5 Minute read
Format of this article:
- Help saving money
- Help for budgeting
- Broaden your knowledge
- Help with financial statements
- Achieve better results
- Help with cost control
- Provide faster turn-around
- Accounting system set-up
- Help with cash flow management
- Help forming incentive plans
The world of business is changing. Financial experts are no longer tethered to one town, state or country. Many businesses now use vendors and service providers from various areas without ever meeting them in person. Welcome to the new age of finance. The services of a CFO dedicated to one business are becoming a thing of the past. Today many CPAs’ are lending their expertise to numerous businesses in the form of virtual CFO services. A virtual CFO can be around the corner or seven states over. Your best option is to have a professional somewhat near-by for meetings and a first-hand walk-through of your operations. But overall, proximity is all a matter of view point. As your business grows, its needs do as well. But do you need a full time CFO? Probably not. This article will address the best reasons to consider virtual CFO services.
Just because the economy is booming, it doesn’t mean that you want to throw money away. Virtual CFO services can be a boon to helping you save precious dollars on staff. The average pay range of a full-time CFO for a ten-million-dollar company is upwards of $100,000 a year and that doesn’t include bonuses and incentives. The fact is, any top tier accountant or CPA you hire on staff will cost more in this empty employment market. This is where virtual CFO services save you cash. A virtual CFO only needs to be contracted for your specific needs. If you only need a monthly meeting, financials and business advice, why hire an on-staff person? Instead, hire for your needs and save money. Depending on the amount and extent of services desired, you could be paying tens of thousands a year less. Work smarter, not harder.
If you’re currently relying on office staff with little more than bookkeeping experience, it’s time for a change. The budgeting process is not something that the average office staff can handle. However, with virtual CFO services you can attain much needed information in a very easy to understand format. Flying by the seat of your pants isn’t a business plan, unless your plan is to fail. Proper budgeting will save money by setting out a road map for expected project costs. As well, a proper budget can highlight areas where you may be spending more per unit than planned. Good budgeting can also direct you toward setting up incentives plans to keep your people motivated. Virtual CFO services will start to pay for themselves when you have instituted proper job/service budgeting. It doesn’t matter how much you earn, if you’re wasting the gross profit, you will collapse.
Wider Range of Knowledge
Office staff handling day to day accounting is fine for that purpose and that purpose alone. They have the knowledge to pay bills, receive payments and cut pay checks. But when it comes to financial reports, business planning or cost analysis, office staff will not cut it. Your Virtual CFO however will have a knowledge base that goes far beyond the ordinary. CPA’s (your best bet in Virtual CFO services) have a varied skill set. Not just in the functions of business, but in a variety of business types. While it might seem that knowledge of construction in the manufacturing world isn’t necessary, it is. The more one gleans from a variety of industries, the more they can tailor to your needs. Information I have picked up in manufacturing processes has aided my work with retail work flows. The fact is this: jobs differ, processes though, not so much difference.
One of the best indicators of financial performance are your financial statements. Virtual CFO services can provide yearly, quarterly or monthly financials that can help your decision-making process. Comparative income statements can help you determine whether you are on track with revenue and profit margins. The balance sheet can provide information on the state of your resources. Finally, the cash flow statement can show much insight into how you are handling your free cash and if you need to enact changes in spending. Having a virtual CFO prepare detailed financials on a monthly basis will be a valuable tool. Consider how confidant you will be in decisions at the next staff meeting. With up to date information in hand, your key decision makers will all feel better about evaluating procedures. Don’t let opportunity pass you by because you’re using old data for planning purposes.
The quality of the information you use is just as important as its timeliness. Perhaps your office staff can handle an increased work load or complex decisions, but do you want to risk it? Virtual CFO services are your way to lower the risk that an employee is tasked with work they cannot handle. Consider if you task your staff with producing financial statements and when finished they hand them off to a virtual CFO. In this case you have staff that can bring the information together and a professional that checks and reviews the work for accuracy. As a matter of fact, you could task the staff with more work and utilize the virtual CFO as the “spell check” of the organization. This lets the grunt work be dome by hourly employees and the detail work is in the hands of a pro. It’s a win/win.
Nothing spells doom faster than cost and expenses that are left unchecked and rarely reviewed. The truth is, many businesses leave cost analysis and control as the last thing on the to-do list. With so many other tasks costs often spiral out of control over time. If your staff are already buried under a big workload, asking them to be cost accountants may be too much. Virtual CFO services can be most helpful in the area of cost control. If your business rarely, if ever, reviews product/service costs, contact a virtual CFO today. The reality is that most businesses are losing upwards of 10% of what they make to waste. If your gross profit is 20% of $10 million per year, you could be wasting $200,000 per year and not know it. Savings like this make it imperative to hire the right person to clean up.
With a booming economy it often becomes more difficult to retain the correct number of employees. When this happens tasks are forgotten, left undone or never considered. Often times you end up waiting extra days or weeks for tasks to be finished. Or worse, you completely ignore work and hope for the best, that you won’t need it done. With Virtual CFO services you can now catch up on the work that’s been left behind. Not only will important tasks now get the proper attention, but they will be done quicker. Your virtual CFO will have you on a scheduled basis so that certain tasks are done as promised. This faster turn around of information can mean the difference between winning or losing job bids. Or putting more bids in than you were once able to. The speed of information is increasing, don’t lose even more ground.
Accounting System Design
As much as you may be using too few staff for too many tasks, you could be losing time with antiquated systems. Virtual CFO services can review your accounting information system (AIS) and make recommendations on upgrade or replacement. Just because you purchased the expensive one-size-fits-all software package designed to relieve every ache and pain, it doesn’t mean it’s the best choice. Even if your AIS is appropriate, are you using its full potential? Some companies never take the time to fully learn their system thus they waste resources on work-arounds. Excel is not an accounting tool, it’s a data analysis tool. Ditch the spreadsheets and have a virtual CFO determine the system you need. Perhaps they will find a better way and replace your current system. Alternatively, they can teach your staff the full potential of your AIS and move away from time wasting work-arounds.
In as much as your budget process saves time, it can also be used as an incentive device by increasing productivity. Consider if you could get an extra 10% of work out of your staff, how would that affect you? First, you could hire one less person for every ten, saving money. Second, you can get the work done faster, thus being able to take on more work, earning you more money. Last, moral is higher when people feel productive, earning you a better, happier staff. So how do you get a 10% increase in productivity? By incentivizing your staff, and the budget is how you get there. Once your virtual CFO has set budgets up, you can use them to determine work levels and provide performance bonuses if the staff hits their goals. This can be done based on hours, materials usage, fewer reworks or any number of factors.
Cash Flow Management
Cash flow analysis is where virtual CFO services come in handy. If your business doesn’t have cash coming in fast enough to pay bills in a timely fashion, you’re sunk. Helping you get the cash in fast and out slower should be paramount on your mind. A professional is well versed in how this is done. But it’s not just about getting customers to pay fast, it’s also about managing what you have in reserve and the flow of funds in and out. Cash flow decisions take time and should be made by someone with experience at when to pay out, when to hold and when to invest money. Cash flow considerations also include your Line-of-credit, long-term investments, future fixed asset needs and many more things. Do not leave your cash flow to chance. Work with a virtual CFO to ensure your business stays afloat for years to come.