How to make a choice between an Inhouse CFO and a Virtual CFO

How to make a choice between an Inhouse CFO and a Virtual CFO

The business, or industry, it wishes to be a part of, is a choice for a company. Decision-makers, usually at the time a company is started, make that decision, keeping various factors such as strengths, weakness, market conditions, competition, etc. in mind. Of course, it is also possible that the company, to apply a term currently popular, pivots along the way to a different business or industry.

While the business may be a choice, what is not a choice for the company is certain activities it has to carry out. It could be termed as the cost of doing business, or the privilege of being in an environment where it is possible to set up and run a business. Mostly these are regulatory requirements, such as filing of tax returns, such as maintaining hygienic conditions at the workplace, such as paying compensation that adheres to the minimum wages stipulated by the government.

In order to fulfill these requirements, the company needs to hire resources who are experts in these respective areas, to ensure that the requirements are fulfilled and it does not have to face embarrassment as a result of any failure or non-compliance. These activities are often termed as ‘support’ functions. In other words, they support the main business of the company in the achievement of organizational goals. Some of these functions also have a role to play on competitive marketplaces on which the company might depend, such as HR in the talent marketplace.

Over time, these support functions also strive to create value for the organization, over and above the regulatory aspect of the role.    

oWorkers provides support not only for the business of clients, but also for their support functions. Our focus on data based BPO services has yielded rich dividends. Today, we are recognized as one of the top three providers in the world in our line of work. For an eight year old company, that is a creditable achievement.

 

The role of Finance

One of the support functions in most large companies is that of Finance. The Chief Financial Officer (CFO), who leads the Finance function, often has an important place at the leadership high table that comprises the most senior decision-makers in the company. It is, as it is called, a C-suite role.

It is not a surprise, since money constitutes the life-force that runs through the veins of an organization, and either infuses it with, or takes away from, the energy it needs to operate. The success, or failure, of a company, is defined in terms of money. It does not matter how many jobs your company has created, or how good its products are, until the financial statements show that it has made money, from a business standpoint the company has not been successful.

The CFO, along with the Finance function team, oversees the preparation of financial statements, reviews them and attempts to squeeze efficiencies out of the system by offering suggestions to the operational teams, tracks the funds situation in an effort to balance availability and requirement. Too much cash on the books might mean loss of interest or business opportunity. Too little cash might mean inability to pay bills on time. It interfaces with vendors and clients for invoices received as well as invoices raised. It has an important role to play in the success of the company.

Most business decisions are driven by money. With a pricing model that affords a choice to clients, oWorkers stands out from the crowd. Additionally, our ability to help our clients save up to 80% of their costs, is unsurpassed in the industry.

 

The CFO’s role

The role of a CFO is an established one in the organization structure of a company. It does not need to be justified. Most large organizations, with a sufficiently large business, are likely to have a qualified, well-compensated specialist occupying the role.

Smaller companies, though, struggle in this respect. Often, they do not have the business volumes and financial muscle to be able to afford a qualified CFO in the role. This struggle of the not-so-big companies could have created early interest in the concept of part-time or virtual CFOs.

They need the expertise but they don’t have the money to pay for it. What should they do?

Hire a virtual CFO?

What is a virtual CFO?

The core concept is that the person playing the role is not dedicated to your company. In other words, he or she is not a full-time employee. He/she provides either a fixed amount of time to your company or is engaged on the basis of defined responsibility areas, and compensated accordingly. He/she is free to ply his/her trade in a similar manner with other companies. Of course, there would need to be a clear understanding in order to ensure that business information and interest is not compromised. 

An inhouse, or full time CFO operates as an employee of the company and is available completely to focus on the company’s requirements, without distraction from other competing work engagements.

oWorkers operates with both inhouse employed resources as well as short-term hires taken on a contract. Even freelancers are hired for specific assignments. The rapidly evolving, competitive world requires fleet-footedness. Virtual resources can provide an edge in this situation. Even for its clients, oWorkers, with its close ties with local communities, can hire resources at short notice; almost a hundred additional within 48 hours.

 

Choosing between a virtual CFO and an inhouse CFO

What are some of the factors that should be considered while making a choice between a virtual or an inhouse CFO?

Availability and convenience

In business, time is of the essence. Decisions need to be taken quickly. In house resources are available at all times, facilitating the process of decision-making. A virtual CFO, on the other hand, will either be available at designated times, or not available. This could slow down the process of decision-making. Moreover, for the CEO, or the board, having an in-house CFO could be an added convenience, who could be called upon for a discussion or explanation when needed.

With all centers of oWorkers equipped to operate on a 24×7 schedule, you will never be delayed because of lack of availability of your oWorkers team.

