BCAS Vice President CA Chirag Doshi’s Message for the Month of March 2023
Chartered Accountant as Virtual CFO
I had recently attended the power summit organised by BCAS, lot of new ideas were discussed and one of the emerging area many participants were discussing about is the concept of a Virtual CFO.
I thought of introducing this concept to our members and readers, which is gaining some popularity this days. Virtual CFO is an outsourced service provider offering high skill assistance in financial requirements of an organization.
Key Attributes of a Virtual CFO:
a. A virtual CFO may be a single person or an entity.
b. He undertakes a variety of finance-related duties that many founders and business owners lack the abilities to handle, such as budgeting, identifying market trends, obtaining money, preparing financial forecasts, etc.
c. Helps in acquiring capital at low cost and also helps in controlling the expenditure.
d. There is currently no official requirement as to the qualifications that a virtual CFO should hold. However, it is generally expected for a virtual CFO to have finance professional accountancy qualification along with sufficient relevant experience.
The service spectrum of a virtual CFO services may include the following:
1. System and Process reviews: Streamlining the system and processes to increase the efficiency and bring in better controls and monitoring
2. Budgets: Supports in budgeting and forecasting.
3. Working capital management: Helps in cash flow modelling and working capital management
4. MIS: Preparation of MIS and discussions with the promoters and Investors
5. Financial Statement and Audits: Preparation of Financial Statement as per applicable GAAP
6. Investors: Investor presentation and communication with the Bankers
7. Strategy decisions: Providing inputs in pricing and other strategic decisions from finance management perspective
Apart from above there are various other critical roles a Virtual CFO can play as per the needs of the organisation.
Working Models:
Virtual CFO works under following 3 models:
a. Monthly model: Monthly retainership model, where he is available virtually over the month and makes few days physical visits to the client place as well. It’s a monthly fixed fee model
b. Hourly models: This models are used less, however where the CFO is required only for investor’s communication and monthly reviews, some organisation uses this model as well.
c. Fixed fee: Some CFO charge assignment based fees, specially happens in case of fund raising initiatives.
As the Virtual CFO brings in a lot of flexibility to the organsations, it also has some Challenges like:
a. Gathering deep understanding of the company’s history or previous projects.
b. Effective control and monitoring over the financial management process as it is outsourced to a vCFO.
c. Understanding the industry-specific nuances.
d. Communication and collaboration with a virtual team can be challenging compared to working with an in-house team. However vcFO can plan couple of physical visits during the month.
The startup ecosystem has generated specialized service providers and Virtual CFO is one of them. Startups normally do not have enough resources to hire a full-time CFO. They like to keep fixed costs low and having outsourced service provider provides them with the flexibility of choosing services as and when required.
Friends, with the start ups industry growing in India and also many promoter driven companies have grown and plan to move towards a self monitored and operated entity. Such a transition in India brings in a lot of opportunities to our profession and the time to grab it is now !!
How can we contribute and grab this opportunity
CA’s have the expertise and experience to provide financial and professional advice, analysis, and guidance. We can also help with strategy planning, budgeting, forecasting, cash flow management, and other financial services. Further, We can make sure that all accounting records and statutory compliances are up to date. CA’s can also provide valuable insights into the business operations and help identify areas of improvement. CA’s can also help in making effective and efficient Internal control.
The secret of success is to be ready when your opportunity comes.
By Benjamin Disraeli
