If you are reading this blog, chances are you know that Numbersmiths offer virtual or consulting CFO services. But do you know what that entails and what a virtual CFO actually does? Something with numbers, of course, I hear you say. And that perception is correct. But there are a few different roles when it comes to providing financial support for a company, and this is where things can get confusing.
So, whether you are unsure about what lies behind the title or are thinking about engaging a CFO for your startup or early-stage company, this blog is for you. We’ll clarify what a virtual CFO does and doesn’t do to help you decide if you need to engage one right now.
What’s in a Definition?
Google “what does a virtual CFO do” and one of the first answers will be Wikipedia’s definition. According to that view, a virtual CFO is expected to be a bookkeeper, take responsibility for the client’s accounts, and interpret the financial data for the client.
Now, don’t get me wrong, I’m a fan of Wikipedia most of the time, but this definition is problematic. It’s problematic because it’s confusing in that it combines several different levels of seniority and expertise in one role. As a result, rather than clarifying what a virtual CFO does, this definition muddies the water.
A High-Level View – Whenever Necessary
Few, if any, Chief Financial Officers get involved with day-to-day bookkeeping activities. That’s simply not part of their role.
Instead, the value of a bona fide CFO is being able to provide a higher level of insight than a traditional accountant or bookkeeper does.
No offence to bookkeepers and accountants, but they are generally busy enough in their roles. Moreover, many startups automate some of the work with applications like Xero. A CFO uses the data produced by accountants and bookkeepers to help you and your team with forecasting, higher-level financial strategy, and cash-flow management.
Tech startups and early-stage companies need this type of advice to facilitate scaling and growth as well as avoid the pitfalls associated with both. However, very few need this type of strategic financial support on a daily basis. Instead, they benefit from having access to high-level financial expertise on a consultancy basis.
For most early-stage companies, meeting with a CFO every few weeks or even every quarter is more than enough.
What a CFO Brings to the Table
- Extending your team
- Strategic input
- A la carte services
- Flexible pricing
A virtual CFO works closely with your in-house finance team or other external consultants. As a CFO, I won’t do your books for you, but I certainly want to take a look at them with you. After all, accounting and bookkeeping data form the basis of your financial strategy.
Why do you need strategic financial input? Because not many startup founders start out as accountants. Instead, they come from all types of backgrounds. What unites most founders is that they had a big idea that they’re now trying to turn into a profitable business. Creating the financial foundation of a profitable business is what CFOs do. We can help you with the big financial decisions every business needs to make.
Although many early-stage companies are going through similar development milestones, not every business needs the same services from a virtual CFO. That is why Numbersmiths is happy to tailor our services to your needs. The same flexibility applies to our charges. They depend on the services you need.
Virtual, Fractional, or In-Person?
During the coronavirus pandemic, virtual services exploded in popularity. Virtual CFO services are no exception. Now, that things are going back to some kind of normal, at least where in-person meetings are concerned, does it still make sense to engage a virtual CFO?
The short answer is yes. Working with a virtual CFO saves time and is more cost-effective. Saying that there is no need to look at the matter in quite such black-and-white terms.
It is a fact that few early-stage companies require a full-time CFO. Even fewer can afford to engage a senior-level finance person full-time. For that reason alone, a fractional approach makes sense for both sides. As a new business, you can access the expertise you need when you need it. As an experienced CFO, I can share my insight with more than one business.
Do we need to meet virtually? Not all the time would be my answer to that. Some things are better discussed in person, and there is no reason why we shouldn’t schedule an actual meeting every so often. However, quick updates and check-ins between those meetings are simply less time-consuming and more cost-effective when they’re done through Zoom or Google Meet.
Final Thoughts
In an ideal world, a virtual CFO accompanies your startup from its inception to profitability and perhaps a successful sale.
Understanding what a CFO can bring to the company (and what they generally don’t get involved in) helps make the relationship work smoothly and effectively. If you think your startup would benefit from high-level strategic advice or you simply want an outside view, get in touch!