Big companies have a Chief Financial Officer who provides strategic financial advice to the CEO and the Board. Start-ups, small and medium businesses usually lack the financial resources to afford a full time financial expert in the business. Even if resources permit, business owners are often reluctant to employ someone in a role where often they don’t have the experience to assess that person’s performance. This has given rise to the virtual CFO, a person who is an outsourced provider of expert financial advice.
Small to medium business owners are able to utilise the services of a virtual CFO as and when required. It is cost effective and the return on investment is clear. A good virtual CFO will be a vital sounding board – it can be very lonely to run a business at times and it’s always a relief when you can pressure test your ideas with someone who has your back.
There are a wide range of services available:
- Budgeting – all too often an afterthought for most SMEs but a vital tool in keeping the business on track.
- Cash flow forecasting to ensure the business doesn’t run out of cash. Businesses don’t go broke slowly and cash flow needs constant vigilance.
- Business cases with forecasts to support applications for bank lending.
- Goal setting to agree that key performance indicators (whether financial or not).
- Specialist Tax planning & advice to ensure that you minimise your tax obligations and can pay provisional and terminal tax when it falls due.
- Supervision of your bookkeeping or accounts function.
- Monthly reporting to analyse performance against plan.
- Strategic Planning to agree budgets three years out and plan accordingly.
- Board membership to become a sounding board to the directors.
- Corporate governance to ensure best practice.
A good virtual CFO will have long and successful background in business, usually having worked in larger corporate organisations with exposure to managing teams and achieving financial goals. A virtual CFO is not a business coach and they certainly won’t follow a formulaic approach.
A really good virtual CFO will have experience in managing revenue, not just cost. They will be able to offer good advice on sales and marketing and how to targeting customer segments to build sustainable revenue. They should offer opportunities to open up new markets and propel growth. They will also have access to a network of specialists so that if they lack a particular skill, they can quickly partner with an expert.
Bear in mind that familiarity with your industry is not necessarily an advantage. It can be refreshing to have an opinion from someone who is not limited by the standard orthodoxy in your industry and you should welcome out of the box thinking.
There’s no right time to partner with a virtual CFO. Start-ups can benefit from avoiding common mistakes. More mature businesses may need an injection of fresh ideas and enthusiasm. It is imperative to work with someone you know, you like and most importantly, you trust. Agree the parameters of the appointment and regularly review progress.
A good virtual CFO will improve your business performance by boosting profitability and allow you to spend less time in the business with a clear exit strategy when the time comes.
Generate Accounting works with a number of clients offering virtual CFO services. We offer a package which includes many of the services listed above. Contact us for a confidential conversation about your needs and how we can help take your business to the next level.