When Is a Part-Time CFO Right for Your Business?

When Is a Part-Time CFO Right for Your Business?

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Capabilities of Virtual CFO Services

CFOs make your organization more valuable to shareholders and increase your business’s ROI. The right virtual CFO services act as your partner to boost your cash, increase profit margins, and uncover new opportunities through a variety of different tactics.

 

Cash Flow Forecasting And Management

How effectively are you managing company funds? You need a partner who can keep their eyes both on how much you’re making and how much you’re spending. Importantly, a virtual CFO can determine forecasts for your business—including most likely, best-case and worst-case scenarios.

With a comprehensive view of your business, your CFO can work to help you eliminate unnecessary spending. And that doesn’t just have to mean making sacrifices, either. Many CFOs have vendor relationships they can leverage, giving you products and services you need to operate successfully and optimize your spending to keep you competitive in your market.

 

Break-Even Analysis

Of course, your virtual CFO can also be a partner to get your ducks in a row, so to speak. Need to know what it’ll take to become profitable? First, you need to determine what will keep your company in the black. Your CFO can conduct a break-even analysis to help clarify this. 

A break-even point is where your total revenues are equal to your total expenses, where you haven’t made money on sales or lost it due to excess expenses. Your CFO service partner will look at a few key figures to help you figure out how to break even:

  • Overhead expenses, plus

  • Balance sheet payments, divided by

  • Gross margin

The equation to calculate your break-even point looks like this:

 

(Overhead Expenses + Balance Sheet Payments) / Gross Margin = Break-Even Point

 

Budget-to-Actual Reporting

How are things going for your business compared to what you’ve planned? Budget-to-actual reporting—also called budget variance—is one of the most important analyses virtual CFO services can offer. It compares your planned transactions (your budget) and the financial results (your actual) for a given time period. Your budget variance can be shown in one of two ways: as a percentage or as a numeric difference between budget and actual numbers.

But we’re not just looking at the disparity between the two figures. Rather, you need to know why—especially if your actuals fell short of the forecast. This could happen for several reasons, so ask yourself a few questions:

  • Are sales taking off faster than expected?

  • Are higher raw materials or personnel costs recurring problems? 

Your virtual CFO can look at the data and glean specific insights. Perhaps your growth forecasts are too optimistic, or you simply need to cut staff. In any case, the information can impact future decisions.

 

Raising Capital

Here’s the thing: If there’s one thing virtual CFOs know, it’s money. That is to say, they have tons of experience helping you secure money. Have a funding source in mind? Seasoned virtual CFO services have successful track records of evaluating capital opportunities for companies just like yours. 

A part-time CFO can help you from multiple angles: reviewing, analyzing, and determining the best capital situations possible. By assisting with the monetary side, your CFO can advise on financing options aside from straight equity investment. But your CFO can also facilitate investor relationships by analyzing and negotiating contract terms, preparing financial models for meetings, and doing general meeting prep. 

 

Variable vs. Fixed Expense Reporting

Variable vs. fixed expense reporting focuses on cost management. It incorporates variable costs tied to revenue, such as raw materials or direct labor, and fixed expenses that are unrelated to selling your products or services, including rent, insurance, and administrative payroll.

Your virtual CFO partner can work with you to analyze your cost profile, vendors, and strategy, complete with a report showing both fixed and variable expenses, to plot a plan for growth. The goal of this is simple: To manage your costs so neither your fixed nor variable costs get out of control. Through strategic analysis, virtual CFO services can alert you to cost creep and identify ways to overcome it.

 

3 Instances When Part-Time Virtual CFO Services Make More Sense

So, when is a part-time CFO the best fit, anyway? Myriad factors go into the decision, but Ignite Spot has found that it comes down to three things: Budget, depth of service, and tech savviness. Consider:

 

1. If Money Matters

Companies with under $10 million in revenue can rarely justify hiring a CFO. They want and need to grow but don’t need that talent (or the associated expenses) full-time. In-house CFOs are usually off the table because they frequently command six-figure salaries and receive costly benefits. The compromise? Virtual CFO services.

When your budget is a primary driver, get what you need when you need it from a scalable resource such as a virtual CFO. Maybe 40 hours a week, every week, is a deal-breaker, but a mere 80 hours a month is cost-effective. Bonus! Outsourcing the CFO function also saves you money on recruiting and hiring the position full-time. One industry we usually see this working exceptionally well in is call centers, which are often strapped for cash.

 

2. If a Calendared Cadence Suits Your Needs

Don’t need constant access to financial guidance? If your business runs on a “heartbeat,” a virtual partner could be ideal. 

When we say “heartbeat,” we’re referring to a steady schedule of activities, wherein your business doesn’t need service on demand but instead succeeds when billing and other support functions are executed on a schedule. We see this a lot with organizations such as senior living facilities, which—between finances and patient care—juggle so many balls and need structure.

 

3. If You’re Up on the Latest Tech Tools

You’re tech-savvy, and digital communication is second nature, so maybe virtual CFO services could work for your business, given their reliance on everything from accounting software to videoconferencing. 

Virtual CFO services are remote-based, so you need to be just as comfortable with digital collaboration as your CFO partner. In our experience, companies that are comfortable using apps and digital collaboration tools—such as marketing agencies—adapt well to a virtual CFO arrangement. 

 

Get the Right CFO on Your Side

In-house or virtual CFO services? Trusting an expert external partner has its perks, from having a resource to turn to for forecasting to being able to offload vital reporting functions. Whether you wish to save a little dough or leverage your business’s tech acumen, part-time virtual CFO services can help. 

Think this might be the right fit? Check out Ignite Spot’s outsourced CFO services, and learn how we can help you!

Strategic growth opportunities should be available regardless of your company’s size.

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