As your business begins to grow, financial management becomes more than just basic bookkeeping. When a company is experiencing growth, sales increase daily, and there are more expenses to cover, including payment of salaries, production costs, marketing, and advertising expenses, among others. It becomes challenging to keep track of expenses using a simple Excel sheet or a budget planner. The wrong financial move can easily harm your business, causing not only sales-related problems but also damage to your company’s credibility and perception.
If you are currently managing a growing business, you can attest to the demanding investment decisions, cash flow projections, and the need for a solid financial strategy, which call for specialized skills. You may ask, “Do I need a virtual CFO or is a CPA good enough?” The answer to this question is not always straightforward, and while both a CFO and a CPA are essential to a growing business, choosing the wrong one can cost you. In this article, we break down what each of them brings to the table and help you determine what your business needs at this stage.
Who is a Virtual CFO
Just as an on-site CFO (Chief Financial Officer) does, a virtual CFO provides high-level financial strategy, analysis, and advice to a business. They oversee budgeting, forecasting, and financial risk management, as well as investments, to ensure the company remains financially stable and aligned with its business objectives. They work directly with top management and are responsible for the company’s financial aspects.
Key Responsibilities of a Virtual CFO
1. Strategic Financial Planning
Virtual CFOs develop financial strategies that align with the business goal. They create financial models, conduct scenario planning, and make growth projections that inform major business decisions.
2. Cash Flow Management
Apart from tracking cash flow, virtual CFOs implement forecasting systems that predict potential shortfalls months in advance, allowing the business owner to take proactive measures. They analyze historical data, current market conditions, and potential trends through in-depth data analysis of revenue and expenses to inform decision-making.
3. Financial analysis and reporting
This involves transforming raw financial data such as expenses, profits, or losses into actionable insights. Through advanced analytics and tracking, remote CFOs draw executive-level reports that help you understand what’s driving your business performance. This function is essential as it allows you to clearly understand the health of your company and aids in the financial resource management of available funds.
4. Investment and Fundraising Guidance
After creating financial strategies and forecasts, Virtual CFOs assist in developing detailed financial proposals tailored for investors to explore fundraising and funding opportunities. They also guide in conducting due diligence for investment opportunities and structuring deals that maximize your company’s value.
5. Budget Development and Monitoring
They create actionable and realistic plans tied to the overall financial strategies, implement them, and monitor expenditure, adjustments, and effectiveness in carrying out normal business activities. They also track the return on investment based on budget allocation and compile reports accordingly.
6. Risk Management
Needless to say, every investment carries a risk; waiting for returns to determine whether it will positively or negatively impact the business. CFOs act as a buffer between risk and investment, ensuring that no financial losses are incurred and maintaining the organization’s economic stability. They achieve this through identifying, assessing, and controlling threats to a company’s capital and revenue.
Who is a Virtual CPA
A virtual CPA (Certified Public Accountant), on the other hand, provides accounting services remotely. They are responsible for assessing a business’s financial operations, inspecting their accounting systems for efficiency, maintaining financial records, and preparing tax returns. Renewing financial statements and providing insight on how to boost profits and reduce costs. Let’s dive deep into the duties of a virtual CPA
What does a Virtual CPA do?
1. Assessing Financial Operations
Virtual CPAs conduct comprehensive reviews of your business’s financial processes, identifying any inefficiencies, potential risks, and areas of improvement. They analyze your previous and current accounting workflows and recommend optimizations to streamline operations.
2. Auditing Accounting Systems
They perform a systemic assessment of your accounting records, internal controls, and financial processes to ensure compliance and accuracy. This involves reviewing transaction documents, such as invoices and receipts, testing financial policies, and verifying procedures to ensure they adhere to established standards.
3. Maintaining Financial Records
CPAs oversee the organization and maintenance of a company’s financial documents, ensuring they are appropriately stored, accurate, and complete. They enforce this through the implementation of systems for document management and the establishment of workflows for records management.
4. Preparing Tax Returns
One of a virtual certified public accountant’s primary functions is preparing and filing tax returns. They follow through current tax law adjustments, identify deductions and credits, and ensure compliance with all tax requirements, whether federal, state, or local.
