When a business owner realizes they need a CFO, they may immediately start the hiring process. Before doing so, they should consider working with a virtual CFO. What are the benefits and drawbacks of each option when making this decision?
Virtual CFOs
Many business owners today rely on an expert virtual CFO service. This concept continues to increase in popularity for several reasons. Working with a virtual CFO is a flexible and cost-effective solution.
Unlike conventional in-house CFOs, a virtual CFO provides financial management services remotely. They do so using advanced technology and cloud-based tools. As with in-house CFOs, this individual offers a business owner strategic financial insights. They help the owner with planning and analysis, doing so from afar. The business owner can scale the virtual CFO services as needed.
Business owners are finding they can save money by working with a virtual CFO. They won’t need to pay this individual’s salary and benefits. Furthermore, they save on office space, which can be very beneficial today as property rents are rising.
A business owner might assume they should hire a full-time CFO so that this individual can gain a thorough understanding of their business. However, working with a virtual CFO has benefits, as well. This individual works with multiple industries and may be able to provide insights on how to improve the business. A company might gain an advantage over competitors when it has information from other industries that it can use.
Having a CFO who knows every aspect of the business is also beneficial. They understand the challenges the business faces and can help the business owner find ways to overcome these challenges. Every company must determine whether it would benefit more from this in-depth knowledge of the company or the diverse expertise of a virtual CFO.
When a business decides to expand its operations globally, it may encounter challenges it didn’t anticipate. For example, it can be challenging to connect with a traditional CFO outside of regular business hours. However, this may be when the business handles many aspects of its operations. A business owner may overcome this by working with a CFO in the countries where it is expanding. Doing so ensures the CFO will be available when needed.
Traditional In-House CFOs
Traditional in-house CFOs are full-time employees who work for one organization and are physically present within that business. This individual is tasked with managing the company’s financial operations. They help the business owner develop strategic financial plans and maintain the budget. Furthermore, this individual is responsible for ensuring the company complies with all regulations.
With a conventional CFO, the company cannot scale services as needed. They pay this individual a salary regardless of whether their services are required. Doing so can harm the company if it has fluctuating financial demands, as this individual will remain idle for long periods. Furthermore, the company must pay this individual a salary and benefits. A small business might find it cannot afford this financial commitment.
Hiring a full-time CFO comes with benefits that should not be overlooked. This individual will always be available when the business owner has a question or concern. There will be no delay in addressing the issue when the CFO is on-site and readily available.
Each business is unique. Therefore, there is no one-size-fits-all solution. Every business should consider the benefits and drawbacks of hiring a virtual CFO or a conventional CFO. Many companies today are finding that using the services of both is beneficial. They may have an in-house CFO to handle most tasks and work with a virtual CFO when additional help is needed. Doing so ensures they have the best of both worlds.
