There are three major trends in the business world which are driving demand for Virtual Chief Financial Officers (VCFOs).
- The rapidly growing number of start-ups run by people with big dreams and solid business acumen in response to changing economic circumstances and lower barriers to entry
- Changes in technology such as cloud based services with real-time bank feeds and an increasingly sophisticated set of features.
- A growing number of businesses recognising the benefits of outsourcing CFOs, instead of hiring one full time.
These three trends mean that start-ups both want and need far more than basic bookkeeping and tax advice from their financial departments, and that they are able to afford the services of an experienced VCFO far earlier in their life-cycle than if they had to hire a full time person on-site.
Keep fixed costs low
Cash flow is an issue for every start-up or small business. While you don’t want to skimp on essential services that will help your business grow faster, you want to keep your costs under control and staffing costs can quickly explode your budget as many expanding businesses discover when their cash flow is uneven. By hiring a VCFO you can have access to the appropriate level of time and service needed and you can expand and contract their role as your finances permit without the major ongoing commitment of a full-time staff member.
Make informed decisions
The role of a VCFO goes far beyond that of a bookkeeper or accountant and provides the strategic advice and information every entrepreneur or business owner needs to manage fund-raising, budgeting, financial reporting, cash-flow management, design and implement systems and controls and minimise risk among other things. Without expert advice and guidance businesses often miss strategic opportunities to exponentially accelerate their growth and leverage openings in the market and this lack of expert advice is a major reason so many small businesses close their doors within the first 2-3 years of operation.
Ensure the accuracy of accounts
In most cases your VCFO will also be responsible for bookkeeping or at least overseeing your bookkeeper’s work. This is a critical aspect of business growth because the accuracy of your financial information will directly affect the quality of your decisions.
Interpret financial information
An effective VCFO will ensure that the entrepreneur or business owner fully understands the financial information that is presented and its implications in your decision-making. This is crucial for managing financial risk, controlling expenditure and also finding ways for acquiring capital and equipment at the lowest possible cost.
Trusted sounding board
Every business needs an independent advisor who understands finance in general, and your particular business in particular. Your VCFO fulfils that role perfectly. Their exposure and experience in the wider financial sector ensures that they are aware of current trends in the financial markets to warn you of hazards or make you aware of opportunities. At the same time, their understanding of your own business finances ensures that they provide specific guidance based on your circumstances and goals without being personally involved in the outcomes which can lead to short-sighted advice.
Hiring a Virtual CFO is not the same as outsourcing your financial services such as bookkeeping and accounting. While a VCFO may provide bookkeeping services they are primarily employed for their insights and analysis into your business development and are an important and cost-effective service that will help businesses from start-ups to $20 million range reach their business growth goals faster and propel them to the point where an in-house CFO is a wise investment.
Elan Pamensky is member of CPA Australia and has worked extensively throughout South Africa and Australia as a CFO for large corporations (Sensis; Fairfax), SME’s and family businesses. He is currently the director of the boutique consultancy Cloud CFO. Cloud CFO provides customised CFO, and accounting services to small and medium businesses who want to outsource some or all of their financial management.