The 6 benefits of a virtual CFO

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Business Advisory
Partner & Consultant
April 25, 2023
minute read

Virtual CFOs offer critical advantages to growing businesses

Before we get into the benefits of outsourced CFO services, here’s a quick thought experiment.

If you’re a small or medium-sized business with ambitions for growth, and you don’t yet have a CFO (Chief Financial Officer), what do you think of when you think of the role?

As a business owner, your business acumen is up to par enough to know CFOs are responsible for a business’s long-term financial strategy. Along with their team of bookkeepers and accountants, CFOs:

  • Analyse financial data
  • Unearth and mitigate financial risks
  • Provide financial reporting to shareholders

But financial planning aside, we’re willing to bet you also think of — and let’s put it politely — some of the stereotypes of the role. Six-figure salaries, personal parking spots for sportscars: that sort of thing. It’s hard for small business owners to weigh the value of a CFO against their costs.

That’s why hiring a virtual CFO could be the best way. In this article, we’re going to explore why outsourcing CFO services is an effective and economical solution for budget-conscious growing businesses.

If you’d like to learn more about how Liston Newton’s virtual CFO services can help your business grow into an industry powerhouse, get in touch for a free consultation today.

What is a virtual Chief Financial Officer?

A virtual CFO does precisely what an in-house CFO does: they are the senior in charge of the business’s financial planning. Their role is to foster business growth through cost savings, capitalising on strategic business growth opportunities, and helping to develop a profitable business model.

The difference is that, unlike full-time CFOs, virtual CFOs can be hired for specific hours to work on particular tasks. Limiting the hours and scope of their tasks allows you to avail yourself of outsourced CFO services in strategic and cost-effective ways.

Don’t let the fact that they work off-site and digitally make you doubt their expertise. Virtual CFO services are just as meticulous in their work and brand-focused in strategising as their full-time in-house alternatives.


6 advantages of a virtual chief financial officer

If you’re coming off the fence about hiring, then let’s take a moment to crystalise the six key benefits virtual CFOs bring with them. You can also consider these to be points of discussion with a potential CFO you’d like to hire; ask them about these points and allow them to impress you.

1. Understand your profits

No doubt you’ve already got a running record of your profits and losses. But, and be honest, do you feel you have the business acumen and mathematical skills — or even the time — to know for sure how accurate your records are? Running a small business is an always-on gig, and running the business and the numbers simultaneously is difficult.

Before your virtual CFO helps you boost your profits, they’ll help you understand them. They can help reveal which products and services are the most profitable, investigate and define gross profit margins and help you calculate when your profits will convert to cash in the bank. 

When you genuinely understand your profits, where they come from and when they will hit your business bank account, you can then confidently calculate the profit you can remove from the business and distribute to yourself and other business owners.  


When should you hire a virtual CFO?

The current size of your business is a good metric to go off

Hiring a virtual CFO isn’t just about managing your future financial plans; it’s also about managing your current financial well-being. The best way to think about the bang-for-buck of hiring a virtual CFO is to consider your business’s current revenue — that’ll help you decide when to hire a CFO.

How much revenue does your business earn per year?
  • $1-$5 million: you need a financial controller
  • $5-$30 million: you need a fractional CFO
  • > $30 million: you need a full-time CFO


2. Minimise risks and inefficiencies

Market volatility, national recessions, global pandemics, supply issues — there are any number of hindrances to your small business that are beyond your control. What you can do, is prepare for them.

Your virtual CFO will take a holistic approach to managing risks. That means they’ll make suggestions on reducing internal inefficiencies as well as managing external risks like compliance requirements with the ATO and ASIC.  Of course, a business's biggest risk is running out of cash. A great CFO will help you build an accurate financial forecast that can predict cash flow and cash balances over time, which can assist in preparing for the ups and downs of business and market conditions.

They’ll also keep an eye on the broader industry and national contexts to ensure you have the right financial buffers to survive the unexpected.

3. Create financial KPIs

Keeping a business on its feet requires such a constant focus on solving immediate problems that it’s easy to mistake survival for success. Because of the constant focus required to run a business, it’s important you have a financial dashboard that can easily tell you the financial health of your business.  

Setting financial key performance indicators (KPIs) helps you understand at a glance if your business is on track or off track towards its goals. A competent virtual CFO will know the 4-5 key indicators that are relevant to your business and your industry. They could be things like: 

  • Gross profit margins 
  • Cash conversion cycles 
  • Debt-to-equity ratios 
  • Working capital measurements 
  • Sales leading indicators

4. Reorganise your structure

It’s common for small business employees to wear many hats. That’s especially true of the owner. Lots needs to be done, and everyone needs to take the initiative and make the effort to tick tasks off. But as your small business grows, a loose structure like that will very quickly stretch thin.

Your virtual CFO can work with you to define an optimal organisational structure. They’ll help you work through structural variations to identify how to utilise your employees best. By using financial modelling and forecasting, your CFO can help you identify the right time to hire for a new role and also model scenarios to assist in calculating what you can afford to pay to retain your best employees.  

5. Understand your industry

Whatever service or product your small business offers, we’ve no doubt that you’ve done your fair share of market research to figure out how to differentiate and improve your business. But the more your business grows, the more difficult that task will become. 

Right now, you may just have ambitions for a greater market position. A CFO will help you define those ambitions by placing them in the context of your industry. Their work will reveal flaws and pitfalls in your plans you may never have seen and uncover opportunities you would never have considered.

6. Hard-won, road-tested experience

Becoming a reputable CFO is an arduous process that requires real-world experience. When you hire a CFO, even a part-time outsourced virtual CFO, the invaluable lessons they’ve learned come with them. It’s often said that data is king and the foundation of every good strategy. Well, your financial officer’s expertise won’t just grow your business — it’ll grow you as a small business owner.

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