What is a Virtual CFO and how could the role help your business grow?

With the transition to real-time accounting using cloud-based software, an increase in flexible working arrangements and the need for businesses to continue operating throughout the pandemic, there’s been a strong emergence of the Virtual CFO role. But what exactly is a VCFO and how could the service drive growth within your business?

What or whom is a VCFO?

A VCFO is a person or an accounting firm engaged to provide CFO services to one or more businesses on an ad-hoc (as required) or part-time basis. It’s often small to medium-sized businesses that require the service, due to not having enough duties for a full time, in-house CFO to fulfil in order to justify the expense. Your VCFO could work on a weekly, monthly, quarterly or project basis and fulfil tasks including budgeting, forecasting, cashflow, reporting, financial modelling, strategic planning or specific project work such as preparing for a capital raise, technology implementation and training, loan applications or Advisory Board work.

A VCFO engagement is different to engaging an accountant to prepare your business’s annual financial statements and income tax returns. Rather than being a compliance-driven engagement, a VCFO is hired for a specific objective designed to improve the performance of the business. A VCFO can also provide a tailored service that evolves over time as your business grows and matures.

Why would you hire a VCFO?

  • Provides businesses with a professional that has both business and financial expertise at a fraction of the price of a full time CFO
  • A VCFO might have access to expertise not readily available in the business
  • They will hold you accountable to your business’s financial and strategic goals
  • Access to wider industry knowledge, and
  • A VCFO will be impartial to your business and able to recommend strategies without bias.

When would you hire a VCFO?

  • When you’re not receiving timely or meaningful reporting on the performance of your business
  • When a business is experiencing significant growth in revenue
  • When there are plans to sell the business in next three to five years
  • When decision-makers require strategic guidance
  • When your CFO is on extended leave such as long service or parental leave, and/or
  • Qhen you need to fill the CFO role temporarily while you hire a permanent CFO.

Skills required of a VCFO

Aside from well-honed accounting skills, a VCFO should be adaptable and able to meet the changing needs of a business. A VCFO should have demonstrated experience working in a commercial business environment and strong business acumen.

It’s important that a VCFO is technologically savvy with advanced understanding of cloud-based accounting software and the ability to easily switch between different systems. There is now a range of different accounting and business software in the market, each with its own benefits. What best suits one company will be different for another, so it’s imperative that a VCFO is across the different options and can help you to evaluate the systems available, finding the right fit for your business.

Also high on the list of required skills are communication skills. To reach the best outcomes, a VCFO needs to ask questions of management and staff and will need to work reasonably closely with key decision-makers.

And just as you’d hire people with industry experience for other roles in the business, it’s beneficial that your VCFO has experience in the sector your business operates in.

These aren’t an exhaustive list of skills, nor have I provided a complete list of reasons for when and why you’d hire a VCFO, but rather, the most common reasons cited in my experience.