What Does a Virtual CFO Do? 5 Virtual CFO Responsibilities You Should Know About

A virtual CFO is a financial consultant who provides high-level financial advice and services to businesses on a part-time or as-needed basis. While the traditional role of a CFO is to provide oversight for all aspects of a company’s finances, a virtual CFO can help business owners with specific financial tasks, such as developing budgets, forecasting cash flow, and providing analysis of financial data.

This article will discuss virtual CFOs and their responsibilities in a company. 

What is a Virtual CFO?

The main difference between a virtual CFO and a traditional in-house CFO is that a virtual CFO provides services virtually on a contract or part-time basis. Until now, most small firms didn’t think much of virtual CFO services because in-house CFOs were more prevalent. However, for bigger firms, a virtual CFO may now be hired as an external financial consultant who offers the same high-level financial support as an in-house CFO.

A virtual CFO can be a person or an organization providing virtual CFO services. These financial professionals are helpful for small and fast-growing companies that might not have the resources to engage an internal CFO full-time. Still, they need the financial knowledge and direction they would offer within an organization’s finance department.

A virtual CFO may perform a variety of financial tasks that other finance specialists of a  company might not be able to achieve.

Responsibilities of virtual CFOs include:

• Recurrent Reporting
• Tax and Other Legal Compliance
• Financial Management
• Financial Budgeting and Controlling
• Transactional Support

Since small and fast-growing companies with less staff are more likely to engage a virtual CFO, they may also handle other responsibilities like bookkeeping and reconciliation. 

Recurrent Reporting

A well-established Management Information System (MIS) exists for large businesses. It is so that the system can draw attention to the main company performance areas. Additionally, it offers valuable management information so they may make informed decisions.

Startups and SMEs sometimes neglect to adopt a reliable MIS reporting system because they must maintain minimal fixed expenses. In addition, managing and maintaining relationships with outside investors presents them with a significant hurdle. It is due to the foreign investors’ unique reporting frameworks and data needs. As a result, a corporation must submit legitimate, regularly updated reports before the required timeframes.

Investors can benefit from the knowledge of virtual CFOs in helping to establish the MIS reporting structure. They offer thorough weekly, daily, and monthly reports that assist firms in making crucial instant choices as well as long-term strategic ones.

The following are the reporting services that virtual CFO services offer:

• Monthly detailed MIS reports
• Periodic strategic and business insights
• Follow-up report after raising capital

Tax and Other Legal Compliance

One of the essential virtual CFO functions is ensuring a company always complies with the law, income tax, and other regulations. Virtual CFOs ensure that your company complies with various taxes, including income tax, GST, etc. They assist your company in developing and putting in place systems to collect tax information to support tax compliance operations. Additionally, they make sure that your company never misses a deadline for filing tax returns.

Virtual CFOs provide a full range of services to fulfill business governance and other regulatory compliances in addition to tax management. For instance, they ensure that the month-end closure procedure is carried out without mistakes. In addition, virtual CFOs also ensure that they comply with regulations in the allotted amount of time.

What’s more, virtual CFOs also handle the regulatory tasks that fall beyond the purview of an organization’s regular business operations. For example, these actions might involve mergers, acquisitions, or other unique tasks.

All of these initiatives improve decision-making, performance management, and investor trust. Additionally, it fosters greater openness, aiding organizations in better-managing risks.

Different compliances that virtual CFOs manage for their clients:

Financial Management

One of the primary services provided by virtual CFOs to their clients is financial management. The top management anticipates that the CFOs will take the initiative, be forward-thinking, and ultimately promote improved decision-making.

They also anticipate the CFOs to offer easy access to reliable financial reports in a timely manner. It is because such information would greatly aid businesses in risk management.

Therefore, improving financial operations is one of the main services provided by virtual CFOs. Such a service involves more than merely gathering financial information or keeping track of financial transactions. It entails overseeing a company’s daily operations. These include managing treasury operations and controlling cash flow, receivables, funds, and payables.

Virtual CFOs examine a company’s information system as part of financial management. They then assess these systems against top-tier benchmarks to identify potential for improvement.

The virtual CFOs then put internal controls in place, automate manual tasks, and streamline accounting procedures. These initiatives help boost production, provide accurate data, and reduce costs.

Thus, financial management services offered by virtual CFOs include the following:

• Financial management, including accounts receivable, accounts payable, reporting of financial statements, etc
• Cash flow management  to meet working capital requirements and other treasury operations
• Fund management and meeting capital requirements

Financial Budgeting and Controlling

Businesses get assistance from virtual CFOs in setting business objectives and creating plans to reach achieve those objectives. In addition, they can aid firms in monitoring company performance, conducting routine evaluations, and, if necessary, taking remedial action.

In other words, financial budgeting and controlling are essential services that virtual CFOs provide to businesses. They work on the variance reports and examine variations by comparing a company’s actual performance to its budgeted performance.

For instance, variance analysis performed by virtual CFOs enables a corporation to comprehend the applicability of the forecasting assumptions. Additionally, it aids a company in determining if actual performance matches budgeted performance.

Virtual CFOs similarly generate profit and loss budgets and contrast them with actual revenues and costs. Such an examination aids them in comprehending the relevant price, purchases, or sales concerns. Actual vs. budget differences might occasionally indicate that the company needs to alter its overall business plan. Otherwise, there can be some managerial problems causing these variations.

Thus, budgeting and controlling services of virtual CFOs include:

• Undertaking variance analysis
• Preparing P&L Budgets, Cash Flow Budgets, or Group Level Budgets
• Working on cost sheet variance

Transactional Support

General accounting services are part of the financial transaction support services. It covers management reporting, keeping financial statements error-free in accordance with reporting requirements, and bookkeeping.

It means that the CFOs need to organize the organization’s finance department. In addition, they need to modify the financial functions to meet the new specifications.

With regard to company strategy and the effectiveness of the finance department, businesses sometimes face uncertainty. Virtual CFOs, on the other hand, help establish a solid basis for enabling firms for scalability and growth.

Virtual CFOs make sure a company’s accounting and finance department contributes to accomplishing its overall corporate objectives. Additionally, they assess their current performance compared to outside standards to identify gaps.

Virtual CFOs guarantee the accuracy, dependability, timeliness, and risk management of financial information. Additionally, they always strive for efficiency by lowering expenses within the financial department.

Following are the transactional support services that virtual CFOs offer:

What do you look for in a Virtual CFO?

Here’s what to look for in a virtual CFO:

• Proven industry expertise in corporate finance management.
• Relevant financial management skills.
• Ability to organize and manage your financial resources.
• Ability to offer financial insights and guidance.

Virtual CFO must be well connected with other professional service providers such as tax consultants, corporate finance, lawyers, and insurance specialists.

Wrapping Up

With the advent of digitalization, many firms have realigned the process of their business operations. The CFO is one crucial area that startups and small businesses are working to realign.

However, these businesses lack the financial resources necessary to hire a full-time CFO. As a result, they have hired a virtual CFO to cover the gap. Needless to say that virtual CFO services are the way of the future for financial professionals everywhere.

If the lack of understanding of your business’s financial landscape hinders your business decisions, partnering with a virtual CFO can make a big difference. So take the initiative and schedule a virtual CFO consultation with Oak Business Consultant today.