A great idea is the foundation of businesses. The firm finds itself in the course of a quickly expanding company. It happens when an idea catches on and the services are in high demand. Unless the entrepreneur is also an economic expert, the one thing they’d struggle with is economic management.
Hiring a CFO is a crucial step forward in developing any business. Because every business differs, you don’t want to approach the issue with a “one-size-fits-all” perspective. When hiring a CFO, it’s easy to need clarification on whether to employ an in-house CFO or use remote CFO services for critical decisions.
The answer will depend on your business. It also depends on what you want from your CFO. We will compare these two with some important differences.
This article deals with the difference between a remote CFO and an in-house CFO. Let’s explore it.
Who is a CFO?
The Chief Financial Officer (CFO) oversees an establishment’s accounting. They are responsible for analyzing financial data, managing costs, reporting financial performance, etc.
A CFO is an important element of the organization for businesses. Its responsibilities are not limited to managing the firm’s financial resources. They decide on the businesses’ capital structure and when and where to invest.
A remote CFO outsources work that gives economic assistance to a firm. It is more cost-effective. It is also more efficient than hiring an in-house CFO. As a result, by using remote CFO Services, you can access highly qualified financial specialists who can increase your cash flow and profitability. It can be done without spending a fortune.
You should employ a CFO based on your specific needs. But, all CFOs will assist your company’s financial management systems and processes.
Different types of CFO Hires
CFOs collaborate with companies in various ways. It includes:
Full-time CFO
When most of the people think of an in-house CFO, they imagine a full-time position. Industries will often hire full-time CFOs with annual revenues of $10 million or more to handle economic management and any situation that destabilizes operations.
Fractional CFO
A fractional CFO works part-time with numerous companies to fill out their workweek. Establishments with less than $10 million in annual revenues that need constant CFO expertise may seek fractional assistance to meet their necessities.
Interim CFO
Interim CFOs work with industries to manage their economic demands for a limited time. They provide part- or full-time aids for specified periods. It is usually one to twelve months, instead of fractional CFOs who work part-time.
Virtual CFO
A remote CFO is a cross between a fractional and interim CFO and engages with your firm through remote work. They are also known as outsourced CFOs.
It’s worth noting that these many CFO types overlap. Also, the titles are interchangeably used. For example, a full-time remote CFO could be considered “virtual,” while any form of CFO who provides aid from your office is regarded as “in-house.”
Choosing between in-house and remote CFO services
We have to choose between in-house and remote CFO aids under certain circumstances. It involves:
1. Finance and accounting costs
A full-time or in-house CFO comes with a price tag involving salaries, software, equipment, and office space. For example, the expense of onboarding and training new CFO recruits is high. After all, choosing and implementing an effective digital accounting platform is an important expenditure.
Companies can save money by using outsourced CFO aid. This model accounts for all costs associated with people, processes, etc.
2. Responsibilities
An in-house CFO manages the economic aspects of the company where they work. As a result, they are responsible for stakeholders, board members, etc. The accounting team assists the CFO in preparing a roadmap for the company’s future victory.
Remote CFO extends all CFO functions but only provides them when the company demands them. Economic planning, reporting, and strategic aids are provided without hiring a CFO or accounting staff.
After all, it can simultaneously handle many financial services for various businesses because the remote CFO has a team. You will only have to pay for the aid you rendered to the remote CFO.
3. Financial management
The organization is associated with an in-house CFO. Close involvement in the company’s operations assists the in-house CFO. It helps in developing detailed financial strategies and proposals.
The in-house CFO may devise elaborate strategies. It is because they completely understand the firm and its activities. Making strategic plans, adjusting essential modifications and monitoring their implementation are important. It is simple for an in-house CFO. It is always beneficial to any firm.
A remote CFO works with different clients and is exposed to different situations and issues. The remote CFO can provide intelligent solutions with a broad client base and excellent outcomes. It is because of their overall vision. They know the proper economic approach that works flawlessly.
