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7 Benefits of Working With a Virtual CFO

Ledge Financial · June 2, 2023 · Leave a Comment

There are few things worse than a cash flow problem. So it’s no surprise that’s what usually drives high-growth companies to look for a virtual CFO.

When you’re already challenged with more than you can get done in a day, spending your nights worried about profitability makes it worse. You’re maxed out. Your team’s maxed out. And while everyone knows the bottom line is critical to your growth and success, nobody in-house has the right skill level or experience to lead the path forward.

If you feel like you’re the only one facing this, we can assure you that you’re not. After more than 10 years of working with high-growth companies, we’ve seen how much stress cash flow can cause. This is especially true for technology and software companies because staying lean is one of the key components to profitability. Eventually, though, you need more sophisticated financial expertise to ensure you can grow profitably. At this stage, a virtual CFO might be the answer. 

Two people working at computers- Virtual CFO blog featured image

What’s a virtual CFO?

A virtual CFO (sometimes called a fractional CFO) is the finance arm of your business. The only difference is that they work part-time or tackle your priorities on a project basis rather than joining your team full-time.

They can handle all your strategic finance needs, like accounting, budgeting, and forecasting. If you need day-to-day operations support to monitor cash flow and manage payroll, virtual CFOs can do that as well. It’s like having an experienced CFO and a finance department without building one yourself.

What are the benefits of working with a virtual CFO?

Here are the themes we repeatedly hear from prospects, clients, and industry colleagues about how working with a virtual CFO improved their business and helped them grow.

Benefit #1: Cost

When you’re a lean team, the cost of adding even one more person can be entirely out of reach. For example, in the tech space, you’re looking at a minimum $160,000 investment to get a full-time person who understands high-growth finance. But what if you could add just part of someone’s time? Suddenly, getting the experienced talent you need is back on the table.  

Benefit #2: Ability to scale

Scale is related to cost, but there’s some nuance here. If you’re in growth mode, starting with a virtual or fractional CFO is easier. This allows you to add more or different services as needed or as your strategy evolves. Keeping a finance resource busy full-time is hard until you hit the $10 million mark. Adding an FTE too soon means you’re paying a full-time salary when it may not be necessary for your business stage.

Benefit #3: Outside perspective

When you’re passionate about your business, you’re close to it. Really close. That means you may not have the best vantage point to identify certain issues. An outsider can be direct and honest about the numbers in a way that insiders sometimes can’t. (Who wants to ruin the vibe among their colleagues or give bad news to the boss?)

A virtual CFO is removed from the inner workings just enough to bring an outside and objective perspective to your challenges and opportunities. We’re not in the weeds, and that’s a good thing.

Benefit #4: Emotion

This business is your baby. We get that. Ledge Financial is our baby, too. But when you’re a founder/owner/CEO, sometimes you need a financial partner who’s less connected to the pure passion you have – someone who can take the emotion out of it and tell you what you need to know.

On top of that, money itself can be an emotional topic. Each of us has our own money stories – fears, insecurities, and concerns. It can be heavy stuff to navigate on your own. You want a virtual CFO who can be part coach, counselor, and confidante so you feel emotionally safe putting it all out there.

Benefit #5: Industry knowledge

When you work with a virtual CFO specializing in your market niche, you’ll have a partner who knows where to start, what to look for, and how to put the pieces together. Fast. That’s because a niche-specific virtual CFO has already seen what strategies get ROI for similar companies and can get you to actionable insights and perspectives more quickly. 

Two people working together- Virtual CFO blog image

Benefit #6: Clear next steps

You carry an enormous internal burden when you have cash flow problems or other financial issues. It’s draining. And it’s distracting. But it can improve more quickly than you think.

An experienced virtual CFO can assess your entire financial position and give you a clear plan forward with detailed next steps. With this clarity, you can focus on what you love: people, processes, technology, and strategy.

Benefit #7: Range of expertise

Top-tier fractional CFOs have a team of subject matter experts who bring different backgrounds, skills, and experiences to their client relationships. At Ledge Financial, we work as a team and bring in the necessary resources to fulfill our client’s needs. This is another way you get the value a CFO and finance team would deliver, but you don’t have to invest in building an entire team.

Need financial advice?

Need someone to counsel you on the financial side of the business and offer you honest, forward-looking financial advice that helps you grow?

We’re known for being real people who just happen to be super smart numbers geeks. We can look at the whole picture of your business, from monthly books to tax implications, so you have a financial plan that actually works. Let’s connect.

The Ultimate Buyer’s Guide for Outsourced CFO Services

Ledge Financial · May 24, 2022 · Leave a Comment

It’s the stuff entrepreneurs and founders dream of. You’re a few years into the business and starting to hit your stride. What was once your first million-dollar year quickly becomes your first 5 million-dollar year. Maybe even 10 million.

As your business grows, you want to spend time on the areas you’re passionate about like strategy, innovation or your product roadmap. However, that’s hard to do when you’re responsible for everything – people, processes, technology and finance.

What’s more, your entire team is operating at capacity. So, nobody else has time to focus on your finances or help ensure you can scale, even though a healthy balance sheet is critical for your continued growth and success. 

If this sounds familiar, it may be time to bring in an outside finance partner to help. Someone who can counsel you on the financial side of the business and offer you honest, forward-looking financial advice that helps you grow. 

