Outsourcing Financial Planning and Analysis is a Huge Time Saver. Here’s a Pricing Breakdown.

So you’ve decided to bring in an outsider for financial planning and analysis. Good. 

Acting alone as you navigate the financial decisions that come with growth can lead to unnecessary mistakes. There’s no need to reinvent the wheel here. Experts exist, so why not ask for their advice?

Still, before you sign a contract it’s important to know what you’re paying for and how much you’re paying for it.

Here’s a breakdown of common practices for virtual and fractional CFO pricing.

Why Hire a Virtual or Factional CFO?

Large firms hire full-time, quarter-million-dollar-a-year financial experts to advise them on financial decisions. These individuals tell the firm what it can do and what it can’t with the resources at its disposal. They create projections to inform CEOs as they make critical strategic decisions about the firm’s future.

Small and medium-sized enterprises have similar needs. Founders and CEOs of small and medium-sized businesses face similar critical decisions. Unlike big firms, smaller enterprises don’t usually need full-time Chief Financial Officers (“CFO”), nor are they willing to absorb the costs of a full-time chief financial officer. Rightly so, for a small business resources can be better allocated to other needs.

Still, while they don’t need a full-time CFO, smaller businesses do benefit from sound financial advice; the answer is a Virtual or a Fractional CFO.

A Virtual or a Fractional CFO would offer the services provided by a full-time CFO at a part-time rate. They allow small businesses to access vital financial services on an as-needed basis.

Pricing Criteria

Before initiating a relationship with a Virtual CFO, you should consider what you need and what you’re willing to pay. A service provider should be able to help you with this. Most Virtual CFOs will sit down with you to discuss your specific situation and develop a package that suits your needs.

Nevertheless, before heading into a consultation there are some concepts to keep in mind as a founder, CEO, or owner. Here are five things to consider as you search for or interview your new Virtual or Fractional CFO.

1. How is the Service Billed?

Your first consideration is the units of price. 

How will you pay for CFO services? Will payments be hourly, daily, weekly, or monthly, or will the pricing be for specific services provided?

Most financial service providers will have a series of packages to fit a variety of situations. Packages will range from basic tax filing and accounting services to fully engaged financial projection, cash flow optimization and planning.

The initial consultation will help you understand what service package makes the most sense for your current situation.

The pricing charts usually bill at specific package rates; either weekly or monthly. Pricing charts with options show what exactly you’re getting at what price. VerticalCPA offers a suite of financial services ranging from a basic $600-a-month plan plus add-ons to a comprehensive consultation plan with regular in-person consultations.

Another option some CFOs provide is an hourly rate. Hourly rates follow a consultation model where advisors sit with business owners and CEOs to answer questions and discuss options.  Such meetings proceed based on an hourly billing rate.

Hourly pricing models can be a good option for those seeking answers to specific questions immediately. However, the hourly model also has downsides since financial analysis and planning  often benefits from in-depth knowledge and long-term relationships.

2. Services Provided

As you research financial consulting options, you’ll notice that most Virtual CFOs provide a breakdown of services offered. They do this because it’s vital to define which services a specific package includes. 

A CFO can help with tax planning, financial modeling, business projections, and financial data application to decision-making. All will require different levels of involvement. All require more or less work from your Virtual CFO. The package model helps define what services you receive at what price.

A full-time CFO is on call 24/7. A virtual CFO will provide specific services within certain parameters based on your consultation package. Here’s where a consultation meeting comes in handy. The initial consultation will help you to understand which package best suits your needs.

Some small firms will run optimally with only tax filing and quarterly financial reports. Other firms will benefit significantly from the financial planning advice that comes from a weekly meeting. The services you get from a virtual CFO should match your needs.

3. Access

One question related to matching a specific service package with a particular business is the question of access. How much access do you have to your Virtual or Fractional CFO?  To maintain clarity most Virtual CFO packages will specify parameters for consultation.

If your firm is undergoing a period of rapid growth or a set of specific financial issues you might consider a package that includes regular meetings. Meetings, virtual or in person, are still the best way to face firm-specific issues.

The level of CFO access your price package provides is important for your ability to discuss issues and bounce ideas off your CFO.

A small start-up with only one or two employees might not need regular meetings. At that size, serious financial questions are relatively rare. Whereas a firm onboarding a new team after signing a large client would probably be interested in increased access to their CFO. Access becomes more important as financial questions arise.

Owners, founders, and CEOs should consider access levels built into pricing charts as they search for the right Virtual CFO. 

4. Customization Options

One of the difficulties with fractional CFO-ing is the uniqueness of each firm. Each business will have specific needs, especially when the relationship moves beyond tax filing. Specificity makes customization important.

As you build a relationship with your Virtual CFO you can discuss your specific needs and get pricing options to fit them.

Customization applies to a specific plan, but also over time. Periods of growth call for more interaction. Whereas other periods may require little interaction over quarterly reports.

Customization is one more factor to discuss with a potential service provider before signing onto a monthly plan.

5. Relationships

The final point here is general. Every business has basic needs like tax filing and invoicing, but, it also has its own specific needs. If you’re looking for a Virtual CFO, shop around and ask questions. Service providers are always happy to answer questions. Any good service provider wants to make sure you know exactly what you’re getting and that you’re happy with what you get.

Onboarding a new CFO should be the result of a good relationship. When you meet and consult with a potential CFO try to meet with him or her personally and get a sense of the relationship.

Businesses are built on relationships. Front-end relationships are vital for health and growth, but back-end relationships are also important.

Key Takeaways

So to recap and sum up let’s review the most critical elements to consider as you price out a virtual or fractional CFO.

But first, let’s quickly reiterate; a fractional CFO can be a huge driver of efficiency and growth within your firm. Large firms hire full-time CFOs to handle all things related to finance and accounting. Small and medium-sized firms rarely require such full-time attention, but this doesn’t mean they wouldn’t benefit from dedicated financial services.

Thanks to Virtual or Fractional CFO options, small and growing companies have access to CFO services without the price tag and hassle of hiring an in-house CFO.

Now here are the key takeaways

• Although there are options for hourly and day-rate financial consulting, pricing for Virtual CFOs is usually done in packages. Virtual CFOs offer various packages of financial services to meet the diverse needs of different businesses.
• Finding the right package for your firm at the right price is something you can accomplish  in consultation with a potential CFO. In consultation, you’ll be able to understand exactly what services you’ll get for your money.
• As you decide on the right package for your business, keep an eye on the level of access it gives you to your new CFO. Actual meetings are often the best way to solve problems and discuss ideas.
• Look for the customization options in your package or plan. Some firms might need special services or advice based on specific needs. Customization is something to bring up in the initial consultation.
• Have a good relationship with your virtual CFO. Relationships are the basis for all business.

VerticalCPA’s fractional and virtual CFO services offer complete analysis and specific data-driven insights that enable informed financial decision-making. Contact one of VerticalCPA’s fractional and virtual CFOs here for a free consultation.