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What is a CFO? – What Do They Do and When Does My Business Need One?

Accounting Blog And Medium 9 Jun 23

Finding the perfect financial team for your business is essential for success. If you wait too long, you could miss out on essential funding opportunities for your business or make critical financial mistakes. However, hire too early, and you could be wasting precious capital.

While you might be able to take care of general bookkeeping tasks by yourself at first, such as managing your books, finding opportunities to increase revenue, and protecting your assets, it can quickly become overwhelming if your company starts to grow. So what is a CFO, and when do you need to hire one? Our article will help you understand everything you need to know about CFOs, and the importance of adding one to your business, regardless of the size.

 

What Is a CFO?

A CFO, or a Chief Financial Officer, is an essential role in any company because they have the difficult responsibility of ensuring that the company has enough money to grow and make critical financial decisions that impact the business’s success. CFOs are constantly analyzing, planning, and forecasting to help your business strategically scale.

Chief Financial Officers also need to make sure that there are not too many losses for the business, which means that they have to know about all aspects of accounting, including taxes and budgeting. On top of that, CFOs need to be able to present this information to a board of directors and the CEO of the company while working alongside the COO (chief operating officer).

Many different responsibilities come with being a CFO, so it’s crucial for you as an entrepreneur or CEO to understand what those responsibilities entail before hiring one yourself.

 

What Are the Responsibilities of a CFO?

Chief Financial Officers have a lot of duties that go with their title. Some of the chief financial officer responsibilities include:

  • Financial planning and reporting
  • Data analysis
  • Financial risk management
  • Record keeping
  • Fundraising
  • Responsible for reporting to the executive board
  • Ensuring all projects stay within budgeting requirements and limits

 

The Chief Financial Officer is also not a simple 9-5 job – they need to be available 24/7 so if an emergency occurs outside of working hours (like when a company has lost money), someone will always be there to help you sort it out. CFOs essentially work to gather as much information as possible to help make the decision-making process easy and push their company towards financial growth.

 

Is It Time to Hire a CFO?

Trying to determine when the best time is to hire a CFO can be tricky. It used to be common for companies only to hire a CFO once they were making at least $50 million in annual revenue. However, if you’re making more than 1 million dollars in annual profit, you’ll need to start investing in an individual to take responsibility for your company’s accounting activities. They essentially act as a CFO, but on a smaller scale.

Even at that revenue point, you could hire a virtual CFO to help ensure your company’s path to financial success on a part-time basis. You might not need to hire a full-time CFO at this point, which is why many will choose to hire a part-time virtual CFO from an outsourced firm.

While these are typical industry standards for hiring a CFO, this may look different for your business, depending on the growth expectations, competition, market, and team’s financial operations skills. Even as a small company, you may already have the need for a CFO. If you’re still unsure if you need a CFO, consider your answer to these questions:

  1. Do you know how to calculate your loss and profit, cash flow, or bottom line in your company?
  2. Do you know how to forecast and plan for your company’s financial future based on your previous data?
  3. Can you sustain your revenues while still managing corporate tax compliance?
  4. Would hiring a CFO increase your productivity and free you up so you have more time to focus on other projects?

Just because you have the data available, you might not know how to interpret the data and create a sustainable growth plan from it. However, as the owner or CEO of your own company, that’s not your role, which is where financial officers come into play.

 

Is a CFO Essential to My Small Business’s Success?

A chief financial officer is essential for any company, regardless of size or industry. A financial officer can help with all aspects of a business’s finances, including budgeting and forecasting, accounting processes, payroll management, and tax compliance, which is essential if you’re a one-person business or a giant corporation.

As the owner or CEO, your time needs to be spent on other things like marketing strategy and sales targets, not forecasting and financial strategy. Just because you have the data available, you might not know how to interpret the data and create a sustainable growth plan from it. This is where financial officers come into play.

The best part of hiring a CFO on demand is that you’re able to get the services you need without the commitment or expense of a full-time employee. Virtual CFO rates are flexible depending on the size of your company and your specific business needs.

 

Find the Right Solution for Your Business With a Virtual CFO

When it comes to financial strategy, budgeting, forecasting, and tax compliance for your small business or startup company, a virtual Chief Financial Officer may be the best option.

Virtual CFOs are specialists who can provide expert advice on how to manage finances in order to grow your organization while avoiding unnecessary pitfalls. The right virtual CFO will help you develop an accounting plan that’s tailored specifically for your needs, as well as monitor expenditures, so you don’t spend more than necessary. Take advantage of ioogo’s affordable rates today and get started on improving your company’s bottom line tomorrow.

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