This role is usually called an outsourced CFO, a fractional CFO or a virtual CFO. No matter which term you use, this guide covers everything you need to know about how to bring one onto your team, including:

  • What is an outsourced CFO? 
  • Why do companies outsource a CFO?
  • How to know if your company needs an outsourced CFO
  • How do you evaluate which firm is best for your company?
  • Preparing to onboard your CFO
  • What to expect from outsourcing a CFO

What is an Outsourced CFO?

An outsourced, or virtual, CFO is the finance arm of your business. They handle all your strategic finance needs like accounting, budgeting and forecasting. They can also address the day-to-day operations like monitoring cash flow and managing payroll. 

It’s like having a CFO and a finance department without building one. 

Person working at a laptop- Outsourced CFO blog featured image

Why Do Companies Outsource a CFO

As companies grow, especially when it’s happening quickly, they need access to different counsel and advice. The focus has to stay solely on the future and looking ahead. 

Not every accounting firm aligns with this high-growth way of doing business. Some are more skilled at looking backward. However, boutique finance firms, like ours, have deep expertise in working with founders and entrepreneurs whose annual revenue reaches the 20 million mark, roughly. Once you reach this threshold, we’ve found that it’s probably time to add someone internally and work with a fractional CFO in a more consultative way.

Generally speaking, this size company realizes these benefits from outsourcing their CFO function: 

  • Building a team of advisors – It’s common for founders to supplement their small internal team with a few external experts. 
  • Gaining an external perspective – Sometimes, you just want to bounce an idea off someone not on your team. You know, get a third-party reality check. Here’s where an outsourced CFO can be a lifesaver. 
  • Having access to a broad range of financial expertise – An outside finance partner can offer the full spectrum of knowledge you need depending on your current challenges. 
  • Partnering with growth-minded vendors – High-growth companies want to work with high-growth partners. It’s a shared passion that’s hard to describe. If you know, you know. 

How to Know if Your Company Needs an Outsourced CFO

In our experience, founders and CEOs in any industry can benefit from outsourcing a CFO. Usually, they bring someone on when they’re facing one or more of these challenges:

  • Spending less time in areas of the business where they find passion.
  • Using weekends to catch up on financials or unravel a financial challenge.
  • Facing a specific financial challenge (e.g., tax-related).
  • Becoming concerned about the unknowns because you’re moving so fast.
  • Having cash flow problems now or anticipating them in the near future.
  • Lacking someone they can talk to openly and candidly about the financial side of the business.

Of course, there are dozens more things you could add to this list. These are some of the most significant financial pain points founders and CEOs are experiencing when they give us a call.  

How to Evaluate Which Outsourcing CFO Firm is Best for Your Company

If you’re considering a fractional or outsourced CFO, you will, of course, want financial expertise. That’s table stakes. Beyond that, here are some things you should consider: 

  • Can you learn from this person?
  • Will they push back and challenge you?
  • Do they add something to your internal team?
  • Are they growth-minded?
  • Can you see yourself working with them long-term? 
  • Do you feel a personal connection?

If a few of these surprise you, we believe work is more rewarding when people pass the vibe check – even when it comes to finance. This is especially true if you’re facing a significant financial challenge. If that’s the case, you deserve to feel like you can trust the team you’re working with to sort it out on your behalf.

Preparing to Onboard an Outsourced CFO

As part of your decision-making process, you’ll want to get your fractional CFO up to speed quickly. Ask potential vendor partners how they:

  • Evaluate your current/state financials
  • Identify your top finance priorities
  • Approach your most critical challenges
  • Focus on getting money in the door

Then, ask how they stay involved with you and your team to shift the focus back to looking ahead and continuing to grow. They should have a flexible but templated approach to ensure you have a good onboarding experience.

What to Expect From Outsourcing a CFO

Your business has its own rhythms and routines. An experienced virtual CFO will be able to drop right into that. They’ll focus on setting up your monthly financials, managing your cash flow, and taking care of your budgeting, forecasting, and reporting requirements. 

In addition, you should have a regular cadence of touch-base meetings to ensure you and your internal team have the information you need to:

  • Make decisions
  • Take advantage of opportunities
  • Invest in the business

One advantage to working with a smaller, boutique CFO is the ability to customize what you need. No two situations are truly the same, so you don’t want a one-size-fits-all approach.

Growing a Business Should Be Fun

At this point, you may have noticed we’re not a traditional accounting firm – no pinstripes and navy blue suits here. We take a more modern approach and unapologetically lead with our hearts. We care about people. We prioritize building relationships.

You see, we’ve been in meetings with new clients where you can see the worry in their eyes. They have a cash flow problem (or worse), and they know it. As a result, they have no choice but to lay their situation bare to us. 

It’s a humbling experience. 

It’s also extremely rewarding when you see that same client and notice their smile is back just a few weeks later. They’re feeling lighter already. 

Although we love numbers, our passion lies in building relationships. We want to know you and your business so that we can provide education and services that meet your unique needs.  Allow yourself to focus on whichever aspect of the business you are most passionate about and leave the financials to us. Reach out to Ledge Financial today to take the next steps toward hiring an outsourced CFO. We look forward to hearing from you!

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