Virtual CFO vs In-house CFO: Complete comparison 2023
The role of a Chief Financial Officer (CFO) is crucial in any organization. He not only makes important financial decisions, but he also takes care of critical aspects and jobs related to business finance such as:
- Analyzing financial statements and books
- Account reconciliation to match income and expenses
- Defining financial models
- Building budget model
- Forecasting business finance model and position
- And more
Therefore, it is necessary to have the most skilled and experienced CFO onboard.
When the decision to hire a chief financial officer for a company arises, the decision between two pathways dangles – whether to hire virtual CFO services or in-house CFO.
The selection between Virtual CFO Services vs. In-house entirely entices on the operational area, size, and requirements of the organization. You have to foremost align your business requirements before deciding whether the best virtual CFO or in-house will help your business in the long run. However, to make a profitable decision, you have to fathom what sets virtual CFO and CFO apart.
Before you start evaluating options of hiring an in-house chief financial officer or using CFO outsourced services, you will need to pen down the role of the CFO in small business or large enterprise business. There are also multiple aspects that you need to evaluate to make the right decision on hiring an in-house or remote officer to handle your business finance at its best.
In this article, we will explore all major elements that differentiate both options to help you choose the right model for your business.
Virtual CFO Services vs. In-house – Which One Is The Best?
When you are juggling between the decision of whether to hire a virtual CFO or a local CFO, you can make a clear decision based on the following comparison –
• What is In-house CFO?
In different organizations, the role of a chief financial officer may differ even if there are some common jobs that all CFOs have to handle. For example, a virtual CFO for small business may need to handle different challenges than an in-house CFO for an enterprise. Thus, the first part to evaluate the difference is to analyze the core responsibilities by defining what your in-house CFO will do for your business.
The Chief Financial Officer is an integral part of a company with the core responsibility to analyze the financial position based on past and present data. The responsibilities of the CFO are beyond the management of the financial resources of a company. They have to decide the capital structure of the company, find a balance between debt and equity, along with determining when and where to invest.
The CFO may also coordinate with other financial staff to overlook their work and give them the required coaching to work more efficiently. When a CFO performs all his or her duties while sitting on a dedicated desk on the premises of a company, he or she is referred to as an in-house CFO.
• What is Virtual CFO?
The alternative to the in-house CFO is outsourcing the CFO function that any business can use to handle all jobs of an in-house CFO.
CFO outsourced services is an outsourcing service that is handled by an offshore accounting and finance company. The company handles the everyday jobs of an in-house CFO. They will also coordinate with your in-house team to coach them to perform financial jobs better if needed. The only difference here is that all these will be handled 100% remotely.
In the context of in-house CFO, virtual CFO services are highly economical and effective. You can outsource the duties of a CFO to leading outsourced companies offering the best remote CFO services like CapActix. Here, you have the opportunity to enjoy and experience the difference made by highly experienced CFOs in your business and finance. All competent financial services will be performed virtually, which is beneficial for a business in all aspects. A virtual CFO can improve the cash flow and profit of your business or organization without putting additional stress over your financial resources.
Also read A Brief Comparison for CPA Firms – In-house Accounting Staff vs Outsourcing to India
What a CFO needs to do must be defined well in advance regardless of the fact that you want an in-house or outsourced CFO. This will help you hire the right professional or company.
In general, an in-house CFO handles all the financial aspects of a business organization. The CFO leads the accounting department of a company, and he or she is answerable to stakeholders, board members, and employees. One of the core duties of a chief financial officer is to prepare a roadmap for the financial future of the company, for which they have the entire accounting team at their disposal.
On the other hand, virtual CFO provides all the services of a CFO, but delivers only when the company wants it. Alternatively said, remote CFO services can provide all deliverables and handle all responsibilities like an in-house resource, but you will receive as many services as you have defined as the responsibilities to be handled. In other words, as per the defined key responsibilities document, you will receive the deliverables.
In general, businesses that prefer outsourcing the CFO function can use executive level financial planning, reporting, and strategic services without the burden of hiring a CFO and other accounting staff. One virtual CFO can handle the financial services of numerous businesses at one time as the virtual CFO has their own team of proficient accountants.
Thus, you have to only pay for the services that you have rendered from virtual CFO. You are not liable to pay for the hours a chief financial officer or his team spends in coffee breaks during office hours, which you have to do in case you have hired an in-house professional for this job.
When you hire a dedicated CFO for your organization, you have to rely upon the expertise and knowledge of an individual to handle your finances. Now, there is a possibility that a single professional might not be efficient in handling all business finance duties. Your in-house CFO might be good at speculating the future, but there’s no guarantee that he or she can make swift decisions based on market trends. Thus, there is a possibility that your in-house CFO might lack the responsiveness to adjust according to the situation. It is also possible that your chief financial officer might not have all the skills to handle all duties belonging to him as a key financial decision maker.
On the other hand, when you choose to use outsourced CFO services from a reliable and certified company, you will get access to the pool of talent. Usually, CFO service provider companies have a team of certified finance officers that holds vast experience in working under different market conditions. The company will have multiple financial officers that have expertise in different areas if they are not a jack of all trades.
