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What is a Virtual CFO?

The question, “what is a virtual CFO”, is probably one of the most asked questions in the business and corporate world today. You may not have even heard the term until fairly recently.

Remarkably, CFOs, or Chief Financial Officers, are not a novel concept. Traditionally, they were the people who effectively held the purse strings for businesses and companies. They operated like fitters at the tailor’s, determining and managing – among many things – the company’s capacity for risk and investment, the resources needed for its growth, its sources of capital, as well as financial policies, systems and internal controls.

A Virtual CFO is essentially the next stage in the evolutionary cycle of the traditional CFO job role. It is exactly what it sounds like, someone who performs all of the services normally associated with a traditional CFO, but in a third-party role and with all the added benefits of technology.

You will find that all business owners or executives usually come to a point where they realize the need for high level financial expertise. The systems and technology that a business uses will invariably change as it grows. The faster the rate of growth, the quicker it will outgrow its existing technology stack. Systems such as a simple standalone point of sale and traditional desktop accounting software such as Sage 50 or QuickBooks Desktop, become outdated quickly.

Many companies are unable to maintain the financial systems and controls required to operate effectively and efficiently as it grows. What once worked great for a startup with 15 employees won’t provide the visibility into real-time reporting, effective cash flow management and strategic business analytics needed for a medium size enterprise of 100 employees. As a result, these businesses make decisions based on inaccurate, incomplete and/or outdated information rooted solely by gut feeling and emotion. This inadvertently leads to many companies growing themselves right out of business.

Understanding the Job description

What do CFOs do that they are uniquely qualified for? It is common knowledge, that finances can be perpetually intricate and worrisome when you are in business. Especially since a business must be able to manage, and hit its financial goals in stride if it will thrive in any way.

These goals reflect on issues like payroll, cash flow, inventory, foreign exchange sourcing and the cost of capital. Things which, clearly, are critical enough to be left only to a dedicated lead; who is very often a Chief Financial Officer (CFO). His or her job is to develop strategies to deploy towards securing the financial wellbeing of a given organization.

This ensures a versatile repertoire of duties for a typical CFO. Asides from providing financial expertise, leadership and insight; CFOs were also the go-to for control and compliance oversight.

CFOs are versatile enough to be able to cater for a wide range of financial management tasks and services including and not limited to:

  • Financial planning and reporting
  • Cost management
  • Debt and risk reduction
  • Advisory and Compliance
  • Sales and profit forecasting
  • Cash flow projection and management
  • Budgets and payroll review
  • Inventory management

A CFO is not a Bookkeeper or Accountant

Although it entails accounting and bookkeeping duties, the role of a CFO is fundamentally different from the roles of a Bookkeeper and an Accountant.

A bookkeeper’s roles only extend so far. One is to accurately process the basic transactional paperwork for a business. Depending on the size of the business, it could mean simply processing payroll, tracking income, expenses, accounts payables and receivables and reconciling bank and credit card accounts. In essence, a bookkeeper provides you with an accurate record keeping of source documents of your business’s activity.

The roles of an accountant differ in that they interpret the company’s financial statements and data, and ensure their accuracy. And it is this power of interpretation that differentiates an accountant from a bookkeeper. Additionally, accountants work to ensure appropriate closing adjustments are made to the financial accounts to ensure compliance with International Financial Reporting Standards (IFRS).

The Chief Financial Officer (CFO) is the final major component of a fully developed financial team. As the principal financial officer, he or she is the public face of the company’s finances. The CFO complements (with their financial expertise) the accounting, reporting and interpreting functions of the bookkeeper and accountant.

CFOs are in charge of the business’s investment, debt and capital outlook. Beyond mere monitoring, a CFO would be expected to be hands-on and drive strategy to ensure budget compliance, improve profitability etc.

CFO positions are too strategic to any startup or company to easily ignore. Even so, it doesn’t always make strategic or financial sense to keep one permanently and full-time. In fact, the financial security that CFOs work to ensure will often dictate that roles are outsourced to keep business operations lean, and less expensive.

Virtual CFOs: The Modern v. Traditional Approach

Times have changed. In the past, CFOs led traditional functions like cost reduction and managing record keeping, internal control, compliance, and reporting aspects of a business. A job as CFO meant spending long periods of time reporting and closing the books periodically.

Thankfully, technology has freed up CFOs and they can now offer support to the broader strategic vision of a company. Thanks to developments in technology and organizational approaches, CFOs can easily deliver insight regarding not just the past but the future. The work of a CFO can now be done faster, better and for a fraction of the cost.

Virtual CFOs epitomise the modern approach, and are today’s answer to efficiency, flexibility and security in business. Thanks to virtual CFOs; routine control, compliance, and reporting functions now enjoy automation and accurately generate faster results, giving finance a clear view of business performance in real-time.

Technology advances like cloud computing also allow virtual CFOs incredible potential to bring a range of benefits to finance, including significant cost savings, operational efficiencies, flexibility in integration and deployment, improved access for employees, and more robust disaster recovery. While some offer bespoke services and experiences, a virtual CFO typically works by;

  • Handling the duties of a traditional CFO, but remotely and on a third-party basis;
  • Offering insight and guidance on financial decisions and issues;
  • Providing back-office functions such as managing accounts ledgers, depending on the client and their needs;
  • Leveraging cloud technology to manage the financial health and well-being of the business.

Hiring a virtual CFO allows access to high-level financial expertise even when it is not financially favourable to do so. The virtual CFO will perform the services of a full-time CFO remotely, and typically at an affordable cost. Businesses can also expect a greater degree of versatility and experience with a virtual CFO that has had the opportunity to provide solutions for, and glean from, a diverse set of clients.

Leveraging efficiency through Cloud technology

Virtual CFOs integrate cloud-based technology to automate your business systems and processes to improve efficiency and streamline your day to day operations.

With cloud solutions, data is easily compiled and shared; effectively simplifying the processes required to synchronise and transfer data between different systems. Cloud accounting software also allows real-time reporting and analytics features. All of which help give a virtual CFO valid insight into a client’s financial condition, and into strategies to improve it.

With cloud accounting, business management solutions are accessible anytime, anywhere. This means Virtual CFO services are available to clients from any location, and financial compliance is made easier.

By leveraging some of the new analytical tools, CFOs can also foster greater insight and transparency into the organization. Knowledge which may then be leveraged and used to evaluate approaches, reconsider incentives, and improve productivity.

Where do we come in?

Start-Ups and SMBs require a finance professional who can provide insights that can influence the success of the business by bridging the gap between the numbers, operations, and strategy.

High-level virtual CFOs like FirstLink have the advantage to do this in real time, thanks to our advanced integration and automation of cloud-based technology and business analytics.

We believe that business finance is about more than just numbers. That’s why we love working with growing businesses to help them to understand the story behind the numbers.

With us, you can enjoy the ability to control costs by getting only the services you need, when you need them, without the need to roll benefits and other terms of employment into the equation. For a Free No Obligation Business Assessment, please Schedule a Free Consultation.

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