Entrepreneurs dream of making it big. However, when this dream comes true, they often struggle to manage certain aspects of their venture. Financial management is one example of a situation in which many business owners need help. Hiring a chief financial officer can help them manage their finances and continue growing the business.
However, hiring a CFO can be a costly endeavor. Many companies today have found an alternative solution that every business owner should consider. They utilize strategic virtual CFO guidance rather than hiring a full-time professional to fill this role. When is a virtual CFO preferred? When should an in-house CFO be employed?
CFO Vs. Virtual CFO
Chief financial officers oversee a company’s finances. They handle all accounting tasks, including financial analysis and reporting. These professionals also choose the company’s capital structure and manage investments. They do so whether they work full-time for the company or provide these services virtually.
Types of CFOs
Interim CFOs fill an open position for a short period, often when the company is in the process of hiring a permanent CFO. Virtual CFOs work remotely, often for multiple companies. In-house CFOs work in companies as employees and only handle the finances for that company. Fractional CFOs work for multiple companies, offering their services part-time for each company. These roles often overlap.
In-House or Virtual?
Small companies often opt to hire a virtual CFO rather than bringing on a full-time or part-time employee. Doing so saves the company money, as they won’t bear the expense of hiring, onboarding, and retaining a full-time employee when they don’t need someone for 40 hours a week. The money can be used to grow the business.
When a small company hires one person to handle the finances, there is little oversight. Fraud is sadly common in these situations. Hiring a virtual CFO means that a team of accountants will help manage the business accounts, reducing the risk of fraud.
Company size plays a role in whether a virtual or in-house CFO is the best option. Companies with revenues less than $10 million often choose the virtual CFO option. Those bringing in over $10 million a year typically choose an in-house CFO, as there is enough work to keep this individual and their team busy. However, every company is unique, so this should only be used as a general guideline.
Hiring a CFO allows the business owner to focus on core operations. They must spend time hiring a full-time in-house CFO as this person will become a team member. They must blend well with the company culture. Hiring a virtual CFO may make more sense, but the business owner must be closely involved with the bookkeeping and accounting.
In-house CFOs have more responsibilities. They must communicate effectively with all stakeholders and assist the company in developing a strategic plan for the future. Virtual CFOs only take on the tasks clients request. The in-house CFO can also offer advice and guidance tailored to the company’s specific situation. Virtual CFOs provide intelligent solutions that work for many companies.
Virtual CFOs offer cost benefits, but in-house CFOs have a deeper understanding of how their organizations operate. Companies with high revenues often opt for the in-house option, allowing them to have professionals focus solely on their operations. Virtual CFOs are ideal for small companies because the funds saved by outsourcing this work can be used for other purposes. Every business owner must carefully consider their needs and choose between the two. Either option is an excellent choice, so they will not miss essential services regardless of their decision.