How to become a virtual CFO

Accountant & Bookkeeper Guides

8 min read

Financial advisors help small businesses make the right decisions. In this guide we'll look at how you can become a Virtual CFO and provide the valuable services that your clients really need.

The changing face of accounting

The accounting profession is going through some major changes. There are now more firms competing with each other than ever before.

Small businesses now have so much choice that ordinary services like compliance, tax preparation and basic bookkeeping are becoming commoditised. There's so little differentiation in this crowded market that the value of these services is being driven down.

Cloud technology is also reducing the value of basic accounting services. Firms using cloud-based systems are more efficient and productive. That's because many labor-intensive and time-intensive tasks can now be automated.

Making the most of new technology

Cloud technology opens up new and profitable opportunities. Communication is getting easier as mobile devices become more popular. These are leading to big changes. For example, it's now possible to see your client’s cash flow in real-time, using cloud accounting software.

Modern technology can help accountants and bookkeepers become their clients’ trusted advisor. You can be the financial expert that helps them make smart and timely business decisions.

So it's a good time to move away from labor-intensive services into the world of business and financial consulting. But that can be a challenge, especially for firms that are used to working with clients in a particular way, and feel comfortable with their established software.

In fact there's more to it than just new software. To successfully move into the consulting services market you'll have to change the way you work and communicate with your clients.

That may sound daunting, but it can lead to a big increase in efficiency, productivity and profit. Cloud technology, coupled with valuable financial advising, helps you stand out from the competition.

So it's not only a good idea to use cloud technology – it's essential. Firms that don't adapt will face decreasing revenue as their services become more commoditised.

What is a virtual CFO?

The Virtual CFO is a new concept. It's a way for small businesses to get CFO support that they wouldn't have been able to afford previously.

Small businesses that hire a Virtual CFO get access to an experienced financial professional at a fraction of the cost of a full-time CFO. The services will differ from firm to firm, but usually a Virtual CFO will:

  • Handle all the duties of a traditional CFO, but work remotely and on a part-time basis.
  • Monitor the financial health and well-being of the business, usually with cloud technology.
  • Offer financial insight and guidance on all company decisions and issues.
  • Provide back-office functions such as managing accounts ledgers, depending on the client and their needs.

How the cloud can help you offer a virtual CFO service

If you want to offer valued-added services such as Virtual CFO, the first step is to start using cloud technology. The cloud offers several benefits that will help you set up a Virtual CFO service:

  • Cloud solutions can share data, making it easy to synchronise and transfer data between different systems.
  • Cloud accounting software gives you real-time reporting and analytics features. These help you gain insight into a client’s financial condition.
  • Cloud accounting and business management solutions are accessible anytime, anywhere. This means you can offer Virtual CFO services to your clients from any location.

The bank account reconciliation is one example of how the cloud can save you time and money. Traditional reconciliation is tedious and time-consuming. Cloud accounting software can do it much faster, connecting to online bank and credit card accounts that are also in the cloud. Daily bank transactions are fed into the accounting software and matched to the corresponding transaction. Then all the user has to do is confirm the match.

This shows how cloud accounting can automate a low-value task, leaving you with more time to work on more profitable business.

Do your research carefully when deciding which cloud accounting software is best for you. Read our guide to moving your accounting practice to the cloud to help you make the right choice.

Advantages for small businesses

Having access to a Virtual CFO can be a big benefit for a small business. Most of them can't afford an experienced, knowledgeable CFO on a full-time basis and may never consider hiring one.

That's a problem, because many small businesses fail within the first three years. Reasons include failure to set themselves apart from the competition, and an inability to find a profitable business model. With an accounting professional acting as their Virtual CFO, they could keep their financial goals and realities clearly in sight.

A Virtual CFO is an affordable alternative to hiring a full-time CFO and can make a big difference to a small business, by:

  • Creating budgets and forecasts.
  • Pinpointing problem spending by highlighting trends in the market.
  • Validating or discouraging business decisions with financial well-being in mind.

These are abilities that the vast majority of business owners don't possess – but they often need them in order to succeed.

With a combination of practice knowledge, cloud-based accounting software, mobile technology and modern data analytics, you can provide Virtual CFO services that will be of great benefit to your clients.

Having access to a virtual CFO can be a big benefit for a small business.

Why are virtual CFO roles becoming more common?

You may not have even heard the term until recently. Trends in the accounting profession have led to value-added services like Virtual CFO becoming more common:

  • Increased competition and improvements in technology.
  • Compliance and tax preparation becoming commodity services.
  • Automation of basic functions, lowering the value of traditional services.
  • Small businesses outsourcing non-core functions like accounting, in order to lower their costs and obtain better talent.
  • Software that provides true, real-time cash flow insight for proper decision-making.

These trends are forcing firms to evolve, by expanding and differentiating the services they offer. Basic services like compliance, financial statements and tax returns can still be profitable. But they should be relegated to the bare minimum package your firm will provide to a new client.

In the near future, successful firms will generate most of their revenue through financial insight, analysis and other services that can directly influence the success of a small business.

Introducing the virtual CFO role into your firm

The public accounting profession includes many different types of firm. These range from single-employee bookkeeping firms to larger practices with outsourced accounting divisions.

This diagram is a simplified view of the parts of the profession – it's only a general approximation.

The services become more important to the success of your client’s business as you move from left to right. The greyed-out services on the far left have become highly automated and commoditised.

This means you should be providing services on the right of the diagram – services that help your clients run their businesses more successfully. If you offer services that have high value for your clients, your revenue should increase.

Many small businesses don't even know that their accountant or bookkeeper can do much more than just compliance and tax work. So it’s important to explain the value you can provide. Some clients will still choose basic services, but over time you can offer added value by providing useful insights. As the client grows to know and trust you, the advantage of working with you in an advisory capacity will become clear.

Remember to package your services into different bundles. That way the terms of service are always clear, and your clients can migrate upward when they need to.

Change the way you work

To become a Virtual CFO you'll need to make some fundamental changes. These include moving to a cloud-based accounting system and changing the way you interact with your clients.

However, you must also change the way you think about your business relationships. To truly embrace the role of a Virtual CFO, consider the following changes:

  • Stop seeing process-driven services as the core of your business.
  • Offer more consulting services.
  • Build meaningful, face-to-face relationships with your clients.
  • Talk to clients often enough to manage their issues proactively.
  • Understand and provide feedback on your clients’ business goals.
  • Help your clients achieve their goals.
  • Become a trusted business advisor.

Is my firm ready?

The short answer is – it has to be. Basic services have become commoditised. They will continue to decrease in value as more competitors emerge and technology improves.

Profitable accounting firms of the future will be 100% cloud-based and advisory-driven. You can start moving your firm in the right direction by:

  • expanding the delivery of basic services and moving into a broader, advisory role.
  • differentiating your firm from others in an increasingly crowded market.
  • changing your business philosophy and engaging with clients as a business advisor instead of a service provider.
  • using a cloud-based accounting system with in-depth reporting and analytical tools.
  • having the scope and resources to deliver Virtual CFO services to your clients.
  • having a solid customer base of small business clients who would benefit from a deeper level of business advice.

From this starting point you can move your firm out of the commodity services sector and into the advisory sector. And start making the most of the new era of accounting services.