPIs and benchmarking data -- to help clients plan for the future by developing a roadmap to success. This involves talking to the client about their goals and then working backward to identify one or more paths to achieving them. After a VCFO has identified a path forward, they may take on weekly financial meetings, budgeting, cash flow management, financial statements, business forecasting, companywide KPIs, financial strategy, financial reports, and other tasks to ensure that clients stay on track to their goals.
Should You Hire a Virtual CFO, Bookkeeper, or a Full-time CFO?
The decision to hire a bookkeeper, virtual CFO, or a full-time CFO comes down to business needs and company scale. Here’s some guidance:
Generally, we’d advise that if your business is under $2 million in annual revenue, a bookkeeper or traditional CPA firm will likely be more cost-effective. However, if your business is over $2 million in revenue and has grown to the point where you need a financial advisor, but your business can’t yet afford a full-time CFO or controller, a virtual CFO is the right fit.
Experienced, full-time CFOs command high salaries. By one estimate, the median CFO salary is $440,000+, not including vacations, bonuses, and other benefits. That gives you a ballpark of whether it’s in your budget to hire a full-time CFO versus a virtual or fractional CFO.
The image below shows our typical client size and the virtual CFO services they generally require at their size.
While a very large company will likely benefit from an in-house CFO because of the complexity of the job, there are reasons beyond scale to consider outsourcing your CFO function. Because a virtual CFO works with multiple clients and with a team of collaborators, you get the benefit of diverse experience. In business, there's rarely a problem that's never been seen before; a virtual CFO has probably encountered your very same challenges and engaged in a range of solutions. If they've never seen it before, someone on their team certainly has. In addition, when you engage a fractional CFO with specific experience in your industry, you get insight into best practices that will help you elevate your business to the next level.
I hope this blog post helps you better understand what a virtual CFO role is, and which type of financial professional might be right for your business. If you want to learn more about our virtual CFO services, download our free VCFO guide or don’t hesitate to reach out for a free virtual CFO consultation.