Such a variety range of economic management skills saves them time making trial-and-error decisions. It also guarantees their clients profit.
4. Security
Fraud costs the average corporation roughly 7%. According to a study, these are the company’s annual earnings. A normal company has a small team of finance professionals. It can be, say, two or three. As a result, just a few economic experts have complete authority over the economic department. Thus, such companies are subject to fraud.
Small and medium-sized companies can get aid from an outsourced CFO. It helps them overcome this obstacle. It has a dedicated group of accountants. They work within a system of regulations. The outsourced CFO aid experts are highly dependable, reputable and trustworthy.
They give company executives consistent and accurate data reporting. After all, these people speed up the implementation of new operations. As a result, company executives profit from the firm’s secure technology stack.
5. Revenues
The important factor to consider before deciding between an on-site CFO and a remote CFO is the size and revenue of your company. At the same time, this isn’t a rule of thumb or a guide. Various companies only engage an on-site or in-house CFO if their gross revenues are USD 10 million.
You’ll have to give full-time salaries and extra gifts if you hire an on-site or in-house CFO. You’ll also need to give gifts like paid time off. You should consider whether giving for all of these expenses is worthwhile.
Employing an in-house CFO may be cost-effective if you have a lot of work to perform in your economic management. If you have a lot of daily work that needs to be supervised by a CFO and many accounting = records that need to be completed weekly or monthly. You may need to hire an on-site CFO at this time,
However, if the work that has to be done can be done remotely, you should consider hiring a virtual CFO.
6. Focus on core
Entrepreneurs need to gain the experience and knowledge needed to perform specialized duties such as economic management. They need more information and skills to report and analyze the company’s accounting activity.
As a result, businesses need the assistance of expert financial professionals who can lead them to success. They need strategic counsel. They help in managing a company’s accounting difficulties.
Companies can address this gap with the help of virtual or outsourced CFOs. They provide a company with an economic strategy. They also allow owners to concentrate on their primary businesses. They also set safeguards to ensure that a company only spends what it should.
Giving such aid offers business owners adequate time. It helps to concentrate on expansion. Hiring in-house CFOs is a difficult task. It is challenging because they have to keep a check on the whole group. Business owners must collaborate with full-time remote CFOs to handle accounting and bookkeeping.
Winding Up Note
While both in-house and remote CFOs offer advantages in certain situations, it’s worth noting that remote CFOs are becoming more widespread in the business world. Consider the size of your company when deciding between an in-house vs a remote CFO.
Suppose your enterprise has reached the point where it needs the assistance of a CFO. A remote CFO might be a perfect choice because they give considerable cost benefits. However, if your company generates substantial annual revenue, consider hiring an in-house CFO who can focus solely on your company’s finances.
Kindly connect with Startup Fino for more assistance.
FAQs
What involved remote CFO aids?
Remote CFO services involve economic planning and analysis, budgeting, forecasting, and creating detailed financial plans. It also gives projections to anticipate future expenses and revenues.
How much does a remote CFO cost?
Employing a remote CFO can cost anywhere from $2,000 to $10,000 per month. It depends on the provider and aids. It can be an essential but pricey investment for your business.
How much does a freelance CFO charge per hour?
Freelance CFOs normally charge between $200 to $500 per hour. It depends on location, education, company size, and experience. This rate usually does not include benefits.
Types of Technology Use in Outsourced Accounting
Cloud-based accounting software helps in outsourcing accounting. That is the help in document management systems, electronic payment platforms, etc.
How does technology improve data security in outsourced accounting?
Technology plays a vital role in ensuring financial data security. These involve encryption, multi-factor authentication, etc. All measures to protect sensitive information, too
What does a remote CFO do?
A remote CFO provides economic planning expertise. It implements strategies and manages assets to ensure business growth.
How does a remote CFO manage financial risks?
A remote CFO manages financial risks by identifying potential risks. It also develops strategies to mitigate them. After all, it monitors economic exposures through internal controls and observation. This helps to ensure the company’s financial stability.