Thus, a company with a team of finance officers and accountants can provide the best services to handle and manage your business finance. The virtual CFO can very well handle the role of the CFO in small businesses or any scaled enterprise. Even in the absence of the delegated finance officer, your work will not stop because virtual CFOs have a complete team of competent and experienced accounting professionals to support them so they can handle complicated financial situations efficiently.
When you hire an in-house CFO, a person at least requires 2-3 months to thoroughly understand your business and financial structure. Meanwhile, you can’t expect your CFO to offer the optimum level of productivity. And, a few months of low productivity can take your business a few years back. This is true based on multiple studies carried out on different businesses that choose to appoint an on-premise chief financial officer.
On the contrary, a virtual team of chief financial officers is trained in working under diversified business conditions with different accounting software. They also know how to handle different types of financial documents, team members, coordination, etc. Therefore, virtual CFO can speed up the productivity of your business instantly without spending too much time understanding ifs and buts of your business finance and your accounting software as a dedicated, on-premise CFO may take.
Thus, when you are aiming to enhance the productivity of your business organization swiftly, you have to acquire responsive and analytical virtual CFO services. This service makes the whole process fast, swimming, and accurate without the too long wait because productivity is the key to success.
• Empowering Decision Making
One of the core jobs of chief financial officers is to help you make critical financial decisions. They will also help you decide how you can cut costs and increase revenues. The benefit of having in-house team members is that you can contact them any time during office hours to discuss finance and make decisions.
CFO outsourced services might work in a different time zone than yours and that often gives a point of concern to business owners. But, the thing to focus on here is that one of the job roles of a remote CFO is to be available for important meetings at a mutually agreed time. The company that offers small business CFO services or large scaled services also has different arrangements to be present for business queries and provide data and analysis reports along with forecasting to help you make data driven decisions.
In many cases, it is witnessed that a virtual team of CFOs is often better at articulating business and financial data compared to an in-house chief financial officer. This can be because companies deal with multiple clients and businesses and cultivate the skill of insight interpretation in the most simplified business language for business owners like you.
Your virtual CFO can assist in making data-driven decisions. It is a crucial part of a business organization to make investigative and profitable decisions related to potential business investments. The outsourced CFO will have strong business connections and knowledge of various industries.
Thus, they can help in making accurate and low-risk investment decisions. But, in-house CFO comes with a limited set of skills and networks, so they can’t offer high caliber decision making power to the business.
• Support of a Team
When you are bringing a CFO on board, you are solemnly bringing a person into your organization. That means limited skills and the ability to handle a problem. Even if you have onboard CFO is highly experienced and proficient in this job, his time and energy can be one of the roadblocks to meeting your expectations.
On the other hand, outsourcing CFO services to a reliable finance company can help you indirectly have a whole team of finance experts available at your disposal. You may work with only one person, but there will be an entire team that is full of competence, experience, and analytical accounting capabilities. They can provide a myriad of solutions to handle a problem.
Thus, you can take leverage from the expertise of the different professionals by paying for one service. Nothing is more economical and profitable than this for a business organization.
• Remote Reach
Usually, when you hire an on-premise professional for the stated job, it is more likely that he or she is exposed to the local business and finance standards, legislation, protocols, etc.
Unlike that, a virtual CFO usually gets exposed to global accounting standards. If you hire virtual CFO from India, you can easily expect them to provide services in globally acceptable formats, which is very helpful during international business deals. virtual CFO follows global standards; thus, they can help you in taking your business overseas. However, the ability of your in-house CFO related to gloat trends will be limited. This ability of a small business CFO not only helps in adopting international standards, but also helps in defining your brand new growth model to support your aspirations.
If we talk about the role of a CFO in a small business, the cost of hiring this professional cannot be justified based on the jobs you will have for him or her. In the case of an enterprise that can afford to hire an in-house chief financial officer, it will still need a whole team to get set up. Moreover, it will require multiple accounting tools and software, and other infrastructural items. How can we forget human resource management with the right office ambiance, work life balance, beverages, etc? All this actually increases the overall cost even for a large scaled business that can afford the expense of hiring an in-house professional for these finance jobs.
There’s no doubt that the services offered by virtual CFO are far less expensive compared to in-house CFO. You will not need to buy any tools or infrastructure or manage a team of account professionals. The company providing remote CFO will handle all these expenses and provide you with the best services. This is the reason for any sized business; outsourcing becomes a more cost effective and reliable alternative.
Also read Top 10 Benefits of Outsourced CFO Service to Increase Profits | CapActix
From the detailed comparison between the virtual CFO vs. inhouse CFO, we can say that both options have their own advantages and disadvantages. In-house CFO offers dedicated and physical services, whereas virtual CFO comes to economic, flexible, and effective services. However, if we compare all aspects, it is evident that outsourcing the CFO function to a reliable partner can really have more gain than its alternative.
Thus, it is better to use a virtual CFO to justify the cost and other resources to be invested in him or her.
If you are interested in exploring more details or want to learn about some of these aspects in detail, we would be happy to assist you in a free consultation call.
For economical and effective virtual CFO services, you can explore CapActix services by browsing the website. To book your free consultation call or requirement discussion call, get in touch with our team via email – [email protected] or can call on +201-778-0509.