Does your business require hiring a Virtual CFO?
It is the dream of almost every entrepreneur to take his/her business to the next level and overcome competition, while increasing revenue. Achieving financial objectives is one of the most crucial aspects that every ambitious entrepreneur looks forwards to. But the truth is that very few tend to achieve this goal, since there are pains experienced along the way. In case, you have reached this point, then you are likely to be faced a major question, which is, what exactly ‘Virtual CFO’ is all about and do I have to hire one for my business! It is essential to know about the different types of services offered by the professional and to determine if the services are worth the try or not.
About Virtual CFO
The virtual CFO as the designation suggests, is a professional who performs services of the Chief Financial Officer or CFO. Instead of offering such services as full-time employee in person, the virtual CFO might provide these services remotely and with less than full time schedule.
The last few years have witnessed rapid increase in startup numbers and technology paving towards enhanced entrepreneurial activity than before. Startups during the last decade are stated to have grown up by approximately 50%.
Few defining characteristics pertaining to startups are lean operation and limited capital, hence, creating the need to work along with niche professionals such as accountants, strategists and marketers at an affordable rate.
Enter the outsourcing world
Companies through outsourcing can harness the expertise and experience of highly talented and skilled professionals without actually spending a fortune to attract and retain full time employee. The professional on being outsourced is in a position to offer his/her expertise and knowledge to diverse clients, thereby splitting precious time and cost amongst them. For both the sides, it can be termed to be a win-win situation.
Few services that can be offered by the virtual CFO (detailed below):
- Financial reporting
- Financial planning such as cash flow forecasting
- Cost management
- Financial risk management
- Debt reduction
Policies & Procedures
Implement critical policies and process in
• Fund management
• Procurement to Pay Process
• HR and manpower (leave – travel – authority/responsibility matrix)
• Order to Cash process
• Forex management
• Implementation of IF – RCM
• Identification and implementation of ERP
• Policies on IT controls and mechanism
• Key Trade Policy (CD/Dealer)
• Implementing critical SOPs
Finance & Accounts
• Monthly and periodic Profitability and Balance Sheet review
• Monitoring and controlling Cash flows
• Review of Operational MIS/Departmental MIS
• Conducting Inter Departmental MIS meeting – Guiding the team and building
• Budgeting and Costing Implementation
• Efficient fund raising for various needs Working capital/term loans/project
funding/non fund-based limits/structured funding/off Balance Sheet funding
• Banking & Institution management
• Inventory control and integration with accounts
• Improving the External Credit rating
• Evaluation of an Opportunity (JV – PE – strategic – long term contract – IPO –
M&A transaction) and supporting the process
• Resolution of any legal – commercial – accounting – tax matter
• Engaging and defining the role of various consultants
• Implement Best practices for creating long term value for the Organisation
• Defining job profile and KRA of finance and accounts team
• Accounting as per Indian GAAP
• Timely compliances
• Merger/Acquisition/Restructuring Support
• Due Diligence support
• Migration of F & A Software
• Identification and Implementation of ERP
• Internal Audit
• Critical fund raising
• Emergency hand holding of any function or task
• Deal making/Valuation/Critical Agreements
• Support in Improving Cash flow from Operations
• Participating and adding value in non-routine business decision/large business
contract/commercial negotiation and structuring
• Negotiating any deal
• Support in improving the Decision-Making Process
• Review of critical candidates and supporting sourcing of key manpower
• Support in Planning and building second line for critical manpower across
• Business and Financial DD
• Take additional responsibility as per need (ERP – New Project/Expansion)
• Focus on profit/operations/cash flow improvement on defined metrics
Scope of work of the virtual CFO for the organization depends typically upon its unique financial needs and size. Usually, the professional is paid flat monthly rate or by the hour as deemed fit by the company management.
Benefits derived by hiring the virtual CFO
Several benefits can be derived by hiring the professional to manage the growing financial posture of the company.
- Manage costs: The biggest benefit to hire the virtual CFO probably is the capability to manage expenditure. The Chief Financial Officer’s average salary is quite high, thereby not allowing many small organizations to be in a position to hire them. It can be paired with other essentials, such as bonuses and benefits and a big price tag will be expected if the CFO is to be hired full time. But by virtual CFO, costs can be curtailed and controlled by a huge extent. They will provide only those services that is desired and hence, charge accordingly, which is quite low and when desried. You, as an entrepreneur do not have to worry about the roll benefits to be provided or to fulfill other employment terms.
- Develop with you: Hiring the virtual CFO does come with a benefit of growing with the business. It is quite natural for the Rs.1 million revenue targets to be different from that of the Rs10 million mark requirements. The professional with the right kind of expertise and experience can help navigate through varying growth phases, thereby forming a financial perspective. The well known virtual CFO will be able to recognize that his/her services offered are just a temporary solution. The professional doing the job perfectly is likely to become redundant as the organization develops into a better position to hire full time CFO as an employee. Till then, the virtual CFO does help the company to transition to in-house CFO from outsourced position as the time comes.
- Personalize based upon specific organizational budget and needs: The e-commerce apparel company is likely to have varying financial needs when compared to a divorce attorney. The forecasting, processes and reports which both the businesses require are quite unique. The virtual CFO professional can help personalize the scope of work and skills that are essential to fit perfectly the company, without actually making payments for anything not needed. It is possible to shift such services as necessary as the business changes and grows.
- Diverse expertise: Since virtual CFOs are known to work with several clients at a time, they can offer affordable rates to everyone. You can benefit from the diverse pool of expertise and experience as a client. The professional also views unlimited varying financial situations to resolve numerous diverse financial conundrums. Whatever be the unique situation your business is facing, chances are very high of your virtual CFO having taken care of the same with other similar types of clients, thus providing you with proper advice.
Does my organization require Virtual CFO?
It is essential to understand that the virtual CFO is actually not the perfect solution for every type of business. For some businesses, outsourced arrangement may not be the right fit, while for others it might not be just necessary as of now. If financial house is found to be not in order, it needs to be taken care of first.
Few scenarios where hiring virtual CFO will be necessary for the business
- Experiencing rapid growth: Sudden growth may cause financial troubles, especially if not prepared for the same. The virtual CFO can help navigate accelerated growth periods and place systems in proper place.
- Business becoming more complex: Adding more employees, contracts, vendors, suppliers and other components to business can get more complex.
- Unfavorable financials: At some point of time, almost all organizations experience unfavorable periods, which is part of any business. Knowing why, can help take appropriate steps to get financially secure. The professional can help overcome issues faced with profitability and maintenance.
- Lack of detailed financial understanding to make proper decisions.
The above are few of the scenarios where the virtual CFO can prove to be of great help.
Contact us at firstname.lastname@example.org for further details of our services