Operational Role of Virtual CFO in an SME
Virtual CFO is a new concept in India wherein instead of employing full-time CFO in an organization, the company prefers to outsource the related work to a person or organization which would provide similar service either from a remote location or onsite on a part-time basis.
This is also called as vCFO or virtual Chief Financial Officer.
Major areas of operation of Virtual CFO are as under:
- Maintenance of accounting records as per applicable accounting standards and GAAPs
Here, He will ensure that clients’ records are properly maintained as per applicable accounting standards and GAAPs. This will help in comparison of accounting records for different accounting periods. Also, increase the reliability of such records before outside parties like bankers etc.
- Analysis of operations and financials
Here, the role of virtual CFO will be to analyze financial results, financial trends and how to achieve desired results in the future. He will also analyze operations and identify operation indicators and set up systems for making the measurement of periodical performance. He may also analyze process inefficiencies which might cost heavily to the company. Also, whether there is optimum utilization of all the resources like people, materials etc.
- Strategic Planning
He can also assist in strategic decision making and planning. He may discuss with management and staff and identify the factors which can affect future success and growth and make a suitable plan to achieve the desired goals of the company.
- Assessment of risk and opportunity
With his vast experience of industry and general business environment, He may help the company to identify the risks and opportunities which may affect the company in long term and make strategies to avoid such risks and make maximum use of opportunities.
- Analysis of existing systems and development of same
He will make an analysis of existing systems in operation in an organization like financial accounting system, purchase, accounts receivable and payable etc, how effective is the same and would suggest areas of improvement in same. In the case of nonexistence or inadequacy of systems, he may develop the same in the organization.
- Financial and cash flow Projections
He will assist in making cash flow projections and financial projections of the company. Cash flow projection will help in understanding current cash situation and planning future cash requirement. Financial projections will help in understanding whether you have excess funds or you need to secure funding from banks and financial institutions.
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- Setting of performance indicators
He will assist in setting up key performance indicators which will provide an understanding of the present situation as well as future predictions. These indicators provide a true picture of the performance of a business. Such indicators may be found in all areas like production, distribution, sales, cash collections, inventory etc.
- Budgeting process
Here, his role would analyze the existing budgeting process or create a new budgeting process which will be based on a company’s future vision and past results.
- Growth Plan
Without a growth plan, no organization can survive. He will help to create growth plan and regular follow up of the same in terms of addition of more cash, people, capacity, knowledge, training etc
- Staff Training and Replacement
Staff needs to be continuously motivated and trained in order to improve his efficiency. As per requirements of management, Virtual CFO can manage the staff onsite at a periodical frequency so that management may focus on their key business areas. He can also train the staff and provide suitable replacements for staff who are in the wrong job.
- Mergers and Acquisitions
Virtual CFO with his vast experience and expertise may also help the company to make the strategic decision of whether to go for a merger in case of loss-making or acquire some other company in order to further expand the business. He can assist with negotiations, due diligence, negotiations, and smooth operations of company post such reorganization.
An aforesaid list is just illustrative and depending upon the needs of the organization and its management, the role of virtual CFO can be modified.