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Aprio cloud blog

February 23, 2016 at 8:30 AM

Virtual CFO: Luxury or Necessity?

Written by
Jennifer Huang
Jennifer Huang |
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Virtual CFO

When you’re running a startup or a small business, hiring a CFO can seem like an unnecessary luxury. After all, full-time CFOs are expensive. That’s especially true in big cities. For example, PayScale puts the minimum pay for a CFO in San Francisco at over $100,000 per year.

Aside from the cost, there’s also the tendency to put financial analysis and profitability on the backburner and focus on growing the business instead. This is especially true with startups. Why spend what little time you have on budgeting when you really need to be adding more users or consumers of your product so that you can get that next round of funding?

Time and time again, founders neglect the financial well-being of their businesses because they think they simply don’t have the resources to hire a financial advisor.

The good news is that time and money don’t have to be an obstacle any longer to attaining financial health for your business. By hiring a virtual CFO instead of an in-house CFO, you can get the help you need at a fraction of the cost.

Here’s what makes hiring a virtual CFO a necessity:

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A virtual CFO helps you and your stakeholders understand the numbers

Whether it’s making a product or providing a service, you’re an expert when it comes to your business. However, you’re probably not an expert at reading financial statements.

A virtual CFO helps you and your other stakeholders understand accounting reports and financial statements. He/she can translate the language of numbers and ratios into the language of business — what it will take to grow your numbers and increase your profits.

Knowledge is power, and financial knowledge is power around the boardroom table.

Sticking to a budget is easier with an outside accountant

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Have you ever tried to stick to a workout plan? It’s a lot harder when you do it all by yourself. It’s a lot easier when you’re held accountable by an outside party, such as a personal trainer.

The same is true for budgeting in your company. It’s a lot easier for you and your staff to stay on budget when there’s an outside business advisor watching the numbers and helping to hold each department accountable.

A good virtual CFO will help you develop a budget and stay on track with budget vs. actual reports on a monthly or quarterly basis. You might be surprised just how helpful this can be when it comes to improving your bottom line.

Raising money is easier with a financial advisor on board

When you’re looking to raise funds from investors or get a loan, it’s important to have your financials ready to go.

A virtual CFO can help you make sure that you’re prepared to provide at a moment’s notice whatever your investors ask for. This makes you look good, and makes your busy life a lot easier.

Tax time is way easier when you’ve planned for it

When was the last time you did a year-end tax planning session? Many tax accountants fail to provide this valuable service to their clients. But filing a tax return is only half of the job an advisor should be doing. The other half is meeting with you periodically throughout the year to make sure you’re taking steps to minimize your tax burden when you can actually do something about it, and not when it’s already too late.

A virtual CFO can coordinate with your tax preparer to make sure that you’re making the right tax moves throughout the year. In a firm like HPC, which does both tax and advisory services, our business advisors work closely with the tax department to make sure that nothing gets missed.

A virtual CFO can take over management of your in-house or outsourced bookkeeping

This is a big benefit of hiring an outsourced accounting service versus an outsourced bookkeeping service. A virtual CFO that is part of an outsourced accounting firm can help take on many management tasks that are typically time consuming for busy business owners and founders. A bookkeeper usually can’t.

This additional advisor on your team can help manage in-house bookkeeping and/or accounting staff. If they’re part of a firm, such as HPC, which provides a variety of outsourced accounting services, they can also help you decide when and how to start outsourcing other services, such as bookkeeping, payroll, and bill pay.

Virtual CFOs help prevent fraud and control cash

Whenever money is moving around, it’s important to have proper oversight by a second individual to make sure there’s no funny business going on. One person disburses funds while another person records the transactions. Then ideally a third person reviews. This is called “separation of duties”, and is a key concept in management accounting for preventing and discouraging embezzlement.

Having your virtual CFO oversee your in-house accounting staff goes a long way toward providing this oversight and helping to prevent fraud. He/she can also make specific recommendations as to how to improve cash control procedures to minimize risk and increase efficiency in your business.

At HPC, we specialize in cloud accounting technology such as Bill.com, which can cut the cost of processing accounts payable in half, while also providing increased security. Make sure that any virtual CFO you consider is familiar not only with proper procedures, but also with the technology to implement those procedures.

An advisor from an outsourced accounting firm won’t leave you hanging

When you hire in-house staff, you’re making a big bet on that person sticking around for a while. They can choose to leave at any time, and often do. This can be hugely distracting, difficult, and expensive. You have to hire and train a new employee, and the previous in-house CFO or controller may not be interested in a position to help make a smooth transition.

A big benefit of outsourcing your advisory and accounting services to a cloud accounting firm is that the outsourced firm provides continuity in the event that the virtual CFO leaves. When hiring a virtual CFO, find out if they work independently or as part of a team. Reliable cloud accountants are familiar with these concerns and will gladly address them at the outset of any business relationship.

You can afford a virtual CFO

When you hire a part-time virtual CFO, you pay only for the services your business needs, not the salary your in-house CFO needs. You also save on the cost of employee healthcare, payroll taxes, office space, and more.

Most businesses and startups don’t require the services of a full-time CFO. So the CFO ends up spending time on tasks that are beneath his/her skill set. That’s not good for the business or for the employee.

Are you ready to hire a virtual CFO?

HPC is happy to talk to you about our business advisory services. To get started, schedule a complimentary consultation here:

SCHEDULE A FREE CONSULTATION

Jennifer Huang

About Jennifer Huang

As our clients' businesses grow, eventually they need more than just support or bookkeeping. They need someone to help them understand the numbers and answer critical questions to help them manage and grow their business. Jen is our Virtual CFO extraordinaire and provides a higher level of advice and support to our clients in this phase of growth.