Many businesses and startups begin with a brilliant or great idea. When the idea catches on and the products or services sell a lot, suddenly the startup finds itself in the middle of a growing enterprise. In most instances, unless the founder is also a finance whiz, the one thing that they’d find difficult to navigate is financial management. At this stage, money’s coming in and investors are starting to call and take interest.
At the same time though, the startup or small business doesn’t have enough money yet to sign up financial experts to handle the business finances. If you’ve been having concerns with your financial management, you might want to consider this site about hiring a virtual CFO services firm and other similar sites. Here are a few things that you might want to consider if you’re weighing whether to get an on-site CFO or a virtual CFO.
1. Scope Of Work To Be Done
One of the things you have to consider before you decide whether you’ll opt for an on-site or virtual Chief Financial Officer (CFO) is the scope of work that you need them to do. You should hire a CFO who can see the pain points in your business and can do what needs to get done for your business. All other considerations should be secondary. Here are some of the different kinds of working arrangements that CFOs have with businesses:
- Full-time CFO: Most people have this conventional notion that a full-time CFO is how a CFO should be engaged by a business. A full-time CFO is synonymous with an in-house CFO. They handle all aspects of financial management of a business.
- Fractional CFO: A fractional CFO works with several businesses in any given week. They only work for several hours or a few days to do and finish what the client company tasked them to do.
- Interim CFO: An interim CFO only works for a set number of hours or days, but only for temporary periods at a time. The difference is that a fractional CFO works continuously while an interim CFO works only for temporary lengths of time.
- Virtual CFO: A virtual CFO is somewhat of a cross between a fractional and an interim CFO. They often do their work and interact with clients through remote work platforms, video calls, and phone calls.
2. Size And Revenues
Another thing that you might want to consider before choosing between an onsite CFO and a virtual CFO are the size and revenues of your company. This isn’t a rule of thumb or a guide, but numerous companies don’t hire an on-site or in-house CFO while their asset size or gross revenues are below USD$10 million.
If you’re to hire an on-site or in-house CFO, this entails paying full-time salaries and compensation. You’ll also have to grant benefits and paid leave. You should carefully weigh whether paying for all these expenses would be worth it. In the first place, there would be enough work and tasks for your CFO which is commensurate to the pay he or she will be receiving.
It may be cost-effective to hire an on-site or in-house CFO if you really have a lot of work to be done and accomplished in your financial management. If there’s a lot of daily tasks that require the supervision of a CFO, and numerous other accounting statements and reports that have to be done each week or month, then this could be an indicator that you might have to hire an on-site CFO. But if the work that needs to be done can be accomplished through remote work, then you might want to consider hiring a virtual CFO.
3. Control And Accounting
One of the essential roles and functions of a CFO is to oversee and direct the control of expenses and accounting. Most startups encounter issues with their financial management. They often have trouble not having enough cash. This is a common issue among business owners and startups.
This is an issue which can be best addressed through proper controls and accounting. As a business owner, you should consider what would be more suitable for you to have effective control and accounting reports. If having an on-site or in-house CFO would enable you to improve your controls and accounting, then you should hire an on-site CFO.
4. Help With Financial Strategy
Many business owners find out that they’d need the help of a finance professional to come up with financial strategies for their businesses or startups. Having an on-site or in-house CFO will provide you with the advantage of having a full-time financial adviser. Your on-site CFO can help you draw up a financial strategy or financial plan for your business. Another advantage of the on-site CFO is that they’re immersed in your company and would understand not just your business systems but your work culture and business ethic.
But asking a virtual CFO to help you with your financial strategy also has its advantages and benefits compared to an on-site or in-house CFO. A virtual CFO works with numerous clients and companies at any given time, while your on-site or in-house CFO only works for your company.
This gives the virtual CFO a wider array of contexts, circumstances, experiences, and cases from which they can draw their advice and financial strategy. They know which ones don’t work in specific circumstances and which ones do. At the same time, they know that what worked in one company or situation won’t necessarily work at all times. They’ve seen so many scenarios and worked on so many financial data and this gives them a wider perspective.
If you hire an on-site or in-house CFO, it’s very likely that he or she has had only very limited experience in working for numerous companies. Most of the in-house CFOs have served in one or two companies where they learned most of what they know about corporate finance and financial management. They’ve more likely put in the years in their first company then moved on to their next.
The disadvantage of this is that the on-site CFO sometimes doesn’t have the wide experience with multiple client companies, nor the specialized. Sometimes, too, the on-site CFO doesn’t have the specialization that you’d need in your own business. On the other hand, if you get a virtual CFO, they can assign to you someone who has the expertise in the area of finance specialization where you need help the most.
There are no easy answers nor hard-and-fast rules on how to choose the CFO who would be most suitable for your company requirements and work culture. Choosing either an on-site or virtual CFO has its advantages and disadvantages. At the end of the day, you’d have to select a CFO who is most suited to your business requirements and work culture.