Cost

For small and medium sized companies, cost often becomes an important criterion when making the choice between the two. A CFO is a highly paid professional, possessing a highly regarded educational qualification, with experience in most cases. Younger professionals with little or nil experience of work may not be considered for the virtual CFO roles. It is not unusual for CFOs to draw upwards of $300K annually in the US.

While large companies, with substantial revenues, a wide operational base and complex organizational hierarchy, hiring a full-time CFO is often justified, as the CFO is able to create adequate value to justify the cost. With smaller companies, that may not be possible. Often, the business is not spread widely enough or is not complex enough for a CFO to devote his/her entire time to just that company. Hence, many smaller companies tend to opt for virtual CFOs.

Confidentiality and data integrity

Information is a key asset of a business. For inhouse resources, who do not have competing work requirements, it is a straightforward task to remember who they work for and their responsibility with regard to data that is valuable for their employer.

When a resource, however, is working for more than one employer, even though each of the companies have taken due care to ensure that the person has signed and accepted relevant confidentiality agreements, the possibility of data being compromised is much higher, even though the act may be inadvertent or unknowingly done.

Of course, the possibility of data being compromised with ulterior motives is perhaps the same in both situations, hence not a factor in this discussion.

Client data is secure in the secure facilities & protocols used by oWorkers. Our ISO certifications (27001:2013 & 9001:2015) and GDPR compliance will further strengthen the security of your sensitive data.

Staying current and relevant

Each individual has limitations. After all, how much can one person handle? One of the requirements of any senior role in a specialized function in a company is to stay current with the changes taking place, either in the environment, or with regard to competitors, or in respect of regulations and laws. Experts keep track of developments, develop communities of similar professionals, participate in events and discussions in an effort to stay abreast.

A virtual CFO, on the other hand, while needing to stay relevant, might benefit from the presence of a team, either that supports him/her, or in the form of other similar professionals, all of them working for an accounting firm that offers virtual CFO services to companies. Together, they have the advantage of a natural community that can feed off each other and bring the most value to the companies they work for.

Under the steady hands of a leadership team that has several decades of hands-on industry experience, oWorkers stays in tune with developments impacting their industries as well as the various client industries.

 

Who should be a virtual CFO

Being a role that requires professional experience and the right educational background, newcomers to the field are unlikely to be accepted as virtual CFOs. They need to work for a company in a capacity that enables them to get the experience that will enable them to operate as a CFO in future.

Alternatively, fresh accounting graduates could join an accounting firm and through them provide services to clients, thus gaining experience.

It is, therefore, an accepted practice that experienced accounting professionals are the only ones likely to be considered for, and accepted in, the role of a virtual CFO.

With its policy of a multi-cultural and multi-ethnic workplace, oWorkers, as a natural outcome, has got the benefit of a multi-lingual one too. It is able to offer an organically developed ability to serve in over 20 languages.

 

The role of Accounting firms

Accounting firms are boldly going where they have not gone before. They have been scouting for opportunities to bolster sagging top line growth in the wake of a slew of DIY accounting software applications hitting the market. Value added services seems to be the go-to place for most firms, adding value to the business of their clients rather than merely helping them complete the compliance related tasks such as filing tax returns and audits.

Virtual CFO is becoming a prominent service for firms seeking to grow. They already have smart accountants who have been working with clients. In a way, they were already playing, somewhat informally, the role of a virtual CFO for many small and medium-sized companies. With the acceptability of virtual CFOs growing, they have a ready product to offer, complete with a team behind the CFO that is ready to do the heavy lifting. With many capable accounting heads becoming available to SMEs, they are addressing complex situations fast. Moreover, with this arrangement, they are not reliant on one head.

oWorkers has pioneered the concept of forging long-term relationships with other industries, such as technology, that can be leveraged for delivery to its clients. Accounting firms can learn from oWorkers and develop relationships with industries and companies that will benefit from their services.

 

Conclusion

The virtual CFO has opened new doors of efficiency and effectiveness for many companies. They need to welcome virtual CFOs and learn to take decisions in the absence of an inhouse CFO. Virtual CFOs need to deliver and meet and exceed client expectations even as they take them to places they have not been before.

Data analysis and interpretation, cost reduction, revenue enhancement, there are many areas where virtual CFOs can add value, even taking companies to places they may never have thought about, such as sustainability accounting.

The BPO industry is dependent on people for its work. oWorkers, recognized as a credible employer in each of its delivery locations, can draw walk-in candidates at will. In fact, we have to turn back many when we don’t have open positions. We are registered as local companies in all our service locations. We pay social and local taxes for our employees who rate us 4.6 or more, on a scale of 5, on external platforms such as Glassdoor.

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