Why using a Virtual Chief Financial Officer (VCFO) makes sense!

Why using a Virtual Chief Financial Officer (VCFO) makes sense!

It’s challenging enough being a business owner, even more so when you’re having to deal with endless issues day after day, or trying to grow or even start your business, or simply trying to survive through tougher times.

Dealing with everything that is going on in your business can be a burden, is quite often time consuming, and something that some owners struggle with and understandably so.

Not everyone is good at everything or has the time to focus on all aspects of a business and do it well. You got into business in the first place because you were good at what you do and wanted to make something of it, but running a business quite often involves a lot more.

Most business owners quickly build a support network around them that includes lawyers and accountants, insurance brokers and bankers, to use as and when they are needed.

You may even have a book keeper too to handle the accounts and administration, a time consuming but important function.

But what about support around making key business decisions, about making changes to your business, about exploring new investment opportunities or deciding how to improve business performance and profitability.

Some accountants can take up that responsibility, but not all. I don’t mean that in a derogatory way, I mean that from the perspective of being able to do it when you want it done, not when they can free up time to do it, i.e. they work to your schedule, not you to theirs.

A Virtual CFO is someone that offers expertise in their field i.e. strategy, accountancy, and business management, offering it as a flexible resource as and when you need it. If there is a concentrated piece of work, they can be there supporting you, if there is a period of time where little support is required, they respect that too. That’s the beauty of having this type of resource, you only use it when you need it.

Why would you use a VCFO?

Virtual CFO’s are problem solvers and solution providers, they act independently, coming into the business with a fresh unbiased outlook on the issues you are trying to deal with.

They think outside the box in terms of options, but they bring a strong financial and business acumen to addressing problems and clarifying the best way forward.

Good CFO’s are planners and analysts in one, forward thinkers able to assess the risks associated with any change, or in doing nothing at all.

Why not just get in an efficient bookkeeper? Book keepers are an important addition to any business’s infrastructure, especially as businesses grow and it becomes too time consuming for owners to continue with that responsibility.

But there are limits to what a book keeper can do. Keeping your accounts up to date and accurate is extremely important but ask them to make key strategic decisions relating to a business’s future direction and you’re asking them to perform beyond their capabilities.

So what can a VCFO help you with?

  • Refinancing the business to meet future demands, e.g. document & present your proposal.
  • Restructure the business to better handle current and future growth.
  • Introduce sound cash flow management disciplines to better manage the business out of trouble.
  • Help instil better disciplines around strategic planning, budgeting and forecasting.
  • Help make sound decisions around improving business performance, i.e. getting more out of existing resources; strengthen business systems and processes to handle increased demand for services or products; improve quality, and introduce changes that bring efficiencies to business operations.
  • Evaluate the risks associated with your business and how they should be monitored and managed.
  • Help owners prepare their businesses for sale with a focus on making them more profitable and bigger, and in mitigating or managing risks associated with business value.
  • Help owners evaluate new business initiatives or ventures e.g. the best way to set it up, modelling the financial impact a new venture will make on the existing business and how it should be funded, managed and operate.

Added to all this, a virtual CFO will strengthen the quality of reporting and analysis on business performance and how they should be used to set any future course of action.

What benefits do you get from using a VCFO?

  • A VCFO brings their expertise around financial analysis, governance, risk management and investment analysis that is often missing from a business. It’s an important addition.
  • They will save you money by ensuring that changes to the business are properly thought out, analysed and implemented.
  • They will instil disciplines within the business that ensures spend is controlled and related to what you can afford.
  • They bring an independent view of what you are doing, they will challenge the status quo and encourage improvements throughout the business. Improvements should equal better performance, which should equal more profitability.
  • You only pay for what you use. You’re not taking on a full time resource so you don’t have the overheads associated with another senior manager but you still get the benefits.

Whether you use a virtual CFO regularly or sparingly, if you embed them in your decision making process, you’ll find the decisions you make are better thought out and the solutions better positioned to meet your needs.

Technology plays its part in making a virtual CFO more effective. Embracing cloud technology means that the virtual CFO is always at your finger-tips even if they are geographically challenged. Technology plays a big part in empowering people in business and bringing the support they need closer. I’ve heard of examples where the virtual CFO isn’t even in the same country and has never personally met the client yet provides the support the client needs – that is the power of cloud technology.

A virtual CFO is always looking to make changes that improve business value and profitability, and will always ask “why do you want to do that, or why do you need to do that?”

So what makes a good Virtual CFO? Someone that has sound knowledge and experience, is solution orientated, is forward thinking and has proactive as opposed to reactive disciplines, and is flexible and adaptable to your needs and timeframes.

It’s never too early to bring a VCFO into your organisation?

  • Start-ups – advice on structure, funding, planning and forecasting, cash management.
  • Trying to establish a presence in the market, challenged to keep afloat.
  • Growing the business and the changes that may entail.
  • Preparing to explore new ventures, projects or investments.
  • Preparing your business for sale.

Of course cost is always a consideration, but actually you need to think about it another way – how much are they saving you in having someone focus on areas of the business that you don’t know how to manage or what to do? Yes there is the back fall of your accountant, but as already mentioned, not all accountants can get to your problems when you need them to, and sometimes those decisions or that support is urgent and needed now.

Think about how your business could be improved and benefit from incorporating this area of expertise and support. As an owner think how it could free you up to focus on areas you are the expert in. Even in start-up mode, second guessing about what structure you need and what technology is available to support your business, or how best to manage your funding and cash churn, and even how to identify and manage the risks associated with your venture, should all be handled by an expert.

If it’s something you’re considering, or simply want to understand more about, give us a call (09 309 3222), we would be more than happy to chat to you about it. Make Murray your Accountability Partner. Also, If you need an accountant in Auckland – feel free to reach out. Murray comes with over 30 years’ experience in commercial roles in industry and can relate to the issues you as business owner’s face in your day to day business activity.

Are you struggling to make your business work?

Insight CA Limited is a team of experienced Auckland-based chartered accountants and business advisors who can help. We’ll give you the power to see what’s really happening in your business, so you can take control and start making progress. Click here to learn more about how we can help you achieve your goals.

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