Choosing a CFO: Virtual Versus In-house

When hiring and financing, having a virtual CFO or an outsourced CFO versus having a full-time CFO is a significant decision that any organization needs to make. Although there are benefits in both options, there are factors in every company that must be considered before deciding which method is preferable for the financial plan of a company. This article unravels why many businesses are torn between hiring a virtual CFO or an in-house one.

There are Specific Cost-savings for Your Business by Hiring a Virtual CFO

There are several benefits to derive when contracting the service of a virtual CFO, and one of them is the ability to save money. Medium-sized companies that avoid employing a senior executive to handle the CFO functions will not have to pay a full salary and other benefits. There are also cost savings because the business does not have to provide an office, equipment, etc. to another senior staff member. The skills and knowledge available from a virtual CFO company may sometimes surpass what the company could obtain with an in-house expert.

Access to Specialized Expertise

The virtual CFO services employ only experienced financial executives, many of whom have previously worked as CFOs with large firms. Outsourcing such an expert at a small and mid-sized company level is a better option than hiring an expert with the same experience and knowledge as the outsourced CFO. The expertise of services that virtual CFOs bring might be even wider than the single in-house CFO can offer.

Flexibility and Scalability

Outsourcing CFO services enables more flexibility in the provided financial management structure. Services can expand their volume to cover workloads and reduce volume when workloads are low. It is not feasible to hire and fire an in-house CFO based on volume. The virtual CFO team can also help 24/7; therefore, there will be no coverage issues as there might be with an in-house expert.

Strategic Insights

Information the virtual CFO receives from outside the business can be far more insightful than that from insiders. Virtual CFOs’ broad experience of engaging in various companies can equip them with invaluable context to observe the growth potential and deliver unbiased reviews of the performance of a company. In contrast, an in-house CFO may not possess this bird’s eye view approach.

CFOs from Inside Can Assist a Company Because They Know a Lot About the Firm

An in-house CFO has the benefit of handling one company and possesses more knowledge of that company than a virtual CFO. Aspects such as corporate culture, people, procedures, and past performance can significantly contribute to the financial dynamics of a company.

Alignment with Company Goals

An in-house CFO has no conflict of interest; he/she is loyal to the company’s objectives and is dedicated to pushing the company forward. The incentives of an in-house CFO can be aligned with the firm’s goals and objectives such that their benefits are contingent on the firm’s performance. On the other hand, a virtual CFO has other considerations that involve multiple client firms. It may lead to a conflict of interest whereby the service provider’s interests are not in tandem with the client firm’s interests.

Full-time Availability

An outsourced CFO ensures that the top-notch, fully dedicated CFO expertise is on hand whenever the executive team, managers, or staff require. However, in-house CFOs can also communicate with the employees directly and regularly, as well as with any of the employees across the organizational hierarchy. Unlike a conventional CFO, who is always physically present to attend to various financial management needs, a virtual CFO can only participate in meetings and calls or be contacted when required.

Enhanced Data Security

In the case of several sensitive sectors, for example, in industries that handle financial information or trade secrets, an in-house CFO may be perceived to maintain better security and proprietary control. Virtual CFOs ensure the client’s information is safe and secure.

Conclusion

In conclusion, it is essential to be as honest as possible when answering questions related to financial goals, available funds, company development, data security, and organizational culture to determine whether hiring a virtual or in-house CFO suits your business. There are both benefits and disadvantages to each option. Sometimes, the optimal solution can be found by combining virtual tools and in-house resources. There are specific considerations that executives should balance to determine the proper approach to financial leadership within their organizations.