Virtual CFO vs. In-house Accountant: Which One Is Better for Your Business
Finance is the lifeblood of every business, and having the right person to oversee your company’s finances is crucial for your business’s success. When assigning the right candidate to spearhead a company’s finances, many business owners are torn between CPAs and virtual CFOs.
By definition, CPAs and CFOs serve distinct functions, yet they are often interchanged. In this blog post, we’ll discuss the functional difference between the two and which is better suited for your business.
What Is a Virtual CFO?
A virtual CFO, or Chief Financial Officer, is a financial executive who oversees the finances of a business. Generally, virtual CFOs are experienced professionals with a wealth of knowledge in accounting and finance.
These professionals guide businesses in managing their finances, including budgeting, cash flow management, and financial strategy development.
Virtual CFOs typically work remotely from their clients, making them the perfect solution for businesses with limited budgets and resources. They can provide insight and guidance in a more flexible way than traditional finance hires, as they have a broad range of experience across multiple industries.
What Are Their Responsibilities?
When it comes to duties and responsibilities, virtual CFOs are responsible for a wide range of financial obligations.
These include developing financial strategies for the company, providing financial advice and guidance to business owners, analysing investments and determining their risks, preparing financial reports, budgeting, analysing cash flow trends, and ensuring compliance with applicable laws and regulations.
Pros and Cons of Outsourcing to a Virtual CFO
You can benefit from outsourcing to a virtual CFO in many ways. Most notably, you can save costs on hiring and training an in-house accountant, as virtual CFOs typically charge less than traditional hires.
Additionally, they bring with them extensive experience from working with other industries that can be used to benefit your business. Finally, because most of the work is done remotely, there’s no need to physically set up an office or manage additional staff.
However, there are some drawbacks associated with outsourcing to a virtual CFO. For starters, communication can be difficult, and it may be hard to get the attention of your CFO right away due to their distance and multiple clients.
Another challenge you might face with a virtual CFO is that you might be unable to track their progress easily or evaluate their performance as closely as you would with an in-house accountant.
What Are the Responsibilities of an Accountant?
CPAs, or Certified Public Accountants, are responsible for various specialised financial tasks, including preparing tax returns, providing auditing services, and reporting to the government. They are also responsible for developing a company’s budget and ensuring it is followed correctly.
In addition, accountants often provide advice on legal matters. They help companies make sound decisions when managing their finances and comprehensively understand financial regulations.
Many entrepreneurs misidentify CPAs and CFOs because they have few overlapping responsibilities. However, the skills and qualifications required for each role are very different.
Pros and Cons of Building Your In-house Team of Accountants
One evident benefit of having your own team of accountants is that you will have complete control over the entire process. You can evaluate their performance and give direct feedback or guidance whenever necessary.
Moreover, an in-house team allows for better communication since they work in your office. This makes it easier to hold regular meetings and ensure everyone is aligned with your business goals and updated with any financial changes.
However, having in-house accountants comes with a few drawbacks as well. First and foremost, hiring and maintaining an accounting team can be expensive, especially if your business is small or just starting.
Additionally, you may need to spend more time training the staff since in-house employees tend to lack experience compared to virtual CFOs.
Comparing a Virtual CFO Against an In-house Accountant
Let’s dive deeper and look at the different factors that set these two professions apart.
Past vs. Future
CPAs are more focused on your company’s financial history. They are primarily concerned with filing taxes, preparing financial statements, and ensuring compliance with existing regulations.
In comparison, virtual CFOs are more forward-looking. By leveraging their experience across various industries, they can provide strategic advice on investments and other significant decisions to help your business grow.
Virtual CFOs project your company’s cash flow and how you can make your business more profitable. They evaluate possible opportunities to maximise profits and help you build a sound financial plan for the future.
Both professions are masters of different financial disciplines. CPAs are more specialised in the details of bookkeeping, taxes, and regulations.
On the other hand, virtual CFOs have a more comprehensive understanding of financial matters. They are experts in investment strategies, budgeting, and forecasting to help you make informed decisions about your company’s finances.
With CPAs, you’re restricted to their scope of responsibilities, and you can only count on them to help you with tax filings, financial statements, and auditing services.
In contrast, virtual CFOs provide a more flexible approach to managing your finances. Depending on their experience and expertise, they can take on various roles for your business, including budgeting and forecasting, investment advising, cash-flow management, and much more.
When utilised properly, you can maximise the potential of a virtual CFO and have a fully-functional remote financial team to help you achieve your everyday goals.
Choosing the Best Option for Your Business
Knowing which one you need for your business starts with understanding the core differences between the two, and your business goals.
If you’re just starting out and need someone to help with filing taxes, preparing financial statements, and ensuring compliance, an in-house accountant is a great option.
However, if your business has grown significantly, or you need assistance making strategic decisions related to investments and cash flow management, working with a virtual CFO can be your ideal option.
Book a Free Strategy Session With the Lucent Team Today
If you’re struggling to choose between hiring an outsourced CFO or a licensed accountant, we can help. At Lucent Advisory, you don’t have to burden yourself with the ultimate decision.
Our can team can provide accounting and virtual CFO solutions to help you comply with tax regulations while aiding your long-term business objectives.
Book a free strategy session with the Lucent Advisory team to get answers to all of your questions and discuss how we can help.