The virtual CFO

Virtual CFO services for start-ups and SMEs can help them organise their finances at one-third the cost of a full-time CFO

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A typical entrepreneur, while building his business, faces several challenges on an ongoing basis, especially with respect to finance. One of the key challenges is ensuring positive cash flow. Besides cash flow, other critical issues before an entrepreneur include lack of intelligent reporting and good quality budgeting. Many companies have a good accountant, but from a financing perspective, planning and strategising is the area where they really need help.

While issues regarding planning and strategising can be addressed once you hire a permanent chief financial officer (CFO), it is no secret that experienced CFOs are expensive. Also, often in case of small and medium enterprises, the size of the company does not support the cost of a full-time CFO. And even if these organisations do manage to hire a CFO there may not be enough challenges on a day-to-day basis, to keep him engaged.

I saw the void for experienced CFOs in the industry seven years ago and asked myself: "Why can't one CFO help, say, may be three companies simultaneously? While a growing company may not be able to support full salary of a CFO, it can perhaps look at paying for say one-third of the CFO's total remuneration. Meanwhile, a CFO can exercise the option of working with more than one company to compensate for lower compensation at a single small organisation. And in the process, the person will get an opportunity to work in different challenging environments, ensuring that he is occupied and remains excited about the job on hand. Thus, was born the idea of virtual CFOs.

The concept of a virtual CFO is very simple - find like minded CFOs, who would like to take on challenging projects, and still earn closer to what they would in a full time role. This has many advantages for companies which are in their growth phase. A few of these advantages include:

• The engagement is flexible. They can start small, and scale up as they grow. They could also scale down, if they feel finance and accounting function in one of their advisory companies has been streamlined.
• They can now bring on board a CFO, with many years of relevant experience who can help strengthen the finance function of the company.
• A good CFO brings with him the best practices in managing the finance and accounting function. Many a times, the CFO also acts as an advisor cum mentor to the CEO and helps management formulate business strategies.
• Depending on the nature of the engagement, many a times virtual CFOs also carry the company's visiting card, representing the company, as their CFO in important meetings. These could be meetings with banks, investors, clients, vendors or even potential business partners. With a strong CFO on their side, it not only helps them with the decision making process, but also helps in better negotiations.

A virtual CFO engagement, is a win-win business model both for companies and CFOs. The advantages to a CFO are that he/she can be an independent professional and can leverage flexible working hours. Moreover, they also get to nurture and shape the future of a lot of companies. The excitement and challenges of working with a growth company CEO is an enriching experience.

As regards the market potential, India has about 48 million SMEs. Let's assume that about 20 per cent of them require a good CFO to lead the company; this means there are about 9.6 million SME's who need virtual CFOs. The only limiting factor here is availability of good quality talent.

Bhairav Kothari
Managing director, SuperCFO