What is a Virtual CFO and How to Become One
What is a virtual CFO (chief executive officer)? Also known as fractional CFO or online CFO, a virtual CFO (vCFO) refers to an expert finance professional hired by a business owner, usually part-time and remote to guide them in making sound business decisions.
A virtual CFO performs the same role as a traditional CFO except in a remote/virtual environment and for multiple clients. When a business starts, the role of strategy, forecasting, raising capital, financial analysis, etc. lies with the business owner among many other hats like operations, manufacturing, supply chain, HR, accountant, and many more.
As a business grows in complexity, the business model becomes more complex, and therefore the business owner who carries the role of a strategist for their business might require help.
Some of the decisions where a business might require a virtual CFO include – cash flow management, planning and forecasting, pricing decisions, market expansion, etc.
The concept of a virtual CFO has become so popular and, in this post, we'll cover why that is and how to become one.
Responsibilities of a virtual CFO
Why is virtual CFO becoming more common
Who can become a Virtual CFO
What does it take to be a great Virtual CFO?
What Should a CFO Know?
What qualities make a great virtual CFO?
What are the signs that a small business needs a virtual CFO
What are the signs that a small business needs a virtual CFO
How to become a virtual CFO
Responsibilities of a virtual CFO
Virtual CFO roles and responsibilities are but not limited to:
Comprehensive and detailed financial analysis
Budgeting and forecasting
Developing and implementing financial strategies plans and policies to ensure a company's financial health and long-term growth and stability.
Identifying new opportunities while analyzing potential risks
Providing the business owner with recommendations for sustainable topline while keeping the bottom line manageable.
Advising the business owner and board of directors on the strategic direction of the company
Improving business processes e.g., cashflow and growth strategies, raising capital, pricing, etc.
Timing is everything when it comes to hiring for small businesses. Too soon and you might not have enough work to keep them busy hence an unnecessary expense, too late and your business could be in a financial crisis,
Why is virtual CFO becoming more common?
The business landscape has been marred with strong headwinds and tailwinds that have left a lot of small and medium businesses struggling to survive. Think COVID-19 and the myriad challenges that came with it – lockdowns, travel restrictions, labor shortages, and changes in consumer preferences as a result of lockdown e.g., preference for online shopping vs. brick-and-mortar stores and many others.
This unpredictability is what has led to many business owners looking for guidance through new and existing challenges. A virtual CFO is hired as a consultant to come in and stabilize a business' finances and plan for the future taking into account all the risks and opportunities in the business environment.
Who can become a Virtual CFO
The majority of CFOs in big companies will understandably have a background in finance, business, economics, and management. As a matter of fact, the majority of them hold an MBA with some being CPAs or ACCA designation.
Besides education, experience is key! Past experience in accounting and finance, treasury, and controllership, especially in a leadership role are crucial to the success of a CFO. In, most organizations, there's no standalone treasury team and the role is embedded in accounting and finance.
These roles will give a potential CFO experience like cashflow management and raising capital, mergers and acquisitions (M&A), and financial analysis and storytelling. For a CFO you need someone who can do a good job analyzing numbers and providing useful insights to make business decisions.
What does it take to be a great Virtual CFO?
Knowing how to flawlessly execute strategy
Business acumen
Being strategic and tactical
Being an agent of change and a strategic influencer in every department
What Should a CFO know?
One of the main things a CFO needs to know is the different departments in an organization and how they work together toward the company's vision.
Sales and marketing
Operations
Product and each product's position in the market
Customers landscape and their ever-evolving needs
Vendors & suppliers
Employees because they're the engine of the business
Shareholders and their objectives
What qualities make a great virtual CFO?
Great communication skills
Confidence
Leadership
Strong financial background
Diverse professional background
Great agent of change
What are the signs that a small business needs a virtual CFO
Timing is everything when it comes to hiring for small businesses. Too soon and you might not have enough work to keep them busy hence an unnecessary expense, too late and your business could be in a financial crisis, and you don't want to go there.
Here are signs that your business is ready for you to bring in a virtual CFO consultant:
You're experiencing rapid growth
You're targeting or entering a new market
You need to raise capital or are bringing in new investors
You're struggling with cash flow
You can't interpret your finances to align them with your company vision/strategy.
Your business has outgrown the current systems and processes and needs to put new ones in place – accounting systems, processes
How to become a virtual CFO
Assuming you have the educational background required and have garnered work experience in the field of accounting, finance, etc. Below is a step-by-step process of how to become a virtual CFO:
1. Identify your why
Why do you want to become a virtual CFO? Is it the flexibility that comes with managing clients virtually, is it the thrill of working in different industries at the same time, a luxury that a traditional CFO cannot have unless they switch companies.
Or just because you breathe and live strategy and you love it. The key word here is "love it"! Being passionate about your role or the industry will make those late nights more manageable.
2. Find a mentor who can help clarify and guide you in the path of becoming a vCFO
A good mentor can help you accelerate your professional and personal growth by offering guidance and accountability on your goals. Many executives and successful people attribute part of their success to having a mentor. Find a good one to help you navigate leadership, compliance, and strategic issues. You'll never go wrong with having someone to pick their brain when things are tough in the office.
3. Identify any skill gaps you need
Polish up your storytelling and presentation by joining Toastmasters, and up your leadership skills by taking leadership courses. In short, identify what skills you lack that make a great CFO and fill in the blanks.
4. Be open to learning along the way
It is not going to be smooth sailing y'all! Just like any career, you'll be met with different challenges, clients' demands, personalities, expectations, etc. Just know that this is the best way to learn.
Listen and learn from those around you no matter their background and educational level.
5. Put everything you learned into practice
Now that you have all the tools and knowledge to learn how to swim, go to the pool and dive at the deep end. You'll be surprised you already know how to swim.
Will it be easy to swim through a complete lane? No. Will you learn and tweak your technique along the way? Definitely, yes.
6. Have fun while at it
This is important. Assuming you're passionate about strategy and budgets and financial analysis and that's why you wanted to become a virtual CFO.
