There is no getting around it: a full-time, in-house CFO is a prohibitively expensive resource for most small and early-stage businesses. So the founder assumes responsibility for managing the company’s strategic financial challenges, and a finance manager (or external bookkeeping firm) keeps the IRS happy as well as getting the invoices issued and the bills paid.

At some point, though, the business will outgrow these arrangements and need a deeper financial perspective. That’s where a virtual CFO comes in. 

But what is a virtual CFO? Why do you need one? And how do you find one that’s right for your business? Read on to find out.  

So what does a virtual CFO do anyway?

For those who don’t know, a virtual CFO is a senior financial executive who offers strategic financial guidance to businesses. They work as an external adviser, usually on a part-time or time-limited basis, and they work virtually – meaning they operate outside your office, interacting through phone calls and technology. A virtual CFO offers exactly the same support as a conventional chief finance officer, but you won’t need to hire them as a regular employee.

As for what they do, this actually is not a simple question to answer. The role of the CFO will adapt to whatever growth stage your business is at, and whatever challenges it is facing. With access to accounting automation tools, the role is less about number crunching and more about looking at strategies, uncovering potential, and translating the numbers so that you can understand the story. Broadly, their job is to help you make the choices that will lead to greater profitability. 

For a startup or SME, this may not warrant a full-time role. A virtual part-time arrangement gives you all the benefits of a senior strategic financial resource without the full-time overhead. Not only is it more affordable, but you can choose the exact level of strategic support your business needs.

When is the right time to hire a virtual CFO?

The trigger for investing in a virtual CFO will vary from business to business. Generally, most companies will start to explore this option when they hit one or more of the following problems:

Lack of strategic financial management expertise – either there is no one in the business who can fulfil this role, or trying to manage the finances is preventing you from doing what you do best – growing the business. A virtual CFO provides the financial insight to help you steer the ship towards important goals. 

Poor cash flow – poor cash flow can quickly bring a business to its knees, especially in the early revenue-generating years. A virtual CFO can develop a cash flow management strategy to stabilize the situation and make sure the cash runway is as long as possible.

Can’t see the wood for the trees – A virtual CFO is a fresh pair of eyes to see what you are too close to the business to see. They will not be caught up in the day-to-day operations like you are, and can be laser focused on the priorities that keep you awake at night.

The business needs investment – Raising a round of funding takes a lot more time than most business owners expect; sometimes access to a quality CFO is a prerequisite. A virtual CFO can guide you towards the most appropriate type of funding, prepare the financial information, and steer the business through due diligence and beyond.

Poor management reporting – For fast-growing companies, a key challenge is structuring the chart of accounts in a way that puts meaningful information at your fingertips now, and lays the groundwork for critical information delivery in the future.  

There’s a special project on the horizon – Expanding into new territories, a capital raise, merging, acquiring another company or selling the business – a virtual CFO can support your deal negotiations, guide you through the unknowns and stay with you until the dust has settled. 

What does an outstanding virtual CFO look like?

First and foremost, don’t let the term ‘virtual’ put you off. Despite the distant and robotic-sounding job title, a virtual CFO is very much a human element in your business. You will be working with a trusted adviser – someone who will act as a combination of counsellor, sounding board, business coach and strategic consultant to your company. That means you need to trust and respect your CFO.

Beyond that, a virtual CFO needs a range of qualities to be effective and outstanding. When reviewing your options, look for someone who:

• Is a qualified accountant with experience of working with businesses at your growth stage – essentially, they know what this stage of the company’s evolution requires
• Has a track record of success, bringing lessons learned for companies ‘A’ ‘B’ and ‘C’ and applying them to your business
• Has a team of finance professionals to support them, and a network of contacts if needed
• Is not afraid to challenge things and act as a soundboard for business leaders to make objective, data-backed decisions 
• Can liaise with potential investors and financial institutions, giving the business the financial credentials it needs to succeed
• Is probing and curious; only when they understand every part of the company can they get a clear sense of what drives profit and cash 
• Not only knows the numbers, but can clearly articulate them into a story that everyone understands 

Where do you find a virtual CFO? 

It depends whether you want to hire a CFO as a standalone option, or you want full-service financial expertise. For the first option, you can source independent CFOs through the usual freelancing platforms, or speak to a staffing agency that specializes in placing part-time CFOs. 

For the second option, our Finance-as-a-Service model is ideal. FaaS gives you access to a range of financial experts, on a cost-effective subscription basis according to the growth stage and needs of your business provides. If you have a finance team already, we can work with them on your accounts as well as providing more in-depth, high-end CFO strategy and management reporting. If you don’t have a team or a bookkeeper in place, we can take care of this while bringing you all the benefits of a CFO and a cloud-based approach to your accounting. 

The takeaway is this: if your business needs to cut waste, deploy cash efficiently, or is on the brink of a scale-up, you need the right foundations to build on. A big part of this is about creating a viable financial model that has the people, tech stack, efficiencies, and systemized processes needed to meet your long-term objectives. A virtual CFO is part of this picture – bringing you clarity of understanding, far more timely advice, and strategic guidance to help you step ahead of other businesses in your industry.