Is it time to appoint a ‘virtual CFO’?

Darren Upson, VP of Small Business Europe, Soldo advises on the benefits and cost savings with a virtual CFO joining the team

Any business, no matter its size, should prioritise its finances. Neglecting them can make it harder to make decisions and cause serious problems further down the line. But managing a business’ finances is a job in itself and can be hard for those without prior experience or knowledge to manage it.

Enter the CFO – an essential part of many large enterprises who keep the financial side of the business running. They allocate budgets, keep on top of incomings and outgoings and generally make sure that the business is making good financial decisions. The only snag? They’re expensive, especially for small businesses.

This is where virtual CFOs come in handy. They’re outsourced, often remote, part-time CFOs who work with several businesses, helping them manage their money and imparting their knowledge. They’re a useful resource for companies that can’t afford the overhead of a full-time CFO but need their strategic knowledge and advice. They’ve become popular over the last few years, especially with organisations like The FD Centre helping businesses hire a part time Financial Director or CFO.

It’s better to get a virtual CFO before you need one, as long term financial mismanagement can cause further problems down the line. Here are some signs that your small business could benefit from the assistance of a virtual CFO.

Company spending sometimes spikes

It can be hard to implement the right expenses policy for a small business. You don’t want to make it too rigid, but equally, you don’t want staff spending on anything and everything that they want. You need to enable and trust them to make necessary purchases to do their jobs, while making sure that they spend within the guidelines.

A virtual CFO can help you manage your expenses policy. They can recommend technology that helps you control your spending by settling limits on debits cards and create an expense management guideline for you to use. Businesses need to concentrate on money coming into the business, but also money going out (i.e. spending), and a virtual CFO will help to make sure you strike the right balance to stay cashflow-healthy.

Your budget, goals and forecasting aren’t adding up

In order to gain the trust of potential investors, startups need a thorough financial plan with a detailed budget, goals and forecasting. This is much more granular than the bigger picture business plan that CEOs tend to manage. The expertise of a virtual CFO can help ensure money is allocated to the most business-critical areas. Sales, marketing and product development are the departments that typically scale fastest in a startup, and are necessary for continued innovation, increased customer acquisition and, ultimately, turning a profit. They therefore must be given the right budget to fuel their activities – and the necessary means to spend it.

Determining how money should and shouldn’t be spent is a significant part of a business plan and as such, needs someone dedicated to it. For companies that aren’t in a position to hire a full-time CFO, a virtual CFO can provide the analysis that investors need.

You’re struggling to make business decisions

Making decisions for your business is partly down to intuition and experience. But without financial data, you’ll be missing out on crucial insights that could help you to close that deal or avoid that activity that doesn’t align with your overall strategy.

Start making informed, data-driven decisions with a virtual CFO. They’ll give you expert insight into your financial health and will help you make more informed decisions that support long-term goals.

Your processes haven’t changed

Having additional clients, employees and suppliers will change the way you need to manage your finances, as they will naturally become more complex. If your processes haven’t changed, they’re likely to be out of date, they probably won’t scale, and simple tasks will be much more difficult.

Simply employing a bookkeeper might not help, either. Additional processes need to be managed accordingly, and this is where a virtual CFO comes in handy. They can advise on the right technology that you can implement to make these processes easier and will suggest ways to scale your efforts and resources.

All companies, no matter their size, need to prioritise their finances. Working with a CFO will help you understand your current financial position and give you a better idea of your growth trajectory. They’ll also point out issues that needed to be taken care of before you take the next step towards growing your company. If you can’t afford a full-time CFO, a virtual CFO could be the perfect solution for your business.