A good Chief Financial Officer (CFO) ensures good financial management and a good financial management ensures business success. Many businesses having good ideas eventually fail unless they carefully manage their finances. A CFO is the senior most financial officer who looks after the finances of the company and takes strategic financial decisions of an organization. The CFO is primarily responsible for:
- Cashflow management
- Budgeting and forecasting
- Reporting and compliances
- Financial modelling
- Preparing and analysing different financial statements.
Every organization has different needs and operates on a varied scale during its lifetime of operations. Considering the importance of financial management, organizations used to hire a full time in-house CFO to take care of their finances. However, with the large-scale use of technology and internet services, several avenues are now open for CFOs where they are free to operate under different situations and varied capabilities. Organizations are now open to availing services of outsourced financial firms who provide virtual CFO (VCFO) services.
A simple explanation of this would mean that an in-house CFO is a financial expert who is available in the organization physically and takes care of the organization’s finances, while a VCFO would provide their financial expertise remotely.
Some factors that affect an organization’s choice of in-house CFO or VCFO services are:
- Size of organization
- Scale of operations
- Span of control required
- Resources available
How do organizations decide which type of CFO would serve their purpose and help them achieve the required financial soundness?
Some points of comparison between the In-house CFO and Virtual CFO services that would help organizations to decide which type of CFO would be the best fit are:
An experienced CFO brings a wide range of knowledge and expertise to the organization. However, it is not an easy search to find an experienced CFO. Hiring a full-time experienced CFO involves extensive search and recruiting exercise, which is very expensive. It is also very difficult to find an experienced expert who would easily blend into the culture and working environment of the organization.
If organizations opt for VCFO, experienced professionals would deal with their finances. Since outsourced financial providers have a pool of experienced CFOs who deal with organizations across various sectors, they provide clients with the best of VCFO services.
- Expertise and strategic financial management:
An in-house CFO is closely associated with the organization. Such intense involvement in organizations’ operation helps the in-house CFO to draw extensive financial plans and proposals. The in-house CFO can make elaborate plans as he understands the organizations and its operations thoroughly. It is easy for the in-house CFO to make strategic plans and monitor its implementation and make necessary changes quickly, which is always helpful for any organization.
A VCFO deals with several clients and is exposed to different situations and problems. Such diverse client reach enables the VCFO to provide expert solutions which deliver positive outcomes. They know the exact financial strategy that works perfectly in any situation because of their widespread perspective. Such diverse expertise in financial management saves them the time to perform trial and error-based decisions and ensures that it benefits their clients.
The in-house CFO is available in the organization throughout the day. This availability ensures that he can make decisions immediately. Such quick responsiveness guarantees an immediate solution to financial issues and helps to avert major crises. This saves the organization from paying fines, penalties and also saves it from dealing with financial losses.
A VCFO is also available throughout the day, but since he is always available remotely, chances are that he would not respond immediately. Internet connectivity and power shut-downs may also make it difficult to reach out to the VCFO. During these times, the organization would be at its knees because of their inability to respond quickly to the situation. This can also lead to financial losses and if such situations repeat on multiple occasions, then it would prove detrimental to the organization’s financial health.
The in-house CFO is an employee of the organization who is completely responsible for the entire financial operations and management. It is the responsibility of the CFO to oversee all the financial decisions and project the organization’s growth. The in-house CFO is answerable to the shareholders, board of directors and other stakeholders about any financial decisions. As the head of the finance department, the in-house CFO has an entire team to assist and prepare financial statements and reports and analyse the organization’s financial position and take corrective actions as and when needed.
A VCFO provides every type of financial service, however, organizations use only limited services based on their need and requirements. Hence, the VCFO’s responsibility is limited to services offered. Since the VCFO’s involvement in the organization’s operations is limited, the scope of responsibilities is restricted. In case the organisation does not provide the VCFO with all the data and information, they may provide solutions with limited knowledge and hence they would not provide better decisions and projections like an in-house CFO.
Hiring an in-house CFO increases the cost to the company as the payment includes salary and other benefits. This is usually beneficial for large organizations requiring extensive CFO services.
Organizations pay VCFO for the services offered and hence it is extremely cost-effective. A small or mid-sized organization that is constantly struggling with finance related issues is always benefited by availing the VCFO services.
While both in-house and VCFOs have their own advantages in different situations, it is important to note that VCFOs are now becoming common in the business environment. Nothing beats cost and flexibility in any business. A VCFO brings all the benefits of an in-house CFO with maximum ease and minimum efforts. Organizations hiring VCFO services use their expert knowledge, experience, and expertise to take their business operations to the next level.
Diligen’s VCFO services are the best in the industry and they provide all the assistance at the best price. The VCFO services provided by Diligen help its clients in managing their daily accounting activities and planning their future financial needs and projects with utmost ease. Diligen ensures that its clients’ data is protected and they duly meet all security regulations. The expert pool of VCFOs at Diligen do not compromise on quality while ensuring to meet all statutory deadlines.
If you are looking for VCFO services to provide you with accounting support, controlling and financial reporting, financial consultancy services and other services which require financial management knowledge, then feel free to get in touch with the experts at Diligen to address all your finance related needs.