Virtual CFO

What does a Virtual CFO do?

Discover how a Virtual CFO can provide expert financial guidance for your business without the need for a full-time hire. Learn how this growing trend can help you access senior leadership and make smarter fiscal decisions.

RightWay

Jun 16, 2024

You might have heard a bit about ‘virtual’ roles in small-medium businesses. This is growing in popularity as Kiwi businesses are looking for ways to introduce the smarts of an expert without taking them on in a full-time capacity, or even keeping desk space aside for them. This approach can be especially useful for accessing senior leadership roles when needed. And it’s often the financial aspects of a business where owners are most in need of some experience and direction. 

That’s where the Virtual Chief Financial Officer (CFO) comes in. RightWay functions as a virtual CFO for many of our clients, allowing us to help steer fiscal decision making towards a better future business.

Definition and responsibilities of a CFO - virtually

Before we expand on the outsourced or virtual part, let’s remember what the traditional roles are of a chief financial officer. First, they’re required to manage all the financial functions of the company - either directly or indirectly through their team.  A CFO will be expected to keep track of the business’ cash flow, identify areas of weakness or opportunity within the financials and ensure that compliance and tax obligations are being met. 

At the leadership table, they take on a strategic role, drawing upon their uniquely strong visibility of the numbers to make recommendations on important business moves.  Their insights are absolutely central to the success and strategy of any business. Often a business will fully-recognise what a vital element the CFO or financial controller is when they have this resource join.

So, what’s the virtual part of this then? Well that’s simple - they have the same responsibilities, but will plug in on a part-time basis, focusing on the areas that are most crucial. Now while a lot of this work is done off-site, don’t let the ‘virtual’ name lead you to believe that you’ll never meet them. In fact with RightWay, we make a point of sharing the carpet with our vCFO clients in those key strategic moments and review periods. 

Strategic financial planning

Good virtual CFO functions don’t just keep all the numbers in check, they’re an invaluable forward-thinking resource for business owners to lean on. Strategic financial planning requires long-term thought into what current or future activities the business must take in order to help the health of the business. This might include:

  • Specific plans to push towards the company’s wider strategic goals
  • Helping to inform key investments and spending
  • Highlighting risks that the business needs to be across
  • Determining what level of business capital will be needed at different stages - such as moving into a new premises, scaling up the number of employees or introducing a new product line

Not having an eye on the future financials can trip any business up - and it’s certainly not a good idea for ambitious owners to neglect this strategic function.

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Cashflow

What’s felt more by a business owner than tight cash flow? It’s not just about making money (although that’s certainly part of it!). Healthy cash flow allows the business to run more efficiently and creates more liquidity to navigate unexpected challenges much easier. And we don’t need to explain why poor cash flow can bring things to a halt pretty quickly!

A virtual CFO will help ensure that cash flow is never ignored. They’ll prioritise decisions to improve this in almost every business they support. One of the first steps is actively tracking incoming and outgoing money and applying analysis to it to help the business know what shape it’s in. 

Budgeting and forecasting for business change

The budget for the financial year ahead - so much of the business' other areas will be anchored to what’s in the kitty. The virtual CFO will ultimately own this, with the help of others to pull the right information together. A budget can be influenced by things like the recent financial year’s performance, expected market conditions and strategic goals the business has. 

Budgeting is closely tied with a neighbouring concept - forecasting. Like the weather, it is a prediction but based on plenty of science and data. The financial forecast should give the business indications around revenue, expenses and the all-important cash flow. This helps make educated decisions on what the business needs to do at different parts of the year.  

Having a virtual CFO like RightWay can be quite helpful during this forecasting process. Not only will we apply extensive knowledge and methodology, but will draw upon our experience across many industries and clients to provide highly-informed forecasting. Of course, like any forecast, the weather’s subject to change. But it’s much better to bring a raincoat and not need it than the other way around!


Reporting and compliance

Look, we know it’s not the most glamorous part of owning a business, but reporting is one of those necessary things that  is felt most when it’s not there. Compliance is even less exciting but things sure get interesting if there’s a legal, regulatory or tax compliance problem facing you as a business leader or owner. 

That’s why the virtual CFO’s role is to also keep the business across all these requirements and stay well ahead of due dates - such as tax obligations or anti-money laundering . This doesn't mean the virtual CFO is tasked with carrying out all the compliance requirements of the business. But they will help highlight these and give the team clear steps to meet financial and tax compliance. 

We may have been a little harsh on reporting above. Because when a virtual CFO helps to develop clear, accurate financial reporting, it’s like giving the business a really strong torch to finally see all those things that may have been in the shadows previously. This helps discover opportunities for growth, problems that need fixing and simply arm the leadership team with more knowledge.

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Risk management 

The poor CFO (virtual or in-house) gets some flack for being ultra-careful and not always the first to sign things off. But that’s for a very good reason. They’ll need to be identifying and managing any financial risks to the business and finding mitigation strategies for these. Often risk management is about putting preventative measures in place like good insurance coverage, business continuity planning and guiding the business on revenue strategies to avoid unnecessary exposure.


The virtual CFO cheat sheet

So why pick a virtual CFO for your business? In short:

  • They’re flexible - can shape their offering around what your business needs at any given time
  • It’s cost-effective - compared to a full time executive hire, going with a virtual option means you save money without sacrificing smarts
  • Less commitment - many owners simply can’t take on a CFO in-house with other needs in the business and no certainty over the future stages of their business. A Virtual CFO comes with none of the employee obligations, although it’s always worth talking through any terms with them regardless.

Talk to RightWay about Virtual CFO solutions

If you’re interested in exploring a virtual CFO role in your business, we’d love to chat. We’re able to help lead and direct your business finances towards success. Our Virtual CFOs will support decision making, sit in leadership meetings and help keep your reporting and forecasting best practice.  Learn more about our services on our website and get in touch with us today.

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Disclaimer: The information provided in this article is intended for general informational purposes only and may not apply to the specific details of your business. For personalised and tailored advice, we recommend reaching out to our professional team. While we strive to provide accurate and up-to-date content on our website, RightWay assumes no responsibility for any business loss or damage that may arise from relying on the information provided.

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