Should your company hire a virtual CFO?
Before getting into the nitty gritty of this question you should be asking what is my company's objective? It is important to understand where you want your company to go before starting down the path of seeking a virtual CFO.
The forty-hour work week changed the way we do business. On September 25, 1926 the U.S. social and economic landscape changed when the forty-hour workweek was implemented. The impact is still felt today.
We don’t think twice when someone says they work full time. We know that means forty-hours hours a week.
Yet, as technology has changed our society, we still revert to a work week established when many homes didn’t even have a telephone. It doesn’t really make sense.
When you think about the finances of your business, do you still utilize practices established almost 100 years ago?
It’s time to change the way your business operates. Time to make things more efficient. Time to save money.
Enter the virtual Chief Financial Officer (CFO).
A traditional CFO is an professional who works for an organization, usually in an office, for 40+ hours a week. They bring their financial expertise to help steer the company.
This CFO will help the company:
- Establish goals for a financial destination.
- Bring order to a capital-intensive business.
- Manage cash flow for seasonal sales.
- Assist in external reporting.
- Identify products and services that have good cash conversion.
- Develop a financial pipeline report to predict when new employees will need to be hired.
With all this expertise, the CFO tends to have the second highest salary right under the CEO.
CFO salaries usually range from $150,000 - $350,000 a year, plus benefits. This type of structure works well for organizations that have over 100 employees and annual revenues exceeding ten million dollars.
But what if yours is not a large organization? How do you tap this knowledge?
A virtual CFO is a professional who has received training and expertise through a large variety of tasks throughout their accounting career.
They can be someone who worked as a CFO for a manufacturing company for 20 years, or someone who was an audit partner at a CPA firm for 20 years.
The common thread among virtual CFOs is that each one has observed various business structures and is knowledgeable in how to budget, forecast, and project businesses financials. As the name indicates, virtual CFOs work virtually or, more precisely, remotely.
Should your company hire a virtual CFO?
First, you need to ask yourself where you want your company to be in the future. As Stephen Covey once said, you want to “begin with the end in mind.”
- Where do you want to take your company?
- Do you want to sell your company for ten million in 5 years?
- Do you just want to make enough to not have to worry about corporate finances? Can you afford a full-time CFO?
If you have long term goals but can’t afford a full-time CFO, then you probably should hire the services of a virtual CFO.
Virtual CFO services can range from simple forecasting and reporting on key performance indicators to helping with the negotiation with a bank for financing.
The beauty of a virtual CFO is you only hire them for the service you need. When virtual CFO firms advertise for virtual CFO jobs, they are looking for CPAs with a wealth of experience in many areas.
So how do you find out the virtual CFO pricing?
A good virtual CFO firm will quote you a fee up front and will keep that fee fixed for 12 months. This is one of the reasons you want to avoid using a CPA firm to perform your virtual CFO services. CPA firms they tend to use CFO services as ‘filler’ work in-between tax seasons and if they have cost overruns, they will charge you ‘additional billing.’
Your cost should be fixed with the virtual CFO, which is really no different from hiring a full time CFO. The cost for a virtual CFO, sometimes referred to as a fractional CFO, is usually a fraction of the cost of a full time CFO.
- Virtual CFOs tend to run from $50,000 - $75,000 a year.
If you think about it another way, you can get all the knowledge and expertise of a CFO, but for the cost of a lower level staff accountant.
How do you find a virtual CFO?
The easiest way is to Google “virtual CFO.” Many listings for virtual CFOs will appear.
Who do you choose?
- First weed out CPA firms or virtual CFOs that offer tax services, as they are just CPA firms in disguise. Remember, CPA firms love to do ‘additional billings’ and you want to have a fixed fee for the service.
- Next, look for virtual CFO firms that have staff with experience in several industries. Some firms will hire a CFO who has 10+ years’ experience in manufacturing, but what if you are a service organization?
- Also, look for firms whose people have more than just one designation. A CPA is great, but a CPA with an additional designation is much better.
- Finally, make sure the virtual CFO firm fully understands internal controls. The last thing you want to do is hire a firm that dances around their understanding internal controls. Ultimately, fraud in an organization happens because of weak or non-existent internal controls.
When you look at your company’s financial statement tonight, are you wanting someone to help you who comes from the ’40-hour workweek’ world or someone who is utilizing technology and processes from today?
Steven D Hovland is a Certified Public Accountant and a Certified Forensic Accountant. He has 20+ years experience in auditing, accounting, and forensic investigations. He is the founder of Hovland Forensic and Financial, a virtual CFO service company as well as forensic litigation services.
For a free consultation https://hovlandforensic.com/scheduling