10 Top Tips For Working With A Virtual CFO… to Improve Cash Flow, Profit and Business Value
You’ve no doubt heard the term ‘Virtual CFO’ being bandied about, but what do they actually do and how can you work with one to ensure you get a good return on investment?
A ‘Virtual CFO’ is someone with very detailed knowledge and experience running the financial control for an organisation. They act as a ‘right hand’ person to a business owner or CEO. The term ‘Virtual’ means they aren’t employed full time, but work with you on an ‘as needs’ basis (preferably weekly, fortnightly, monthly). i.e. you only pay them for the work they do and the results they help you to achieve.
We’ve come up with 10 tips to ensure you get maximum value here:
1. Sit down with your Virtual CFO and have a high level conversation about what you want to achieve in your business in terms of business growth, improved profit, cash flow and business value. Once you’ve got a high level goal you want to achieve, your Virtual CFO will help you to break it down into an achievable strategy, plans for implementation and measurable targets. At the end of the day it’s all about the ‘value proposition’ – you must receive more value than the cost of their services.
2. Targets need to be broken down into manageable stages/projects e.g.
– Pricing Analysis and sensitivity to achieve best profit
– Sales Revenue growth capacity and funding requirements
– Costing analysis for gross margin improvement
– Overheads analysis for net profit improvement
– Accounts Receivable overhaul for quicker customer payments and better cash flow
– Accounts Payable review for better pricing and terms from suppliers and better cash flow
– Stock and Job management review to speed up invoicing and cash flow improvement
– Profit and Loss Budget and Cash Flow Forecasting including all the above points
3. Your Virtual CFO will have ‘hands on’ involvement in projects – they won’t just say “you need to do this and I’ll see you next month to review”. They will take the responsibility off your shoulders, leaving you free to focus on making more money.
4. Your Virtual CFO will keep a close eye (preferably via cloud based systems) on progress and report to you each week, fortnight and/or month with explanation and discussion on progress towards targets. If targets are not being met, your Virtual CFO will investigate the reason and help to resolve any issues.
5. Your Virtual CFO will act as a ‘sounding board’ for you to discuss your short and long terms goals and ‘ad hoc’ opportunities that arise, feasibility of taking them on and details to ensure they provide a good return on investment with your resources.
6. Your Virtual CFO will participate in discussion and meetings with potential lenders/investors for business growth funding. They will help you put the very best ‘business case’ forward to ensure you get the right funding to suit your business needs.
7. Your Virtual CFO will guide you through the process of reporting to lenders/investors, participate in board meetings, prepare and present financial reports and answer questions from stakeholders.
8. Your Virtual CFO will constantly present to you ideas for business improvement – not just financially related, but anything that helps your business to grow and improve. They will refer you to others who can assist in such areas as Marketing, Sales, HR, Operations, Customer Service etc.
If your Virtual CFO is part of a group you will receive a much wider range of ideas and advice, because they aren’t operating as a ‘one person band’ who struggles to find time to keep up to date with innovation.
9. Your Virtual CFO will stick with you through all stages of the business journey i.e. from stabilising your current situation, to growth, right through to business exit/sale when you’re at that stage.
10. Your Virtual CFO will ideally quote you a fixed fee for their involvement in project implementation. Such fees will be far outweighed by the improvements gained from their involvement.