Traveling back in time to the 1980s and before; the role of a Chief Financial Officer ('CFO') was largely confined to accounting, producing management information reports, handling tax matters, managing audits and maintaining financial controls. This role was seen more as a support function than a strategic one. However, as businesses expanded in size and complexity, the CFO's role evolved to include a wider array of responsibilities. During 1980s and 1990s, the emphasis shifted towards financial planning and analysis, requiring CFOs to adopt a more strategic role in fostering business growth.

Fast forward to present and if you need reaffirmation that the only constant in life is change, then look no further than the evolution of the role of a CFO. The number of professionals reporting to CFOs has increased and the range of roles under the CFO's purview has also significantly expanded. Our research shows that on an average, about 6 distinct functions report to the CFO today, including areas from procurement to investor relations. We have seen this grow across organizations, from an average of 4 just 3 years back, illustrating the rapid pace of change.

Moreover, an increasing number of CFOs are now managing their organizations' digital initiatives and addressing challenges that extend beyond the realm of finance. CFOs are expected to utilize their expanding roles and financial expertise to shape the C-suite agenda and enhance efficiencies in order to fulfill their organizations' annual operating plans. The evolution of a CFO's role is further accentuated by the shifting business landscape, economic dynamics, technological adoption and the management of an intricate web of risks.

Our Human Resource Advisory practice has observed that the salaries for experienced full-time CFOs range from INR 4 million to several crores in India; and they command six-figure dollar salaries in the US. Given these figures, it's worth considering whether all companies can afford a CFO. As a result, there has been a significant trend towards embracing VCFO services in India and internationally.

While harnessing technology, VCFOs are transforming financial management by providing businesses, particularly small and medium-sized enterprises, access to top-tier financial acumen without the burden of full-time executive expenses. 

This article explores the changing role of the CFO, scenarios where a VCFO is a prudent choice and challenges that need to be addressed to ensure a successful transition.

The evolving role of a CFO

As pivotal leaders and members of the steering committee, CFOs have observed a transformation in their role driven by shifting business strategies and an evolving business landscape. A CFO now contends with four critical questions:

1. How can they predict market trends using realistic planning & management tools for overall direction? This includes being in the forefront of innovation and integrating new technologies.
2. How can they produce reliable and secure information that meets the standards of regulatory authorities? This includes requirements of reporting for Environmental, Social & Governance.
3. How can they pinpoint growth drivers and essential cost-saving factors while evaluating risks? This includes utilizing data analytics & data tools to facilitate informed decision making in their organization.
4. How can they ensure that the finance function's daily operations are in line with the organization's strategic goals and objectives for change? This includes striking a balance between immediate and long-term requirements.

The first question has been at the forefront of discussions on the transformation of financial management for a while. The focus has shifted to the reliability, traceability and security of information from financial departments, surpassing internal relationship management and operational control. The reporting role of the finance department has often eclipsed its controlling duties.

The second and third questions reflect the internal expectations of the finance function's clients, particularly the management committee, regarding the CFO. These expectations position the finance function as a strategic business partner to operational management. This empowered role allows the finance function to expand its dialogue with operational management and advance the organization's strategy.

The finance function also addresses the fourth question by leveraging key drivers across two dimensions: the rational and the emotional. We believe that the finance function's next transformational phase will occur through the combined activation of these two sets of drivers.

Benefits of a VCFO

For owners of small and medium-sized businesses, engaging a VCFO offers several key advantages beyond acquiring a strategic partner to facilitate growth and profitability. These benefits include the following.

Cost reduction | Small businesses can avoid the expenses related to employing a full-time CFO, which includes their salaries, regular bonuses, stock options and benefits. Additionally, the costs for such services are customized to an organization' unique requirements, changing according to the time and deliverables that are required.

Varied expertise | VCFOs bring a wealth of experience from managing diverse organizations across various sectors, equipping them to tackle a broad spectrum of business challenges. VCFO service providers often have a cadre of seasoned finance professionals who cater to a wide array of industries and requirements simultaneously. This enables organizations to leverage the collective expertise within VCFO service providers and gain access to financial specialists with expertise in compliance, taxation, accounting, forecasting, budgeting, and MIS report generation, among other areas.

