The popularity of virtual CFOs has been on an uphill trend for quite some time. The digital transformation, which got sped up by the onset of the pandemic, has played an undeniable role in this wide acceptance. Over the years, the role of CFO has undergone a positive transition. Besides the traditional responsibilities related to finance, the CFO is the right-hand person to the CEO in taking the business forward.
A CFO is a master strategist, process implementer, catalyst of change, and steward of the rules and regulations. These four faces of CFO are as per an article published by Deloitte in August 2020. The above pretty much sums up the importance of having a CFO on board. The role, responsibilities, and expectations are the same for an in-house or a virtual CFO. Then the next question arises. How to make a wise choice between the two? The reasons may vary from the cost to the availability of the talent.
To explain further, it is a given that expertise comes with an expensive price tag. The cost of employing a virtual CFO is significantly lower as they work on a need basis. There are multiple needs and specific problems faced by the different industries. A virtual CFO caters to more than one business or industry at the same time. It implies a virtual CFO will have a wealth of varied experiences and a good communication network. These two are essential for the growth of a business.
Let us delve more into how virtual CFOs are becoming a norm for business.
I. Virtual CFO- the new norm
As discussed above, the virtual CFO services have taken up the business world by storm. It is pertinent to understand the reasons to change the ways of the business for the better.
A. Digital Transformation
The business world is growing, and naturally, the competition increases. On top of all this, the pandemic bowled a googly to the business world. The digital transformation helped businesses to survive this unprecedented situation. A cost-effective digital transformation meant the businesses could work efficiently with the virtual connection. During this time, many in-house CFOs also worked virtually, proving the worthiness of a virtual CFO.
The MSME (micro, small and medium enterprises) sector in India is fast growing. As per the India Brand Equity Foundation website, there are approximately 63 million units currently. s, Digital transformation, and virtual financial services can help give an edge to this sector.
B. Reimagination and adaptive business models
It is crucial to understand the pulse of the business and to make the corrective changes. This attribute marks the difference between an accountant or a bookkeeper and a CFO. Reimagination is basically to reinvent the existing business model to meet the need of the hour. For example, during the initial phase of lockdown, the demand for sanitizers increased rapidly. The demand was so high that the manufacturers used the bottles designed for dishwashing liquids to sell the sanitizers. The above is an example of repurposing the existing inventory to meet the need of the hour.
The virtual CFO services help businesses to repurpose themselves. Thus the adaptive business models will help in curbing the cost and thus, increase the profitability.
C. Problem-solving
The role of CFO has developed into being a sounding board to the CEO for ideas and problem-solving. A business can face a problem because of multiple reasons. The importance of understanding the cause and effect of an issue helps to provide the best potential solution. The virtual CFO services cater to many businesses in different industries. They assess the strengths, weaknesses, opportunities, and threats (SWOT) of each. Also, these help them in understanding the best viable option for a given problem.
D. Risk intelligence
Every business owner might not have a weighted knowledge about the risks involved in market and product diversification or new investments. It is important to take calculated risks to achieve scalability in business. They must keep the balance between risk and liquidity for business sustenance. A virtual CFO service helps the business owners to know the different risks and make an educated decision.
E. Feasibility checking
The quote by Nobel Peace Prize winner Martti Ahtisaari emphasizes the importance of feasibility study. He has famously said that it is necessary to carry out a pre-feasibility and feasibility study before entering a crisis. We can consider any new business ideas or investments with the same importance as a business crisis. It is prudent to perform multiple feasibility checks to understand the long-term and short-term returns or risks of the prospect.
Here, the virtual CFOs help the business do the feasibility check before making any crucial decisions.
F. Strong financial culture
A business needs to have its own financial culture and discipline. Here, the CFO acts as a guardian of the rules and regulations of the government and the company. To avoid penalty payments, the team ensures they do every payment and tax submission on time. Another important function is the generation of MIS to the top management. This helps in making pivotal decisions. The finance functions must work in tandem and like clockwork. The virtual CFO ensures these for the smooth functioning of the business.
G. Cyber security
Finance is the lifeblood of any business. Financial data is highly sensitive. Data security is a priority and legally binding on every virtual financial service. They will ensure that they handle every piece of information with utmost care and importance. Also, another advantage of using virtual CFO services is the business doesn’t have to invest a huge amount in digitization.
H. Upskilling
The future of finance function is in digitization. The employees must gain additional skill sets and knowledge about new tools to upgrade themselves to work on sophisticated financial models. And, the virtual CFO services will provide light on which toolsets will work best for the business. The guidance on upskilling the team will happen according to the needs of the business.
The above are some attributes that make virtual CFO services a norm for business. It has proved its worth in aligning the business on the path to success. Diligen has repeatedly proved that its team of virtual services is ahead in learning and understanding the new trends in financial services.
