A great idea is the foundation of businesses. The firm finds itself in the course of a quickly expanding company. It happens when an idea catches on and the services are in high demand. Unless the entrepreneur is also an economic expert, the one thing they'd struggle with is financial management. Hiring a CFO is a crucial step forward in developing any business. Because every business differs, you don't want to approach the issue with a "one-size-fits-all" perspective. When hiring a CFO, it's easy to need clarification on whether to employ an in-house CFO or use virtual CFO services for critical decisions.

The answer will depend on your business and what you want from your CFO. We will compare these two with some crucial differences. This article deals with selecting between a virtual CFO and an in-house CFO. Let's explore it.

Who is a CFO & Virtual CFO?

The Chief Financial Officer (CFO) oversees an establishment's accounting. They are responsible for analyzing financial data, managing costs, reporting financial performance, etc.

A CFO is an essential element of a business organization. Its responsibilities are not limited to managing the firm's financial resources. They also decide on the businesses' capital structure and when and where to invest.

A virtual CFO outsources work that gives economic assistance to a firm. It is more cost-effective. It is also more efficient than hiring an in-house CFO. As a result, by using virtual CFO Services, you can access highly qualified financial specialists who can increase your cash flow and profitability. It can be done without spending a fortune.

It would help if you employed a CFO based on your specific needs. But, all CFOs will assist your company's financial management systems and processes.

Types of CFOs

CFOs collaborate with companies in various ways. It includes:

1. Interim CFO

Interim CFOs work with industries to manage their economic demands for a limited time. They provide part—or full-time aids for specified periods, usually one to twelve months, instead of fractional CFOs who work part-time.

2. Virtual CFO

A virtual CFO is a hybrid of a fractional and interim CFO who engages with your business through remote work. They are also known as outsourced CFOs.

It's worth noting that these many CFO types overlap. Also, the titles are interchangeably used. For example, a full-time virtual CFO could be considered "virtual," while any form of CFO who provides aid from your office is regarded as "in-house."

3. Full-time/In-house CFO

When most people think of an in-house CFO, they imagine a full-time position. Industries will often hire full-time CFOs with annual revenues of $10 million or more to handle economic management and any situation destabilizing operations.

4. Fractional CFO

A fractional CFO works part-time with numerous businesses to fill out their workweek. Establishments with less than $10 million in annual revenues that need constant CFO expertise may seek fractional assistance to meet their necessities.

In-house and virtual CFO: How to Choose?

We have to choose between in-house and virtual CFO aids under certain circumstances. It involves:

1. Security

Fraud costs the average corporation roughly 7%. According to a study, these are the company's annual earnings. A typical business has a small team of finance professionals. It can be, say, two or three. As a result, just a few economic experts have complete authority over the financial department. Thus, such companies are subject to fraud.

Small and medium-sized companies can get help from a virtual CFO. It helps them overcome this obstacle. It has a dedicated group of accountants who work within a system of regulations. The virtual CFO aid experts are highly dependable, reputable, and trustworthy. They give company executives consistent and accurate data reporting. After all, these people speed up the implementation of new operations.

2. Revenues

There are essential factors to consider before deciding between in-house/virtual CFOs. It involves the size and revenue of your business. At the same time, this isn't a rule of thumb or a guide. Various companies only engage an in-house CFO if their gross revenues are USD 10 million.

You'll have to pay full-time salaries and give extra gifts if you hire an in-house CFO. You'll also need to provide gifts like paid time off. It would help to consider whether giving for all these expenses is worthwhile. Employing a virtual CFO may be cost-effective if you have a lot of work to perform in your economic management. If you have a lot of daily work that needs to be supervised by a CFO and many accounting records that need to be completed weekly or monthly.

3. Focus on core

Entrepreneurs need to gain the experience and knowledge required to perform specialised duties such as economic management. They also need more information and skills to report and analyse a company's accounting activity. As a result, businesses need the assistance of expert financial professionals who can lead them to success. They need strategic counsel and help manage a company's accounting difficulties.

Businesses can address this gap with the help of virtual or in-house CFOs. They provide a company with an economic strategy, allow owners to concentrate on their primary businesses, and set safeguards to ensure that a company only spends what it should.

Giving such aid offers business owners adequate time. It helps to concentrate on expansion. Hiring in-house CFOs is a difficult task. It is challenging because they have to check the whole group. Business owners must collaborate with full-time virtual CFOs to handle accounting and bookkeeping,

4. Finance and accounting costs

A full-time or in-house CFO comes with a price tag involving salaries, software, equipment, and office space. For example, the expense of onboarding and training new CFO recruits is high. After all, choosing and implementing an effective digital accounting platform is a significant expenditure. Businesses can save money by using virtual CFO aid. This model accounts for all costs associated with people, processes, etc.

5. Responsibilities

An in-house CFO manages the economic aspects of the company where they work. As a result, they are responsible for stakeholders, board members, etc. The accounting team assists the CFO in preparing a roadmap for the company's future victory. Virtual CFO extends all CFO functions but only provides them when the company demands them. Economic planning, reporting, and strategic aids are provided without hiring a CFO or accounting staff.

After all, it can simultaneously handle many financial services for various businesses because the virtual CFO has a team. You will only have to pay for the aid you rendered to the virtual CFO.

6. Financial management

The organization is associated with an in-house CFO. Close involvement in the company's operations assists the in-house CFO. It helps in developing detailed financial strategies and proposals.

The in-house CFO may devise elaborate strategies. It is because they completely understand the firm and its activities. Making strategic plans, adjusting essential modifications and monitoring their implementation is critical. It is simple for an in-house CFO. It is always beneficial to any business. A virtual CFO works with clients and is exposed to different situations and issues. The virtual CFO can provide intelligent solutions with a broad client base and excellent outcomes. It is because of their overall vision. They know the proper economic approach that works flawlessly. Such a variety of financial management skills saves them time making trial-and-error decisions. It also guarantees their client’s profit.

Winding Up Note

Suppose your enterprise has reached the point where it needs the assistance of a CFO. A virtual CFO might be a perfect choice because they give considerable cost benefits. Consider hiring an in-house CFO who can focus solely on your business finances. It shall be considered if your company generates substantial annual revenue. While both in-house and virtual CFOs offer advantages in certain situations. After all, it’s worth noting that virtual CFOs are becoming more widespread. Consider your company's needs when deciding between an in-house vs a virtual CFO. Kindly connect with Fino Partners for more assistance.