Many companies have good accountants, but from the financing perspective, planning and strategizing is the area where the entrepreneur really needs help. It is then that the CFO or the Chief Financial Officer comes into play.The position of a CFO in a company is that of an enabling partner to the business. They are the ones facilitating the key aspects of a company’s business strategy. Moreover, given their firm grasp of financial fundamentals and their management strengths, a growing number of CFOs are adding the operational responsibilities for functions such as IT or property to their sphere of assignments.
Traditionally, a CFO focuses on the financial controls and processes, with a significant percentage of time spent on reporting historic numbers and controlling the risk and the cost to the company. The CFO bridges the gap between the numbers, operations and strategy.
In today’s business setup when the operational costs keep raising by the day, the option of having a virtual CFO may be thought of more because the size of the company may not support the cost or the dedication of time of a full time CFO. This virtual CFO would be a part time employee as he/she will not do the day-to-day accounting data entry or reconciliation work but will work closely with the accounting staff to ensure accurate historical reporting and add value to the borrowing or funds raising process of the company.
The emergence of this position is based on various overarching trends in the industry that are here for some time now. These may be summarised as-
- Commoditization of compliance related work.
- Increased level of competition.
- Increased rate of fee compression within the industry.
- Usage of technology based automation of basic functions.
There are various points of advantages of having a virtual CFO over a fulltime one for a company in its growth phase.
- The Virtual CFO is very flexible in terms of its engagement criteria. They are able to start small and scale up as they grow or even scale down if the need arises to streamline the business.
- The prior relevant experience of the CFOproves useful in strengthening the finance function of the company.
- The company gets the advantage of the best practices in the management of the finance and accounting function. Along with this, he acts as the adviser cum mentor to the CEO and helps the management formulate better business strategies.
- Despite being a full time employee, a virtual CFO does represents the company to the world at large. He carries the visiting card of the company in all business dealings that are undertaken in the company’s name.
- A strong CFOnot only helps the company with its decision-making process, but also helps in better negotiations.
The above discussion has led us to deduce thatgiven the circumstances of a startup ecosystem where the scarcity of resources is wide spread, the idea of having a virtual CFO is quite lucrative. The presence of an outsourced service provider would provide the company with the flexibility of choosing services as and when required. A virtual CFO provides the strategic, value add services to a startup, which cannot otherwise be provided by an accountant under normal circumstances.