VIRTUAL CFOs : The time now for a paradigm shift

New evolving business eco-systems and global connectivity has given rise to many business models unheard of in the age of traditional business structures.  The rapid expansion of the services sector, especially the IT sector, created an imbalance in talent demand-supply. This gave rise to the outsourcing model.

Virtual CFOs are offshoots of the KPO sector which has found suitors across varied spectrum of businesses ranging from startups, SMEs to established business organizations requiring CFO services as an interim/medium term measure till they scale up or to address specialized tasks.  vCFOs can bring on table financial solutions requiring expert advisory,  resulting in compelling business sense, particularly the cost arbitrage and flexibility it provides.

What do the Seekers need?

Entrepreneurs, especially at Startups, are looking for a Mentoring role by vCFOs to provide guidance in business strategies, financial planning & execution, expert advisory on  specialized financial strategies like hedging, financing avenues & structuring, tax planning, risk management, etc. Technocrat founders have little time and are also apprehensive about getting bogged down in fulfilling the complex and myriad Indian regulatory requirements and need help in navigating the same through vCFO intervention. This is especially true for new foreign players looking to invest and build business in India. Apart from this, small entrepreneurs may look up to the vCFOs to undertake the finance & accounting function comprising of maintaining and reporting on financial activities and fulfill regulatory compliances.

The Indian scene

There are big and small vCFO firms catering to varied needs of business enterprises that seek cost reduction by engaging vCFO services.  Typically, a SME enterprise engagement consists of:  book keeping- financial reporting- tax and regulatory compliance model. This is in essence Finance Outsourcing serviced by Chartered Accountant firms. There are very few engagements delving into the client business complexities and guiding on strategies, business decision making, improving the business effectiveness, etc.

New Challenges & Need of the hour

Businesses today are facing lot of challenges both in terms of business stability as well as external volatility. Technology shifts and external environment, whether competition, government policies, local and economic headwinds are a few of the many storms to be weathered. Startups and small entrepreneurs need a trusted advisor with a financial and strategic acumen in such a volatile scenario.

The role of vCFO becomes crucial in providing valuable insights into the changing economic, regulatory scenario and its potential impact on the business. In the current dynamic scenario, Startups and fast growing businesses need continued support ranging from financial advisory, management consulting, dealing with banks and financial institutions, etc. to financial reporting, tax and regulatory compliances. This requires the vCFO to engage with the client proactively, grasp the business intricacies and possess the necessary band-width and an able support team to truly fulfill the client expectations. Providing timely and real time solutions requires accessing information by embracing new technologies like integration of IT services between the client and the vCFO, tapping cloud based IT enabled services in the areas of  accounting, taxation, payroll, etc.

The vCFO model has to transcend the traditional role of ‘Accounting-Reporting-Compliance’ to develop close relationship with client and their business to support the business decision making process and advise on risk management and mitigation. Both the client and vCFO have to proactively explore for mutual benefit, then only CFO suffix would have the true intent!