#virtual finance

Why Does Your Business Need A Virtual CFO?

Businesses are built by ideas but sustained by good financial management. Because every step in business has a financial implication, business intelligence in today’s world has got a lot to do with financial insights and skills.

Over the last 1-2 decades, aided by new technologies and widespread penetration of the Internet and social media, the business has gone through a lot of changes in its perspective and techniques. Old concepts and mindsets can hardly match today’s highly informed and competitive world of business.

Many bottlenecks of the past are giving way to opportunities. The two principal requirements for starting a business–the source of capital and market for the finished product are within the reach of a business aspirant. The ecosystem is ready with the raw materials and logistics. But the stark reality behind this widespread optimism presents a picture of intense competition with an increasing number of failures.

Look at the following heart-wrenching statistics on startups:

9 out of 10 startups fail,

7.5 out of 10 venture-backed startups fail,

2 out of 10 new businesses fail in the 1st year of operation.

There can be a variety of reasons why early-stage businesses might fail, but the most common ones as identified by the top business leaders are:

Failure to develop a profitable business model,

Lack of adequate financial planning,

Lack of compliance and company administration

Poor cash flow.

Therefore, addressing the compliance issues and getting the financial side of things right from the start is critical. Hiring a virtual CFO service can be your best bet to ensure the same and good cash flow management in the most cost-effective manner. Cash flow is an organization’s lifeblood, and it’s vital to have a steady supply of capital flowing through the business.

What can you expect from a virtual CFO service?

The term virtual CFO or “virtual chief financial officer” refers to an outsourced service provider who provides a complete range of financial services to a business, similar to what a chief financial officer (CFO) does for major corporations.

The difference between a CFO and a virtual CFO lies in the fact that while the former is a senior position in the management that attracts a high pay package and other benefits, the latter is an outsourced person or agency that offers high-quality services and consultancy at much lower charges.

Understanding the role of a CFO will help us realize why virtual CFO service is so important to a company before it can hire a full-time CFO.

The Chief Financial Officer (CFO) is the person who controls A-Z of your company’s finance and related matters that range from bookkeeping to compliance, and from financial planning and corporate investments to corporate governance and strategic requirements.

When you think about virtual CFO, you should expect all the above services performed with equally high expertise. It’s like outsourcing the head of your finance department. Virtual CFOs are especially advantageous for small organizations that may not have the financial resources to engage a full-time CFO but would benefit from having an experienced financial professional in charge of their finance department.

As an owner of a small business or a startup, you have got many challenges, such as managing finances, financial planning, financial reports, compliances, corporate governance, addressing strategic requirements, so on and so forth. Some contribute directly or indirectly to the company’s earnings, some protect the organization from compliance issues, fines, etc., and the rest are for creating new opportunities.

But if you can’t manage them on your own and hiring an experienced CFO is also not a viable option for you, a virtual CFO may be the right solution for you. Virtual CFO agencies offer customized packages that include the services required by you. This makes the offer flexible and cost-effective. Unlike recruiting a CFO, which is a fixed cost to the company, a virtual CFO package may be a one-time or a variable cost.

Besides helping the smaller companies gain from professional financial management, that’s usually reserved for major corporations, virtual CFOs particularly benefits the startups and small businesses in the following areas:

Financial Forecasting:

An organization’s future performance can be forecasted using financial forecasting, which entails processing, estimating, or predicting a business’s future performance.

Predicting a company’s revenue is a common example of financial forecasting. An organization’s performance is determined by its sales figures. So forecasting is considered critical to the success of an organization’s goals. In addition, financial forecasting involves estimating future revenue as well as future fixed and variable costs, and also capital requirements. Another crucial role financial forecasts can play is in terms of winning investment to your company and taking the next step up the funding ladder.

To have a control over spending:

When your firm is just getting started, expenses can quickly spiral out of control. With increased visibility and understanding of your incoming funds and outgoing costs, you’ll be able to make more informed decisions. Don’t forget that if you’re spending too much money on unnecessary items, your budget will be slashed, and you may not have enough money to make actual, business-critical expenditures in the near future. If you hire a virtual CFO, he or she will make sure that these systems are in place, allowing your staff to make essential purchases for your organization.

To scale up the process of money control:

As you grow in size, your finances will become more complex. There will be many avenues through which money will flow in and out of your company. Without an expert to scale your processes, you may not be able to keep up with the demands.. A bookkeeper or accountant won’t suffice for this type of duty; you’ll need a virtual CFO.

