Finance and Accounting
Choosing a CFO: Virtual versus in-house
A chief financial officer (CFO) oversees the financial aspects of a company, such as financial performance, cost management, and other business decisions that affect the company’s financial status. Often, when companies contemplate hiring a CFO, they often face a dilemma between hiring a virtual CFO or having a full-time, in-house CFO. Let’s weigh both the options and decide which one suits you better to help you make an informed choice.
A comparison of in-house CFO versus a virtual CFO
Let’s start with the basic definition of both these types of CFOs. An in-house CFO works on the company’s payroll as a full-time employee. A virtual chief financial officer (VCFO) does everything that a company’s in-house CFO would, but remotely. A VCFO operates as a bookkeeper and a financial expert on company matters. The scope of their influence on the company’s financial decisions vary depending on the company policy, but VCFOs are available when the company needs their expertise and experience. We could compare in-house CFOs with virtual CFOs across costs, convenience, integrity, experience, and decision-making parameters to understand their benefits and drawbacks granularly.
Costs to company:A CFO is a C-suite position with significant costs attached to it. The median salary of a CFO in the United States is well above $300,000 per annum. In addition, the position entails added costs such as insurance, benefits, and so on. Companies with a sizeable annual revenue may be able to afford an in-house CFO. Those in a weaker financial position may end up draining most of their resources with such a position. In situations like these, hiring a virtual CFO proves cost-effective. Companies that provide virtual CFOs demand specific resource fees and cover employment costs, which helps emerging companies save millions of dollars.
Convenience:You may opt for an in-house CFO when your turnover and income are substantial and you have extensive financial needs. You’ll need a full-time resource to continuously monitor your economic well-being. But if you are a start-up or an SME, hiring a virtual CFO can prove convenient. You can avail the service selectively - when you need the CFO’s expertise.
Integrity:Often, people think external partners (in this case, virtual CFOs) wouldn’t work with the same integrity as in-house CFOs. But that’s not true. Outsourcing CFO functions to a reputed service provider can prove helpful for companies. Virtual CFOs are seasoned and senior finance professionals who understand the criticality of financial excellence in the modern business environment. Hence, they work with the same integrity as a full-time resource.
Experience:Hiring an in-house CFO means relying on one individual to handle the finance operations of an organisation. A single person’s expertise and experience may sometimes prove inadequate to address some issues. But with VCFOs, that’s seldom the case. In many instances, a virtual CFO is a team that works behind the scenes to manage the company’s economic challenges. All of them are experienced enough to handle various complex issues and are capable of helping a company tackle a complex situation. The onus isn’t on a single person in the latter scenario. You can leverage the expertise of several people at a time to ensure effective financial management.
Decision-making:In terms of decision-making, one can term in-house CFOs and virtual CFOs equivalent in this aspect. In the latter case, it depends on the company policy. Some companies may seek a virtual CFO’s expertise but reserve the decision-making aspect to themselves. But other companies who are availing the services of a virtual CFO, who’s been part of the ecosystem for years, may allow the VCFO to take vital decisions in their favour. In a nutshell, both are capable and visionary enough when it comes to decision-making.
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How can Infosys BPM help?
In-house CFOs and virtual CFOs have their unique set of advantages. They undertake businesses’ finance tasks and shoulder similar responsibilities. However, with either formats of services, digitisation is a sink-or-swim issue. Digital transformation can prove beneficial to company finance, considering cost reduction, revenue optimisation, and convenience. Infosys BPM can help such companies. We offer finance and accounting outsourcing services to support the end-to-end F&A function. Our pool of financial experts enables you to achieve financial excellence and sustainability.