The pros and cons of a virtual CFO

February 20, 2024
9
minutes to read
by
Ben Winford
Table of Contents

As a small business owner, there are 101 different financial admin tasks on your to-do list every week. From chasing up unpaid invoices and paying utility bills to figuring out the latest tax rules from the ATO. Every day is a minefield. If you find it hard to invest the right amount of time into managing your finances, a virtual CFO could come into play. Virtual CFOs can free up valuable time and help you chart a course to financial freedom. Check out the pros and cons of a virtual CFO below.

A virtual CFO is a finance professional who manages the books remotely rather than working in a traditional in-house role. A virtual CFO will provide various services such as financial planning, budgeting, forecasting, risk management, financial analysis and reporting, and other financial management tasks. Virtual CFOs usually work part-time and can be an excellent fit for small businesses, as they provide access to strong financial expertise without needing an in-house CFO. Virtual CFOs are increasingly popular because smaller businesses need someone with good experience, but they can't justify paying someone full-time to do the work.

When you hire a virtual CFO, you're freeing up your time and energy and making it easier for the rest of your team to get their work done. With a virtual CFO, you won't have to worry about managing budgets, tracking burn or approving expenses. Business owners like yourself need to focus on running the business instead of worrying about all the details of hiring an accountant or bookkeeper.  

Key Responsibilities

The typical responsibilities of a virtual CFO are:  

  • Accounting: Ensure financial records are accurate and up to date in line with ATO standards.  
  • Financial Planning: Develop and monitor financial plans and budgets.  
  • Financial Modeling: Evaluate different economic scenarios on potential business performance.  
  • Financial Admin: Perform payroll, expense approval and accounts payables.  
  • Capital Raising: Support in raising money, including preparing financial reports.  
  • Implement Standards: Train and monitor team members to ensure compliance.  
  • Risk Management: Assess and mitigate financial risks, such as currency or interest rate changes.

A virtual CFO may also act as an advisor to the business owner. This can include offering strategic and financial planning advice, helping with mergers and acquisitions, and providing other related services needed for the company.

Pros of a Virtual CFO

There are many pros to having a virtual CFO. They can work from anywhere and have access to tools and technology that can save time and money. For example, a virtual CFO might not need to drive for hours every day or travel to client meetings because their company provides them with the tools they need for their job. Some of the key benefits include:  

  • Cost-effectiveness: A virtual CFO is more cost-effective than hiring a full-time, in-house CFO, as there is no need to provide benefits, office space, or cover other employee-related expenses.  
  • Better value: From an affordability standpoint, you could pay a full-time, in-house CFO $140,000 per year. So, you will be limited in the level of experience you can hire. If you hire a virtual CFO part-time, you can pay the same amount for 3 days a week but get an even more experienced candidate.  
  • Access to specialist expertise: A virtual CFO will provide access to a broad range of financial knowledge that an in-house CFO may be unable to deliver.  
  • Flexibility: A virtual CFO can provide flexibility regarding their services and the time they spend working with a business. Their time can more easily be scaled up or down as the company's needs change.  
  • Removed from day-to-day operations: A virtual CFO will be removed from the day-to-day, which can provide a fresh perspective on the financials of the business. They will act more independently than someone hired full-time.  

Cons of a Virtual CFO

However, there are also some potential disadvantages to consider, including:  

  • Information access: A virtual CFO may need access to real-time information, which makes it difficult to respond quickly to financial issues as they arise.  
  • Information security: A virtual CFO will have access to sensitive financial data. Because they will likely be working with other clients, there is a risk that this data will be mishandled.  
  • Reliance on technology: As virtual CFOs work remotely, they rely on technology to communicate with the company, which can be a problem if the technology is unreliable.  
  • Communication barriers: Working remotely, including at different hours, can make communicating difficult. The virtual CFO may also be unable to attend key meetings in person.  
  • Transactional relationship: A virtual CFO may feel removed from the business and not motivated to drive performance like someone who is part of the team full-time.  
  • Trust building: Building trust and confidence may be more challenging in a virtual CFO setting than an in-house CFO since personal interaction is limited.  

Virtual CFO FAQs

What is a virtual CFO?

A virtual CFO is a professional who provides financial management and strategic planning services to a business on a part-time or project basis. Unlike a full-time CFO, a virtual CFO is not a permanent business employee and works remotely.

What services do virtual CFOs provide?

Virtual CFOs can provide a range of financial management and strategic planning services, including financial reporting and analysis, budgeting and forecasting, cash flow management, tax planning and compliance, risk management, fundraising and capital raising, and mergers and acquisitions.

How is a virtual CFO different from a traditional CFO?

A virtual CFO differs from a traditional CFO in that they work on a part-time or project basis and do not have a physical presence in the business. They typically work remotely and provide services on an as-needed basis rather than being a permanent business employee.

Why would a business hire a virtual CFO?

A business may hire a virtual CFO for various reasons, including providing financial management expertise and strategic guidance without the expense of a full-time CFO, filling a gap in the business's financial management capabilities, or supporting the company through a period of growth or transition.

How does a virtual CFO work with a business?

A virtual CFO typically works remotely and communicates with the business through email, phone, video conferencing, or other digital means. They may work on a project basis or provide ongoing services to the company, depending on the needs of the business.

How can a business choose the right virtual CFO for its needs?

To choose the right virtual CFO, a business should consider the virtual CFO's experience and qualifications, understanding of the business's industry and needs, communication skills, and availability to provide the services the business requires. Discussing fees and payment structures upfront is essential to ensure the business can afford the virtual CFO's services.

Alternatives  to a Virtual CFO

If you need more convincing about a virtual CFO but need an extra pair of hands, there is the opportunity to try Thriday. Using the same approach as Chat GPT, Thriday has developed an automated solution for managing banking, accounting and tax.

Thriday automatically categorises your transactions and has developed an innovative bookkeeping algorithm that was fine-tuned by testing on a data set of over 50,000 real-world bank transactions. This new solution means that small businesses only need to earn and spend money using their Thriday transaction account.

To find out how much time you can save using Thriday, take the time saver quiz, and in a few minutes you'll know exactly what time you can save.

Using AI, Thriday's unique value proposition is automating financial admin that currently relies on the business owner, CFO, bookkeeper, or accountant to complete. Without Thriday, businesses today are stuck with doing a vast number of manual calculations and updates. Doing it manually leads to human errors, incorrect categorisations, and an expensive bill at the end of it all.

Thriday can be an excellent fit for those needing more time to be ready to hire a virtual CFO. Even if you sign up for Thriday and change your mind about a virtual CFO, they can still use Thriday as it makes everyone's life easier. In that case, you can still take advantage of Thriday's unique features, whilst a virtual CFO can assist with more strategic items such as financial planning, modelling, compliance and helping you raise funds.

Combining Thriday and a virtual CFO can allow your small business to compete on a level playing field with companies with more resources than you have.

Virtual CFOs are an excellent option for any small company wanting to upgrade its financial management game. They help companies with their most important task and alleviate the time and stress of managing finances effectively. In addition, they can save you a lot of money, directly or indirectly, by not having to hire expensive full-time staff or identifying strategies for you to minimise costs or taxes. If you're looking for a new way forward with your operations team, consider hiring an experienced virtual CFO who can help make sure things run smoothly from now on.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360 AFSL 241167 (Regional Australia Bank). Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you. Team Thrive No 2 Pty Ltd ABN 26 677 263 606 (Thriday Accounting) is a Registered Tax Agent (No.26262416).

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