Virtual CFOs Vs. Other Financial Professions: A Complete Comparison
Having a successful company doesn’t seem like it could ever be a bad thing, but a growing company typically comes with new problems that require new – and often expensive – solutions. One of the things you may notice as your business continues to thrive is that you need help managing your finances.
As beneficial as Chief Financial Officers can be in advising your business’s current and future financial decisions, it can be painful for business owners to sacrifice thousands of dollars each month for a full-time CFO.
Fortunately, today’s technology has paved the way for a new option for companies needing financial help: virtual CFOs. How does a virtual CFO differ from a traditional CFO? Additionally, how does a CFO differ from other financial professionals, like bookkeepers and finance directors? Let’s discuss the differences.
What is a Virtual CFO?
At KBS CFO, we provide businesses like yours with virtual CFOs every day! Virtual CFOs are outsourced Chief Financial Officers. They are hired to provide detailed financial data about your business. They consider your current profits, losses, and overall financial goals. Then, using their expertise, they can help your team analyze data, develop strategies, and execute plans. A virtual CFO will help you make sound business decisions while keeping your company at the heart of everything they do.
And although they’re crucial team members when introducing new products or offerings, virtual CFOs are also essential to everyday planning and decision-making. They stay on top of economic trends, new technologies, vendor financial health, and other external factors that could affect your business’s success. And as your strategic partner, they’ll help you understand your choices and make the best decisions for your company’s future.
Virtual CFO vs. In-House CFO – What’s The Difference?
Virtual, or outsourced, CFOs have the same level of expertise as an in-house CFO would. They both work to understand the unique needs of your business so they can connect the dots in your financial planning and make critical decisions. The most significant difference, however, is that a virtual CFO does it all remotely and on an as-needed basis.
Think of it this way: if you have an in-house CFO, they are “always on.” In addition to the regular duties of a Chief Financial Officer, an in-house CFO is also the head of the accounting department. They answer to the board and likely have direct reports themselves. They may also take on additional tasks that make sense for their role that may not be clearly defined in their job description.
A virtual CFO, however, is given an overview of their responsibilities and handles them as needed. They provide deliverables on time and advise on important decisions, but they aren’t “in-seat” the way an in-house CFO would be. And although some businesses may feel better having someone in-house, the truth is that many companies – especially small businesses – don’t need that kind of commitment. As long as you know how to communicate with them, virtual CFOs are always there when you need them. But they don’t require the same kind of paycheck when you don’t.
Additionally, a CFO isn’t the only financial professional you’ll want to work with. Let’s break down the differences between key financial roles in an organization and why CFOs, either virtual or in-house, should be key players in a business’s strategy.
CEO vs. CFO
Chief Executive Officers, or CEOs, are the highest-ranking position in an organization. Sometimes they’re the company’s founder; other times, the board of directors hires them. A company’s CEO oversees the company as a whole and is responsible for maintaining its position in the market. That being said, with so many departments to keep track of, CEOs often don’t have in-depth oversight of every aspect of the company.
On the other hand, a CFO has a very specific role: overseeing the company’s finances. As the highest-ranking financial position in an organization, the CFO should have deep knowledge of a company’s financial standing and strategy and a detailed plan for the future. The CFO reports directly to the CEO, and the two roles often collaborate on decisions that will make the business successful.
Finance Director vs. CFO
For small organizations, the CFO may be the entire finance department themselves. However, hiring a Director of Finance may be the right decision as a business grows. Finance Directors and CFOs work hand-in-hand, but it’s important to note the differences in responsibilities.
The easiest way to distinguish between a Finance Director and a CFO is this: a Finance Director is focused on today, while a CFO is focused on tomorrow. Finance Directors are in charge of managing budgets, pulling and analyzing financial data, and monitoring cash flow. A Chief Financial Officer will then use that information to strategize on the big-picture financials of the company. They’ll develop long-term financial plans, consider potential challenges, and determine growth opportunities.
Controller vs. CFO
A Controller is a senior role that often reports directly to the CFO. And while a CFO is in charge of big-picture strategy, a Controller oversees the day-to-day tasks and compliance within a finance department. This could include managing various finance teams such as accounting, accounts payable, and accounts receivable. They’re also often in charge of approving daily transactions, generating regular reports, and keeping track of all the different departments under their control.
A CFO, however, most likely won’t see much of those day-to-day tasks. With a Controller overseeing routine activities and reporting back on trends or obstacles, a CFO can use that information to develop long-term plans and strategies.
CPA/Bookkeeper vs. CFO
Certified Public Accountants, or CPAs, and Bookkeepers are essential roles in organizations, but they’re very different from the role of a CFO. Although CPAs have a bit more responsibility and authority than Bookkeepers, both are responsible for short-term, day-to-day tasks within the financial department. These activities often include creating financial statements, paying and keeping records of bills, and sending invoices.
CFOs often start as Bookkeepers and are sometimes CPAs themselves. However, their role in the company is more strategic. CFOs look at all the financial data within the organization instead of only seeing individual projects, and they make projections and decisions based on trends and overall margins. That being said, without CPAs and Bookkeepers, a CFO’s job would be significantly more difficult in the long run.
If you’re beginning to see a need for some extra financial help in your business, consider adding a virtual CFO to your org chart. Virtual CFOs have the experience, expertise, and passion for helping take your business to the next level, and they can do so without sending your balance sheet into the negatives.
Here at KBS CFO, we take pride in finding the right person for the right seat. We’re in the people business, not the numbers business, and we’ve successfully matched virtual CFOs to businesses all over the country. We strive to understand your financial goals, but we also take the time to learn about your entire business as a whole. Contact us today, and let’s talk about your unique needs.