There are times in every small to mid-sized company when the business owner may wish he or she had the expertise and guidance of a chief financial officer. A CFO can not only help guide the accounting and bookkeeping functions of a business but also serves as a visionary who sets strategy; reduces costs; and helps with business plans, forecasts and projections. However, the cost of hiring a full-time CFO is often prohibitive for many companies. But there is an alternative: “virtual CFOs.”
“A virtual CFO can step in and perform many of the functions of an in-house CFO,” says Gary Isakov, CPA and director of Entrepreneurial Services for SS&G Financial Services, Inc. “Hiring a virtual CFO is a cost-effective alternative for many small to mid-sized companies that desperately need the services of a CFO but can’t afford the salary, benefits and perks of hiring one.”
Smart Business spoke with Isakov about the benefits — and downsides — of hiring a virtual chief financial officer.
What is a virtual CFO?
A virtual CFO is a service provided to smaller business that cannot afford a full-time CFO — or think they can’t keep a full-time CFO busy. A CFO reviews and assists the work of these individuals and serves as a visionary to guide the company. He or she takes the financials to the next level — analysis — and concentrates on the creation of budgets and projections.
While a virtual CFO’s work is done through the computer or by phone, many virtual CFOs also meet with their clients on a quarterly basis, usually at the quarterly management meeting, where the virtual CFO presents the financial picture of the company to the owners and leadership team.
Outsourcing the accounting functions of a company and hiring a virtual CFO often go hand-in-hand and often work very well for a company that does not want to go through the trouble and expense of having these functions in-house.
What are the benefits to a business to having an off-site virtual CFO?
A virtual CFO gives the business owner an objective perspective on the business. The beauty of a virtual CFO is that a company has at its disposal a person with not only a wealth of financial knowledge, but a person who, by virtue of his or her experience, understands many industries, business matters, and tax implications — all on an ‘as needed’ basis.
A virtual CFO can be very flexible and take on additional responsibilities that may go beyond the scope of an in-house CFO. For example, the virtual CFO may have access to a human resources consultant who can take on the burden of finding accounting staff by taking resumes, scheduling interviews and doing background checks. By the nature of his or her role, the virtual CFO also may have access to a variety of bankers and financial advisers for a company’s financing, pension plan advisers and health care benefits consultants. Using the virtual CFO’s resources and contacts takes an enormous burden off the business owner, who may neither have the contacts nor the time to look at all the options.
Are there any disadvantages of having a virtual CFO?
Interestingly, while one of the benefits of hiring a virtual CFO is cost, one of the disadvantages may also be cost. Most virtual CFOs bill on an hourly or by-project basis. Some projects can be very complex and require additional time that can get costly. However, the cost benefit of using a virtual CFO can outweigh the cost in the long run.
What can a virtual CFO do that a full-time CFO cannot do, and vice versa?
A virtual CFO and a full-time, employed CFO can essentially do the same for a business. The advantages that a virtual CFO brings to the table are: an objective point of view, a wealth of industry information, and a bird’s-eye view of business trends. A virtual CFO will most likely represent a number of different businesses and industries. While they won’t share proprietary information, they will share trends in the industry that can be very valuable to the business owner. A full-time in-house CFO may not be aware of all the resources that are available to help with a project, and a virtual CFO has all of these resources and consultants at his or her fingertips.
GARY ISAKOV, CPA, is the director of Entrepreneurial Services at SS&G Financial Services Inc., a Cleveland accounting firm. Reach him at (440) 248-8787 or [email protected].
