How does a virtual CFO work?

by Aanshika Singh Marketing & Bussiness Services

The CFO (Chief Financial Officer) of a company is a person who is responsible for overseeing the financial decisions of a company. Virtual CFOs perform every responsibility of a CFO and only differ in the fact that they work either remotely, or part-time. Duties of a CFO include:

● Monitoring cash flow

● Examining financial strengths and weaknesses and improving strategies

● Preparing financial statements

● Planning allocation of finances

How Do Virtual CFOs Differ From Traditional CFOs?

While traditional CFOs work full-time in a senior position in the company, virtual CFOs work on a contractual basis and are outsourced by organizations. The position of an in-house CFO surpasses those of directors and managers. Such a high-level position demands an equally high salary.

As a result, small businesses and start-ups are often unable to afford a full-time in-house CFO. This is where virtual CFOs come into play. Since they work remotely on a part-time basis, the rates of a Virtual CFO are not as high. Therefore, outsourcing is an excellent choice for small organizations since it enables them to receive expertise and strategic guidance from a professional for a much lesser cost.

How Do Virtual CFOs Work?

To effectively use the expertise of a virtual CFO in advancing a business, a step-by-step strategy should be implemented. Both the CFO and the organization can benefit from this since it allows both parties to become acquainted with one another. The CFO can become familiar with the financial standing of an organization and devise strategies accordingly, and the organization, on the other hand, can communicate its needs and expectations to the outsourced executive to gain optimal results. This can be achieved in the following ways:

Establishing goals – An organization should communicate its short-term and long-term goals to the CFO so that they, in turn, can form plans that facilitate those goals. These can be anything from decreasing expenses, to improve profits.

Deciding on technology - Both the CFO and the organization are required to decide upon software that is convenient for them. The CFO may recommend certain technical specifications that are better suited for the company based on parameters such as performance and stability. The company, in turn, should trust the advice of the professional and make necessary arrangements.

Restructuring finances – Restructuring the finances of a company is a good way for the CFO to not only arrange the firm’s documents in a way that is convenient for them, but also update the organization’s balance sheet for better analysis. By doing so, the CFO can create a short-term plan of the strategies they intend to implement in the following months.

Weekly or monthly meetings – Both parties must have regular meetings to discuss and review financial reports, and to confer about the next plans of action.

Clear communication – Clear communication is essential in optimizing the results from CFO services. Effective communication is the only way in which both parties can have an understanding and work in harmony. CFOs must explain the reports and strategies they make and be available to answer any queries, and companies must be upfront about their expectations and cooperate with CFOs to ensure smooth coworking.

Most communication between an organization and the CFO in a virtual setup is done via video conferences or phone calls.

Benefits Of Hiring A Virtual CFO

● Flexibility – Having a virtual CFO allows companies to be in charge. They have the freedom and authority to determine the CFO's work hours and projects, and they may even hire a team instead of an individual. Since virtual CFOs are not full-time workers, organizations need not consider additional benefits or spend resources in designating a workspace.

● Affordable – Since virtual CFOs are not full-time employees, their payment is made on a part-time basis. Organizations can seek the services of a CFO only when they require it instead of spending resources in keeping a full-time employee. This is highly cost-effective and can be especially beneficial for small-scale organizations.

● Wider experience – Since virtual CFOs work for multiple businesses at once, their work experience is diverse and ever-growing. This enhances their level of expertise which in turn is beneficial for an organization. Moreover, with virtual CFOs, firms may also hire an entity instead of an individual which allows multiple skilled professionals to provide their inputs. CFO services for startups are especially beneficial due to this reason because virtual CFOs can contribute their knowledge and skill to help a small business grow.

● Regulatory compliances – When it comes to financial records, there are many regulatory compliances to be maintained. Regular people may not always be updated with these terms but since CFOs perform these tasks for a living, they are updated with every norm and regulation at all times. Therefore, using their services is a sure-fire way to ensure that a business is always compliant.

● Better profits – Seeking the services of a virtual CFO is a guaranteed way for companies to generate more revenues. Not only are organizations able to cut costs, but the experience and knowledge of virtual CFOs are extremely valuable in managing finances efficiently and thereby increasing profits.

Due to its innumerable benefits, virtual CFO services have grown manifold in recent times. Their cost-effectiveness makes them highly desirable to start-ups, and their vast expertise can be invaluable to any organization. Virtual CFOs are also highly versatile, and greatly adept at networking and working in groups. As a result of these diverse advantages, virtual CFO India has grown greatly in demand all over the country, as well as worldwide.