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The Benefits of a Virtual CFO

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedAug 20203 min read

Around 60% of start-ups go bust within the first three years, according to research from The Telegraph. There are many different reasons why early-stage businesses tend to fold so readily, but one of the most significant is the failure to find a profitable business model. As such, it’s important to get the finance side of things right from the get-go. After all, cash flow is the lifeblood of an organisation, and it’s important to have a constant stream of capital moving through the business.

You might think that bringing in a CFO would be the obvious move, but for many start-ups, hiring an experienced and knowledgeable CFO simply isn’t plausible, which is why the increasingly popular “virtual CFO” role could be the difference-maker for your business. Find out everything you need to know about virtual Chief Financial Officers, right here.

What is a CFO?

Before we get onto the benefits of a virtual CFO, let’s go back to basics: what is a CFO? Essentially, the CFO (Chief Financial Officer) is the person responsible for managing your company’s finances, from bookkeeping and compliance to financial planning and corporate investments. While the role of the CFO used to revolve around basic financial reporting tasks, the modern CFO is expected to drive the success of their organisation and use financial data to influence operational decision-making. As such, it’s a critical role that can have a major impact on your company’s culture and strategic development, for better or worse.

Now that you have a basic understanding of a traditional CFO, let’s take a look at the version 2.0., otherwise known as a virtual CFO.

Virtual CFO meaning

So, what’s a virtual CFO? Well, a virtual CFO (or vCFO) is a service provider that handles all the duties of a traditional CFO while working part-time and on a remote basis. Put simply, it’s like outsourcing the head of your finance department. Virtual CFOs are particularly beneficial for small businesses who may not have the funds necessary to hire a CFO full-time but would nevertheless benefit from having an experienced financial professional at the helm of their finance function.

Virtual CFOs can handle a range of finance-based tasks that many founders and business owners just haven’t developed the skills to deal with, such as creating budgets, highlighting trends in the market, acquiring capital, and drawing up financial forecasts. As virtual Chief Financial Officers are often employed by smaller start-ups, they’ll also be expected to take on some of the more basic financial tasks such as bookkeeping, reconciliation, and so on.

The advantages of a virtual Chief Financial Officer

There are many benefits associated with the virtual CFO role. Aside from the fact that this innovation can provide smaller companies with a level of experience that’s usually reserved for major corporations, virtual CFOs can help you in the following areas:

Forecasting – Financial planning is a niche skill that requires a solid grasp of multiple accounting tools, as well as broad scope knowledge of financial documents like the cash flow statement and profit and loss account. If you’re just starting out, there’s a good chance that you don’t have anybody with these types of skills on your books, which is why a virtual CFO could be ideal. Remember, financial forecasts can play a major role in your ability to win investment and take the next step up the funding ladder, so this really isn’t something to put off through lack of knowledge.
Spending – In the early stages, expenses can get out of control, so it’s vital that your business has clear policies around expenses, purchase requisition, among other things. This way, you’ll have much greater insight and transparency into your incoming funds and outgoing costs. Remember, if too much cash is leaving your business due to needless purchases, then your budget is going to be throttled and you may not have the funds needed to make legitimate, business-critical purchases. A vCFO can ensure that you have these processes in place, thereby empowering employees to make genuinely important purchases for your business.

Processes – As you get bigger, your finances will become increasingly complex. From employees and vendors to clients and investors, there’s going to be a constant flux of money passing through your companya (if you’re lucky) and without an expert to scale your processes, your business may not be able to handle it. For this sort of task, a bookkeeper or accountant won’t do, you’ll need a virtual CFO.

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