5. Preparing Financial Statements
They are experienced in preparing financial statements, including income statements, cash flow statements, and balance sheets. Such statements provide crucial insights into a business’s financial health and are often required for investors, lenders, and regulatory purposes.
6. Bookkeeping Oversight
They supervise and review bookkeeping activities, ensuring transactions are correctly recorded and categorized accordingly. This includes managing accounts receivable, accounts payable, payroll processing, and management of the general ledger.
Virtual CFO vs CPA: Key differences
While there are several similarities between a virtual CFO and a virtual CPA, there are distinct differences in their functions, characterized by multiple key features. These include
1. Level of involvement in your business
A virtual CFO becomes an integral part of your company’s leadership. They take the lead in all financial processes, actively engage in strategic planning sessions, and inform major business decisions. They clearly understand your business, its competitive landscape, and the growth challenges it faces. A virtual CPA, on the other hand, focuses on specific tasks such as tax filing and creating financial statements without in-depth involvement in your company’s day-to-day operations.
2. The scope of work
A CFO and a CPA have different focus areas. While the latter builds their work on compliance, accuracy, and historical reporting, the former focuses on developing deep strategies that drive business growth.
3. Cost Structure
Based on the extent of work and level of involvement in a business, a remote CFO will command a higher cost than a virtual CPA. However, both remote jobs are significantly more cost-effective than hiring a full-time on-site employee.
4. Terms of engagement
If you hire a virtual CFO, they will work on an ongoing basis, providing continuous insights, guidance, and monitoring. A CPA, on the other hand, often works on a project basis with less day-to-day involvement in the business.
When does your business need a Virtual CFO
- If your company is experiencing rapid growth and financial decisions are becoming more complex, as they have heavy implications for your business’s future.
- If you are planning to raise capital, secure funding or loans, or attract investors. You need to hire a virtual CFO to help you prepare financial proposals, conduct due diligence on investors, and present your financial story compellingly.
- If you are struggling to manage cash flow for your business, experiencing seasonal fluctuations, or forecasting financial needs, you can implement advanced forecasting systems to optimize your finances.
- If you are ready to scale your business, enter new markets, launch new products, or make radical moves, you need a professional to assist with evaluating opportunities, assessing risks, and making informed decisions.
When does your business need a virtual CPA
- If you have stabilized your business with predictable revenue and expenses, and you are not planning any significant changes.
- If your primary concerns are tax compliance, accuracy in financial records, and compliance with regulatory frameworks.
- If you are running a small business that may not accommodate the costs that come with engaging a virtual CFO, a good start with a virtual CPA will help you as you plan to scale your business.
- If your financial structures are straightforward, with limited transactions and basic reporting.
Who does your Business actually need (Spoiler: You need both)
Most successful businesses understand the value that a virtual CFO and CPA bring to them. While one focuses on deep strategies, analysis, and forward-looking management, the other focuses on compliance, accuracy, and reporting. This combination is ideal for a business that provides value, assurance for growth, and ensures internal and external compliance, thereby fostering growth and development. The secret tip? Defining clear goals for each role and building proper communication channels between the remote workers.
A quick Guide to making the right choice.
While it is essential to have both professionals in your company, having a clear strategy will guide you on who to engage, at what stage, and what tasks they will perform to position your business for success. Here are quick tips;
- Assess the current stage of your business. Consider virtual CPAs for early-stage CFOs and enterprises for established companies.
- Evaluate your financial complexity, consider your revenue level, funding needs, and strategic objectives.
- Consider your growth plan. If you are planning significant growth, entering new markets, or seeking investment, the expertise of a virtual CFO will be invaluable.
- Consider your current and future budget, assess the return on investment (ROI), and determine the best role to offer returns and results.
Partner with Remote Raven for the Best Remote Workers
Bottom line, the choice between a virtual CFO and a CPA is not an either/or proposition. Your current business needs depend on your stage, growth plans, and complexity of operations. Deciding between the two can be pretty challenging and confusing for employers. Hence, Remote Raven has invested in qualified specialists who will analyze your business needs, stage, or complexity, and find you the best virtual employees who will deliver results, achieve ROI, and foster growth for your business.
We connect you to professionals who understand the unique challenges of growing a business and provide the strategic expertise needed to succeed. Start by booking a free consultation with our experts today and position your business for success with the right skills.
