Every new business sets off in hopes of succeeding, but without a profitable business model, experience and knowledge, the reality is that most start-ups will fail within their first three years. The best solution for many businesses that can afford it would be to hire a chief financial officer (CFO). However, it’s not exactly plausible for every start-up to hire someone right off the bat. Hence, the rise of the virtual CFO. So, how can hiring a virtual CFO benefit your business? 

What does a CFO do?

The primary role of a CFO is to be responsible for handling a business’s finances. They take care of everything from compliance and bookkeeping to corporate investments and overall financial planning. There is an expectation for modern CFOs to drive the success of the business forward by not only using financial data to impact operational decision-making but also influencing the company’s culture and strategic development.

What is a virtual CFO? 

Times have changed, and therefore, companies don’t always need to have a CFO on site in order to thrive. Enter virtual chief financial officer (vCFO). Virtual CFOs take on all of the duties of a traditional CFO but on a remote or part-time basis. Essentially, hiring a Virtual CFO is like outsourcing someone to be the head of your financial department, and it’s a brilliant option for businesses that can’t afford to hire a CFO on a full-time basis but still want the benefits that come with having one. 

What are the benefits of hiring a virtual CFO?

Hiring a virtual CFO comes with many advantages, aside from that of making their skills more accessible to smaller businesses. Here are some of the best ways that your business can benefit from hiring a virtual CFO:

1. They help smooth out cash flow

What is one of the main reasons why most small businesses tank within the first three years of operation? Badly managed cash flow. Many successful business owners will tell you that cash flow is the lifeblood of any small business. A virtual CFO can help iron out all the issues with your cash flow and put the right systems in place to help your business weather any storms it may face. 

2. They can help boost profits

When you rely on running Profit and Loss reports to help your business make it, you need to ensure that you’re getting accurate data. How do you get that right? You need to put in the time to reconcile it. However, when you’re constantly running into different challenges with your business, you might not be able to reconcile it properly, and there’s a possibility that you’ll be using incorrect data and won’t be able to predict your profits. A virtual CFO helps you benchmark your financial performance and profits by using industry standards and averages. By doing this they can identify what areas need improvement and can help to drastically reduce wasteful spending. 

3. They offer flexibility

One of the major benefits of hiring a virtual CFO over a traditional one is that you can decide on everything from the nature of their engagement (part-time or full-time) to the number of hours they work and how much experience they need for their particular role on your team. 

4. They may offer a rich network

Due to the nature of how virtual CFOs operate, they will generally have a broad network with successful businesses. This could be quite advantageous for your business as your virtual CFO may leverage their connections to aid your business — after all, it’s not always about what you know but who you know. 

5. They can help you remain compliant

As a business owner, you are liable for multiple compliance measures, which can be incredibly technical. With an experienced virtual CFO on your team, you will have the insight and expertise of someone who can take care of various regulatory compliances and internal filing. 

6. They can handle forecasting

A virtual CFO who has gained years of experience in business and finance is more than capable of taking on a leadership role in your company. A CFO will be able to execute major financial decisions and forecast the finances and budget for the betterment of your company. 

Final Thoughts

Virtual CFOs have been a game changer for start-ups and small businesses. The knowledge and insight that once was only exclusive to major corporations has now been made available to those businesses with less capital, so now they have a better chance of overcoming the odds within the first three years of operations. With the right virtual CFO on your team, you can give your business the edge it needs to flourish in a volatile environment.