What to Look for in a vCFO Service Provider

9 min read

June 5th, 2024

Every department within a business requires its own leadership. While the CEO (chief executive officer) is in charge of envisioning a future for the company and coming up with a plan to steer it in the right direction, the CFO (chief financial officer leads the financial aspect of the business creating a financial strategy designed to support and fuel the overall business strategy.

What Is a Virtual CFO?

A virtual CFO (also called a fractional CFO, outsourced CFO, or vCFO) is a third-party chief financial officer that serves a business remotely, as needed. Rather than hiring a full-time employee to act as an in-house CFO, businesses can contract a CFO outside of the company. Just like an in-house CFO would, a virtual CFO provides a business with high-level financial advice, data analysis, and financial strategy.

vCFO Services vs. In-House CFO: What Are the Benefits of Outsourced CFO Services?

Virtual CFO services offer countless benefits to businesses. While some of these benefits can easily be quantified in terms of dollars, others are less tangible but no less valuable.

• Cost Savings - One of the most impactful benefits of a virtual CFO is that businesses only pay for the time and services that they actually need. As a result, they stand to save hundreds of thousands of dollars a year. The average salary of an in-house CFO rings in at nearly $450,000 annually - and that doesn't include employee benefits, taxes, insurance, or any of the additional overhead costs associated with an in-house employee. Depending on the type of CFO services your business purchases, these can cost anywhere from $1,000 to $2,500 per day or $5,000 to $12,000 per month.
• Healthier Financial Operations - A virtual CFO will help you get your back office in better order while leveraging your financial data to improve your company's overall financial health. You'll enjoy better budgeting and planning practices in addition to healthier cash flow, reduced expenses, stronger revenue channels, optimized pricing, and maximized profits.
• Increased Efficiency and Productivity - An outsourced CFO will use your financial and enterprise-wide data to evaluate every aspect of your business. They'll identify and correct productivity lags and workflow blocks to increase operational efficiency and improve productivity.
• Greater Financial Confidence - With a well-ordered back office, you'll be better able to communicate confidently about your business's finances. As a result, your investors, board members, and other key stakeholders will gain confidence in the company's finances and your leadership capabilities.
• Better Management Overall - A virtual CFO provides invaluable insights to help you make data-driven decisions that will enable you to avoid problems, anticipate opportunities, strengthen your business, and achieve your goals.
• Increased Opportunities and Growth - When your business is financially strong and operationally efficient, you can leverage opportunities to maximize your profits and identify the best ways to reinvest your earnings to accelerate growth.
• Flexible and Scalable - With an in-house CFO, you pay for and get everything that a single person can give. With outsourced CFO services, your business can pay for the services you specifically need when you need them - and nothing else. As your business grows and its needs change, you can adjust your service package to meet your new requirements.

10 Tips to Help You Choose the Right Virtual CFO for Your Business

While a virtual CFO can offer several benefits and help you strengthen your business, not all virtual CFOs are equal or alike. Some are more reputable than others, some cost more than others, and every virtual CFO has their own unique experience, background, and way of doing business. Business owners should consider the following tips when selecting a vCFO to ensure you select a professional who is compatible with your company and can meet your business's financial leadership needs.

Read More: The Pros and Cons of Outsourced CFO Services

1. Know Your Business's Needs

Before you even start looking for a virtual CFO, think about what kinds of services you actually need and ask yourself what you hope to get out of a relationship with a fractional CFO. For example:

• Are you looking for a fractional CFO in addition to outsourced bookkeeping and accounting services?
• Do you need an outsourced CFO to help your business through a significant transitional period such as a merger, acquisition, expansion, or leadership change?
• Do you want someone who will help you learn to read, understand, and use your financial reports?
• Do you want someone who can work with you to set business goals?
• How involved do you want your virtual CFO to be?
• How often do you wish to communicate or receive reports?
• What do you hope to achieve as a result of your working relationship with a virtual CFO?