A vast network | Seasoned VCFOs and their service providers often have a strong network of financiers, lenders, and economic specialists, making it easier to secure funding when necessary. This advantage is especially valuable for organizations looking to raise capital for expansion.

Adaptability | The working hours of a virtual CFO can be adjusted according to the changing demands of the business. This enables small businesses to only pay for the time and services they use, while still accessing the necessary level of experience, expertise, and insight for their business.

Technological integration | A dependable VCFO service utilizes state-of-the-art technology, encompassing data analytics, machine learning, and artificial intelligence, to enhance efficiency and boost performance. They possess a thorough understanding of accounting principles and excel in formulating realistic financial forecasts.

Overcoming challenges

A notable trend is emerging across diverse industries, transitioning from in-house CFOs to outsourced CFO services. Research indicates that after relatively lower attrition rates in 2022 and 2023, the first half of 2024 has seen a significant increase in CFO turnover, exceeding 10% worldwide. This surge suggests that the hesitation to replace CFOs has waned as economic uncertainty becomes commonplace for organizations. Consequently, there has been a rise in VCFOs who handle all CFO responsibilities remotely and on a part-time basis, offering on-site services as per an organization's requirements.

The utilization of VCFO services should be grounded in principles of full disclosure by the organization, with transparency and trust exhibited by both parties. This will ensure that a VCFO is cost-effective compared to hiring a full-time CFO. VCFOs should provide the necessary skills and experience to handle all finance-related tasks crucial to an organization's operations, assisting in budget creation, market trend analysis, securing funding and financial projections.

Effective communication is crucial for making the transition to a VCFO successful. This becomes even more imperative when collaborating with a CFO who is not physically present all the time.

Selecting a VCFO or a firm that provides VCFO services requires careful consideration of their knowledge, skills, and expertise in managing your organization's finances with efficiency and transparency. A competent VCFO should collaborate with the executive team to align financial planning and analysis with digital transformation initiatives. They must be adaptable, capable of identifying financial shortcomings, formulating a robust budgeting approach and developing an attractive pitch to attract investors.

In response to the growing demand for VCFOs, our firm has created a specialized and independent service line for VCFO and virtual controller services, distinct from our accounting advisory support. We serve diverse organizations that benefit from our in-house expertise and experience to generate value. As these organizations expand to the point where they require a full-time CFO, our HR Advisory Services practice is equipped not just to find the right candidate but also to ensure a seamless transition for our clients.

To discuss your organization's requirements, please email us at contactus@mgcglobal.co.in, and we will be pleased to offer assistance.

Best regards

Markets Team

MGC Global Risk Advisory

About MGC Global Risk Advisory 

Recognized as one of the '10 most promising risk advisory services firms' in 2017, as the 'Company of the Year' in 2018 &, 2019 (both in the category of risk advisory services), one of the 'Top Exceptional Companies to Work For' in 2020, amongst the 'Top 25 Customer Centric Companies' in 2020, 'The Consultant of the year' in 2021 (in the category of risk advisory services), 'Top Exceptional Leaders in Risk Advisory Services' in 2023 and 'Best place to work' in 2024; MGC Global is an independent member firm of Allinial Global.

MGC Global provides services in the areas of enterprise-wide risk management, forensic, internal audits, control assessments (SOC, IFCR & SOX), process re-engineering, governance frameworks, privacy & data protection (including GDPR & DPDP), IT risk advisory, GDPR, VAPT, ISO readiness, cyber security, vCISO, accounting advisory, VCFO, forensic, ESG & CSR services.

Our firm has the capabilities to service its clients through its offices in Bengaluru, Mumbai, NCR; and has service arrangements with associate firms in all major cities in India.

About Allinial Global

Allinial Global (formerly PKF North America) is currently the world's second-largest member-based association. With collective revenues to the tune of approximately US$ 6 billion, Allinial Global has dedicated itself to the success of independent accounting and consulting firms since its founding in 1969.



It currently has member firms in over 105 countries, which have over 28,000 professional staff and over 6,000 partners operating from nearly 700 offices across the globe.

Allinial Global provides its member firms with a broad array of resources and support that benefit both its member firms and their clients in the key impact areas of learning & development, human resources, international outreach, technical support, knowledge-sharing through its specialized communities of practice, information technology and practice management.