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The Rise of the Virtual CFO

Chris Schwalbach  ·  June 5, 2020  ·  6 min

The growing need for financial experts in business has become even more apparent with current economic difficulties, but the demand has been growing for a while. The need for a virtual CFO is higher in demand for multiple reasons. As business becomes more complex and the CFO is required to wear many hats (while working remotely), we have provided some background and questions to ask when choosing the right CFO for your business.  

The Rise of the Virtual CFO

Why the Rise?

The rise of the virtual CFO has a lot to do with more significant demand for the full-stack CFO–one who deftly leverages resources like their team, technology, and strategic partners effectively while also being accessible at any time. There are three primary reasons why there has been a rise in the virtual CFO:

  • A virtual CFO brings experience into increasingly complex business scenarios. For a while, we’ve experienced a more complicated business world with added challenges arising from globalization, cloud management, multi-channel needs, and added demands on businesses at an earlier stage. Adding the COVID needs around PPP loans, EIDL loans, the mainstream lending programs, cash flow forecasting, scenario planning, employee tax credits, and other tax impact changes increase the need for CFO  expertise. With these ever-changing and growing challenges, the virtual CFO has been able to help businesses pivot quickly and on-demand
  • A virtual CFO offers agility. As businesses grow and change, the need for agility is critical. This can be seen not only with current COVID-19 related changes, but also high growth moments or significant shifts in markets. Full-stack, virtual CFOs have more access to resources and have the expertise to help businesses stay flexible and provide more opportunities to adapt quickly and be proactive. 
  • A virtual CFO is integrated. As working remotely from home has become a mainstay for early-stage businesses, and now a necessity for all businesses during the pandemic, we see how teams are successfully implementing technology and teamwork in these virtual environments. Since this foundation has already been established and confidence is growing around its effectiveness, companies better understand how virtual CFO services are possible and can be an integrated part of their team, despite not being in the office. 
The Rise of the Virtual CFO

What are the types of CFOs?

Let’s take a second to get clear on the vernacular around the types of CFOs. Every position a CFO serves is necessary and essential, but there is a growing need for CFOs to wear multiple hats in multiple platforms. There are many types of CFOs that provide a matrix of services for a variety of business needs. Here are a few types that build-up to the need for a virtual CFO presence. 

  • First, there’s the Virtual CFO and the Local CFO.  Traditionally, an on-site and in-person CFO was the way of business. However, today we have distributed and remote workforces, companies leverage a network of national service providers, manufacturers, and distributors. Based on how you work and where you’re going, you need to determine how critical the on-site component is for your business right now.
  • Next, there’s the Full-Time CFO and the  Contract CFO.  In deciding what’s right for you, a couple of key questions to think about: Is the CFO role truly a full-time role in our company yet? Are we at a stage that will attract the right caliber Full-Time CFO or could we utilize a Contract CFO until we hit Milestone X?  How do we want to utilize our precious financial resources for this role at our stage?
  • The Fractional CFO vs the Interim CFO.  The advantages of an interim CFO are mindshare and dedication to your business whereas Fractional CFOs will typically work with multiple businesses simultaneously (like a lawyer has many clients). These can both be virtual CFOs or on-premise, but the language is typically descriptive to how they work with you.  Think about the time needed, the focus required, and the stage your business is at right now relative to the role.  What work is needed? What’s the time & effort required? 
  • The Full-Stack CFO and the Individual Contractor. The Full-Stack CFO is part of a team with other CFOs as well as other resources like Accountants and Controllers. And the Full Stack firm that shares best practices, leverages technology for growth and has relationships with other key services providers in the community bringing value far beyond the accounting & CFO services. (What is full-stack? It’s a phrase borrowed from technologists referring to a developer who can build and manage both the frontend and backend of a website, meaning “full service, or full tech.”)
The Rise of the Virtual CFO

How Can I Identify the  Virtual CFO who is Best for Me?

While considering the type of CFO that will work best for your business, consider how the virtual, full-stack CFO can be a multifaceted partner for your company’s protection and growth. 

  • Size: Ask the CFO if they have served businesses that match the size of your business. Just because they’ve been a CFO for a $100M business, it doesn’t mean that they know the challenges of being a CFO for a $2M business. Does the CFO know the difference? Dig in here on their experiences!
  • Stage: Ask the CFO if they are familiar with the pace and stage of your business. There are differences between a cash-flowing and a total cash venture business. Maturity is also a factor. The CFO needs to understand what you need based on your stage.
  • Industry: Ask the CFO if they have worked in your industry. A SaaS CFO is very different from a consumer packaged goods CFO, an agency CFO, or a financial services CFO. Also ask what kinds of metrics they have used associated with your size, stage, and industry specifics. Knowing what metrics should look like and how to drive those metrics with experience in any given industry is very important. 
  • Technical Accounting: Ask the CFO what their experiences are with specific technical accounting issues that they see in your industry and how they have dealt with those issues in the past. The CFO needs to be knowledgeable of the tools and techniques specific to your industry to keep your business compliant and forward-looking. 
  • Support: Ask the CFO what resources they pull from. Is there a back-up plan? What resources do they have to learn new information for sudden changes? Having a full-stack CFO team helps. Also, ask if they have other partners they can leverage (like CPA support or other tech partners). These connections are important to have when new situations arise, and a quick learning curve is needed. 
  • Beyond Services: What is the role of the CFO beyond the general CFO work they provide? Do they offer a robust tech stack or a connection with investors? The firm should bring more than just the work itself. I like to use the example of differences between “dumb money” and “smart money.” There is a difference between someone who just writes a check and walks away versus someone who brings a wealth of resources with them beyond money.  

The AVL model

As a dedicated management and financial operations team who is “always on,” AVL is a virtual, full-stack CFO firm that is responsive and available whenever a business needs us. It provides a complete set of skills surrounding finance and operations expertise. 

We’ve built a network of strategic partners to support any client’s additional needs, provide consistency, and provide the best answers created by the team and network collaboration. We are not an island unto ourselves–our network of resources is available to rapidly deploy services for every client in a virtual space that provides immediate access. If you want to find out more about what we can do for your business, reach out at hello@avlgrowth.com