If you know what your business needs from a virtual CFO, then you will be better able to narrow down your list of options, only looking for fractional CFOs that provide the kinds of services your business requires.

2. Look for Industry Experience

A CFO who has experience working with other businesses in your industry is ideal. Every business is different and every industry presents different challenges, financial requirements, and opportunities. If your CFO has never worked with a business like yours or in your industry at all, then they are probably not the best fit. You want to look for a professional who is familiar with the unique aspects of your industry. This will reduce the learning curve and ensure they are already somewhat familiar with your business and its needs from the get-go.

3. Look for Extensive General Experience and Qualifications

Not any accountant or person with financial knowledge can be a CFO. A CFO must have extensive education and leadership experience in order to be a good CFO. When choosing a CFO, you want to find someone who has enough experience to provide you with solid, trustworthy advice and counsel. Look for someone with the right qualifications such as expertise in financial management and tax compliance in addition to industry experience.

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4. Check References, Reviews, and Success Stories

In addition to looking over a potential CFO's CV, you should also read through client reviews, ask about past success stories, and check references.

5. Talk About Availability and Communication

In any outsourcing relationship, communication is key. Your virtual CFO won't be in your office. They won't experience the day-to-day ebb and flow of work. They won't be immersed in your company's culture. They won't attend every meeting.

It's vital that you are able to communicate successfully, clearly, and frequently with your virtual CFO to ensure they are up to speed on everything that is happening in your business. They should be kept up to date on financial matters in addition to strategic changes, goals, benchmarks, performance, and operations.

Make sure you are choosing a virtual CFO who will be available to communicate with you in the manner you prefer (email, phone calls, video calls, etc.) as frequently as you require.

6. Look for Cultural Compatibility

While a virtual CFO is not getting hired on as an in-house employee, it is still important to choose someone who fits in with your company culture and shares your business's core values. Even if they are outsourced, a CFO is in a leadership position in your company, and they must be compatible and on board with your working style, values, and future vision.

Read More: What Services Do Fractional CFOs Provide?

7. Find Someone With Strategic Vision

Yes, a CFO can help you with the nuts and bolts of your back office such as establishing sound policies and procedures, ensuring compliance, setting up accounting software, and recommending the right integrations for your business. A CFO, however, is primarily meant to be a strategic, future-oriented position within the company.

So, you want to choose a CFO who can see your future vision for the business, suggest plans and strategies, and help formulate a financial strategy that will support the greater, long-term endeavors of the CEO.

Additionally, your CFO should have an eye on the market, economy, and industry to help you anticipate shifts that could present challenges or opportunities. A good CFO will help your business stay ahead of the curve and thriving

8. Look for Tech-Savviness

The nature of a working relationship with a vCFO requires them to be good with technology. You'll need to use collaborative tools such as cloud-based accounting software like Sage Intacct or QuickBooks Online that allows you to work together, communicate, and share data. Select a CFO who can suggest the best accounting system and tools for you, guide you through the implementation and data migration process, and continue working with you on these systems throughout your partnership.

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9. Customization, Flexibility, and Scalability

One of the major benefits of an outsourced CFO is that you can access the CFO services you need when your business needs them. To take full advantage of this perk, make sure you choose a virtual CFO who offers a wide array of customizable service packages that are flexible and scalable to meet your business's changing needs as you grow.

10. Consider Their Pricing and Your Budget

Finally, when choosing a virtual CFO, consider your budget and the cost of an outsourced CFO service provider. While the cost of working with a virtual CFO generally generates a healthy ROI, you still want to be sure your business can afford the provider and package of services you select. Consider your options and the value they will add to your business carefully before making any decisions.

Elevate Your Financial Strategy With Outsourced CFO Services for SMBs

If you're ready to take your small or medium-sized business to the next level, then it's time to consider working with a fractional CFO. Outsourced accounting and CFO services can help you get your back office in order, implement systems to automate manual processes, and make smart decisions that will feed your profit drivers and accelerate growth.