What is Virtual CFO?
A virtual CFO is an outsourced service provider offering high skill assistance in financial requirements of an organization, just like a chief financial officer does for large organizations. Virtual CFOs are professionals who can manage the overall financial, legal, taxation and compliance part of the business house. A virtual CFO may be a single person or an entity. A CFO typically overlooks the financial planning, managing the financial risk, and controlling costs of any organisation.
The mushrooming of the start-up ecosystem has generated specialized service providers which fit the requirement of start-ups. Virtual CFO is one such specialized service provider. Start-ups normally do not have the resources to hire a full-time CFO. A virtual CFO provides strategic, value added services to a start-up which cannot be provided by an accountant. A start-up business is basically starting from scratch, so they may need a business plan and financial forecasts and then ongoing monitoring of those forecasts.
Benefit to small organisations
Small companies may need a financial controller on a weekly or fortnightly basis. Virtual CFOs also offer one-time help with strategic transactions, financial processes, business plans and budgeting.
Most firms provide tailor-made services and the service charges vary from client to client. This practice is gaining ground in India, with a thriving start-up and SME culture in the country. This sector has discovered new virtual CFO companies in the last three to four years, mainly because the start-ups want to focus in their core areas, leaving the technical job to technical people.
Virtual CFOs allow the privileges of a full-time CFO for companies that cannot afford a full-time CFO at half the cost. All virtual CFO service providers offer slightly different sets of skills and experiences. The price you pay will largely come down to the expertise of the person you’re working with and the amount of time they’ll need to spend working with you each month.
Practises offering virtual CFO services make a compelling business sense, particularly in terms of cost reduction and often tend to develop closer relationships with clients. Some services include strategic planning, compliance and business reporting for both listed and unlisted entities.
The role of virtual CFOs varies from assignment to assignment but generally they are responsible for overall accounting, finalization of accounts, financial control including cost optimization, strategic advisory to the management and Boards of the business houses, direct and indirect tax matters of the company, legal, secretarial and statutory compliances of the company. All the services are customized based on client company’s sector and requirements.
Services Rendered by Virtual CFO
An array of services are offered under Virtual CFO inter alia strategic decisions such as guiding companies in making decisions for growth of business, investment/divestiture decisions, market entry strategy, project planning, corporate governance, financial decisions such as accounting, audit, taxation, relationship management with banks/financial institutions, raising debt/equity, IPO support, due-diligence, operational decisions such as business monitoring and decision support tools like development of KPI, MIS, budget framework and its effective implementation.
Virtual CFO is an emerging full-time as well as part-time career opportunity. Virtual CFOs can choose to work seasonally, and will often flex their hours up and down to suit their lifestyle. They also have the opportunity to diversify their clients to gain new experiences, and many enjoy the satisfaction of having a direct effect on a company or organization. Virtual CFOs main value lies in formulating strategies, ensuring accurate reporting and improving business processes.
Virtual CFO services are intended to not only conceptualize the right strategies but also to handhold implementation of those strategies for the organization and achieve the desired results.
Small medium business groups especially feel crippled by the lack of capability to afford a full-time CFO and the ability for strategic, financial and operational decision making can benefit by employing a virtual CFO service. With Virtual CFOs, a company ensures continuity, and decreases dependence on one person. In some cases, the cost of a Virtual CFO can be as cheap as 50-70 per cent the cost of a full-time CFO.
Major reasons why a company who does not have a dedicated accountant or CFO should invest in a virtual CFO are that they encourage business growth, they are great for business evolution, compliance with legalities, advise on investment opportunities, and ensure everything is streamlined. Particularly in SMEs, where competition is cut-throat and access to capital is limited, a virtual CFO can help business owners in improving both top and bottom line revenue figure.
About the author
The article has been penned down by Shristi Banka- Founder Partner and CEO of Banka and Banka CFO Services LLP. At the age of 24, serial entrepreneur Shristi has over 6 years of experience where she has worked with industry leaders and leading multi-national companies in finance, law and accountancy sectors. Shristi has a well-rounded work experience ranging from areas of international taxation, internal audit, direct tax litigation, mergers and acquisitions, due diligence and capital market transactions like IPOs, qualified institutional placements, rights issues and debt offerings.
(Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any department of the Government of India.)