Virtual CFOs are driving the organization’s success and using financial data to influence operational decision-making. It has become a grand success in the USA (the land of most startup ventures). Most of today’s giant tech firms in the USA started as startups and were powered by virtual CFOs.

Poor handling of finance is a root cause of failure for numerous businesses, and efficient financial handling helps a business move ahead during difficult times. This basic tenet of business holds the keys to the survival and growth of a startup venture.

But the irony is that finance is not a priority area for most startups at the initial stage. This may be due to a lack of awareness about how efficient finance handling can remove many roadblocks and create opportunities.

Another reason may be that the startup owners usually aren’t seasoned businessmen in professional life and therefore more inclined towards revenue generation without caring for the need to maintain a healthy bottom-line.

That is a fundamental mistake in cash management, the business owners often find out too late when suddenly they are faced with situations where they have utilized their available cash flow for operations without making budgetary allocation for tax incurred liabilities. This alone can cause a small business to liquidate.

Also, some compliance criteria may appear that the company might have breached due to ignorance, imposing heavy penalties payable within the stipulated time. Situations like this eats up the profit earned and also force the company to hire a CFO or a senior financial expertise manager (more financial burden) to survive the threat of winding up.

This is where a virtual finance department can come in as a viable, cost-effective, and trustworthy support service to address all your financial issues and also guide to accelerate the growth of your business performance. Wow, sounds great and just ideal for small startups that require nurturing by experts!

So, what is a Virtual Finance Department?

Whatever the size of a business, it needs to perform disciplined financial activities for growth. If you’re a startup or a small business and want to keep the upfront investment and risk minimum, this solution is practical and gives you more freedom to work when and where you want.

As the name implies, a virtual finance department acts like your own finance department, but yes, it’s outsourced and operates remotely using the Internet(remote employees). It’s a group of financial experts with long exposure and experiences in handling a full range of financial functions of various sizes and types of businesses. The responsibilities or functions it performs include:

Bookkeeping and regular accounting services.

Management of the company’s cash flow.

Budgets and forecasting.

Advising and sourcing longer-term financing.

Management of Taxes.

Management of Company’s Investments.

Financial Reporting and analysis.

Assist managers in making key strategic decisions.

The requirement may vary depending on the size and type of a business. Your requirement may be as basic as virtual bookkeeping, another company may require advanced level virtual accounting services, while a third company may be looking for full-fledged virtual finance management services or virtual CFO services.

Benefits of Virtual Bookkeeping

Bookkeeping is the most basic but essential financial practice of recording a company’s financial transactions daily. A properly updated ledger gives you many insights to make key decisions on operating, investing, and financing.

Virtual bookkeeping ensures daily recording of financial transactions entirely from remote. Virtual bookkeepers telecommute to post the transactions into your electronic ledger from remote using bookkeeping software.

Activity levels include: Accuracy, speed of work, the flexibility of working from remote, and cost effectiveness are some of the strong reasons that explain why you should hire a virtual bookkeeper.

What other services are included in advanced Virtual Accounting Services?

Besides virtual bookkeeping the other services covered in an advanced virtual accounting services are:

Periodic GST Filing.

Monthly TDS Payments, and Quarterly TDS Preparation and Filing.

Bank Statement Reconciliation.

Periodic P&L, Balance sheets, and other MIS reporting, where applicable.

General guidance, where needed.

From a startup perspective, virtual accounting services present significant key advantages due to factors such as cost, accessibility from anywhere & anytime, no need to come to the office (in fact, small startups may not even have an office for that matter), and above all the combined experience and wisdom of a group of experts and their networks.

The concept of virtual CFO and virtual finance department are synonymous with the startup culture. They match each other’s unique requirements, as was proved during the startup revolution in the US. India is the 3rd largest contributor to startup ventures in the world needs a large number of competent virtual finance departments to achieve a greater success ratio.

Reposted from: fluidscapes.in

Virtual Finance, Finance Director, Ace Accounts 

The challenge is that there is a fine line in between when you need a management accountant, but you cannot afford to employ someone on a full-time basis. This is when you need the services of a virtual finance director – a qualified accountant who will spend as much time and energy on your business as you need but only work the amount of time you need and in a affordable and cost manageable way.