What does a virtual CFO do? The simple answer is that a good virtual CFO will help your business to get better leverage with its money. The question is how so?
I often get asked by new founders what does a virtual CFO do?
- Often the response is around a stronger business capabilities such as:
- Better strategically placed funds to carry out long term plays.
- Better procedures and systems set in place – boosting financial accountability.
- Better preparations & polish in financial negotiations.
- A leaner and meaner approach to expenditure.
All of these are putting a great multiplier on your business!
As a virtual CFO to a number of high growth ventures, we’re a bit of an evangelist for having good financial IQ – particularly having seen many a business thrive based on a good financial strategy.
So let’s deep dive into some of the ways that a virtual CFO can save you heaps of coin.
A long-term approach to cash outflows
Everybody is great at focusing on making money – it’s only after that part when most people tend to start slipping up.
Ever heard of an ‘impulse buy?’ Anyone who has walked into JB HIFI knows this story well. With plenty of attractive goods practically jumping off the shelves for you to buy, it can be difficult to maintain savings and keep track of the more important buys, such as a new house, car or trip overseas.
The same principle applies in business, where a seemingly endless train of B2B sales and slick online marketing is used relentlessly to sell you extra goods or services. Whilst the value propositions seem attractive enough, most of it you just don’t need in the long term.
I’ve come across several startups where thousands have been lost on unfocused marketing or expansion efforts before a product has even been road–tested yet.
This is where a seasoned chief financial officer (CFO) can step into the ring and dramatically lift your game. They can help you to think strategically around where the limited funds in your bank account are placed and manage your cashflow.
Plans & systems for financial accountability
Based on your overall vision, you and your virtual CFO can craft a budget forecast, which take into account the business drivers, revenue as well as the expense departments on which your business is based.
My personal preference is to have budgets aligned against departments (such as sales, marketing, HR and product) so that your departmental managers (i.e. head of sales, head of product) know how much they can spend, all while retaining accountability for their spending.
The right CFO will challenge loose purchase decisions and set up policies to keep your managements’ purchase decisions in check. This is particularly true where there are multiple founders and managers involved, each with their own company debit or credit cards at hand. A well-worded expense reimbursement policy overseen by the CFO gives everybody a good understanding of the boundaries in play around the company’s cashflow.
The same is true of setting accountability for income coming through, where sales managers, CEOs and CFOs can work together to set sales targets and implement incentives for good performance in this area. Not to mention getting paid quicker.
A Virtual CFO = your financial wing person, right?
Negotiating (and what’s best for your bottom line)
Aside from overseeing the finance operations, virtual CFOs help you to maximise your performance during major negotiations. Think investors, leases, cap tables, supplier and customer contracts.
If walking into a negotiation, particularly involving OPM (other people’s money), you’ll need to be prepared to outline your financial storyline in a compelling and informative, but sensible way. CFOs are perfect for this purpose and can help present your financial performance fit to purpose with the right financials, graphs and reports.
With some financial modelling nous, the virtual CFO can also chart the way forwards with some assumptions around business drivers, investments and cashflow requirements.
What if potential investors put in demands for additional growth requirements? No problems, the CFO can adjust the financial model and help ensure that the new requirements are financially viable.
Getting thrown some curly questions around your business financial performance across EBITDA? Month on month revenue growth? Total write-down on stock? With the virtual CFO often being most in tune with the figures, they are generally the person to consult where finances are onboard.
If your business or venture is going places, then you’re going to require someone who is specialised in looking after your company’s financial welfare.
As a virtual CFO, I’m always looking ahead to gauge potential outcomes and recommending financial strategies to best benefit your business in the long-term.