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Calling in a virtual financial expert

A virtual CFO is the best option for SMEs to build their finances with quality talent

Gulf News

A typical entrepreneur, while building his business, has several serious organisational issues to grapple with on numerous fronts. One of the most critical is to ensure that his business generates cashflows for managing day-to-day operations. As many an entrepreneur has discovered, it is cash rather than customer who is king.

As a former corporate banker, I have seen too often that the four critical C’s of a business — cash, costs, collections and credit — are more often than not neglected in the obsessive pursuit of sales. It is fair to deduce then that finance and accounting is the one area which can keep the entrepreneur up all night with worry.

This makes it almost mandatory for him to have an expert finance and accounts team in place, which can be trusted to deliver not only efficiently managed finances, but also provide timely and accurate information on all key aspects of the firm’s business — sales, client profitability, sales team performance, cost behaviour, cash flow and so on.

This requires expertise and experience and is not always available to SMEs as this comes in the form of expensive chief financial officers (CFOs).

On a micro level, a finance and accounts team has to ensure that accurate, timely and easy to understand information about the company’s finances, is presented to the owner/CEO. For example, the following need to be regularly and frequently monitored and reported on:

• Inventory: stock behaviour, ageing and costing (including shrinkage, pilferage, etc),

• Receivables: credit limits, timely collections, debtor behaviour etc

• Costs: are they in line with industry and market norms?

Also, there is an important question to be answered: Is there anyone in the company, apart from the promoter and/or the CEO, to help with budgeting and forecasting, cash flow management, business planning, critical MIS statements, banking functions, due diligence, setting performance targets for employees, and coming up with incentive schemes.

In my experience, for over 80 per cent of SMEs, the answer is a big “No”.

There is invariably the owner/CEO operating at the top, with the calibre of the next level of employee in the finance and accounts team being way down the hierarchy. Secondly, these skills are just not available with an accountant or a finance manager. For these skills, now essential for SMEs to grow to the next level, calls for a qualified and skilled CFO.

However, the common cry of owners/CEOs is: “We just don’t have a reliable, capable, high-level finance person to talk to in our companies, and we just can’t afford such a person”.

Bhairav Kothari, founder of SuperCFO India, foresaw this six years ago and established SuperCFO with the premise of providing Virtual CFOs to start-ups and SMEs, which obviously could not do without one and now could afford one at a fraction of the cost of hiring a full-time CFO. By virtual, it is not construed as someone who is imaginary or digital. It simply means an expert finance and accounts professional who is at your beck and call and works for you on a contractual need basis.

Engagements under this model are as low as four hours a week and go up to four days a week. SuperCFO helps companies right from their incubation days until they become a large public company through its virtual services.

In certain situations, the virtual CFO also carries your company’s visiting card, as an integral team member, when interacting with clients, vendors and bankers.

As with everything, there are pros and cons. The downside to engaging a Virtual CFO is that the SME will not have the CFO on a full-time basis to look at various other incidental matters, and also there is this risk of the CFO getting hired on a full-time basis, by some other client. But while there are such risks, the rewards outweigh risks, and the virtual CFO model is definitely the way to go for SME owners to build their business with quality senior finance talent.

 

 

About the writer

Vikram Venkataraman, managing director of Vianta Advisors, has partnered with SuperCFO to provide Virtual CFO Solutions in the UAE.

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