SMEs are playing a very important role in the Indian manufacturing sector and providing a platform to the businessperson which as a result helps in the economic growth of the company. Due to their significant contribution, SMEs occupy a very important position in the economic sector in terms of output and export. Nowadays SMEs are the biggest employment-providing sectors after Agriculture and form a major part of India’s industrial base. A CFO enables business owners in making an informed decisions. The function performed by the virtual CFO is as similar as Full-time CFO.

Who is the Virtual CFO?

In the case of small enterprises, SMEs, and start-ups, it is difficult to appoint CFO, as CFO is a recognized management authority and it is out of budget for small, SMEs and start-up enterprises to appoint an in-house CFO, in that only case Virtual CFO is required.

Virtual CFO assists companies by providing the following services to understand the financial capability and health of the business. –

Projections of Financial and cash flow through Virtual CFO services with the help of Income and financial statements and cash flow statements.

To understand the cash utilization, proper management of cash flow is done by the virtual CFO along with that debtors and creditors management through identification of key operation indicators as it is an important factor to mitigate the risk factor.

Virtual CFO helps in budget planning which helps in analysing the cash requirement and as a result helps in balancing the income and expenses of the company.

Forecasting the financial and cash flow projections is the key function performed by the Virtual CFO with the addition that it helps in reducing the wastage of resources and implementing such strategy which helps in improving the productivity.

To change the organizational structure of the company as and when required to mitigate the risk and to enhance the number of opportunities.

Why is Virtual CFO growing tremendously? What are the advantages of a Virtual CFO?  

Start-ups and businesses are now more than ever searching for opportunities to operate smoothly. Where needed, there is pressure to make cuts to personnel and outsource, and this has led to a pattern of employing automated CFO providers over the more conventional full-time CFO in-house. Some of the many reasons why Virtual CFO services are growing are mentioned below:

• Flexibility: You set the conditions for time and expense that fit well for your company when you employ a Virtual CFO (VCFO). This may mean working full-time hours for a certain number of weeks for the VCFO and then part-time or on a fractional basis. When the specifications alter, you can scale up or down. Without losing the kind of skills and knowledge that you need; you pay for the time and deliverables special to your business. 
• Accounting Expertise: A Simulated CFO who is a Designated Accountant may be selective and hired. You recognize that they have followed the strict standards set by their discipline when you deal with someone who has received a CPA designation, and their experience is current, and they are still practising through Professional Development classes. 
• External stakeholder and professional services liaison: A Virtual CFO is a liaison with stakeholders, lenders, and specialist bodies from beyond. They give the reporting and review further reassurance, and the due diligence and competent supervision of an Appointed Accountant give the third-party confidence. 
• Get Up to Speed Fast: A Simulated CFO’s life leaps into a scenario and quickly works out things. They have the experience of joining the mid-process dialogue and rapidly assessing what needs to be achieved from a financial point of view, whether it is collecting data, improving financial statements, or introducing better accounting procedures. 

Role of Virtual CFO in an SME

In an SME, the virtual CFO helps the business owners to bridge the gap between finances, operations, and strategies to majorly focus on achieving the long-term goals which helps the business owners in taking an affirmed and strong decision-making process. a virtual CFO bridges the gap between the finance, operations, and strategy that helps the business owner to focus on long term goals.

Functions of Virtual CFO in an SME

To ensure better management and planning for the next financial year by maintaining the balance sheet records all the assets and liabilities of the company.

Keeping a check on the internal controls, as SMEs usually suffer from the deficit management and organizational structure which is a sign of weak internal control. It helps in providing a true and fair position of the company’s performance for a particular period.

As they are expected to maintain and lend a high-level view of the organization and the business environment to create a strong financial base and are also responsible for setting up a strong financial base of the company that plays a vital role in the overall organizational success.

They are expected to enhance and maintain a cordial-relationships with the leaders of the organization to create and fulfil a common vision.

Benefits of CFO In SME

The chief financial officer (CFO) is the officer of a company that has primary responsibility for managing the company’s finances, including financial planning, management of financial risk, record-keeping, and financial reporting. In some sectors, the CFO is also responsible for the analysis of data. Some CFOs have the title CFO for the chief financial and operating officer. In the majority of countries, finance directors (FD) typically report to the CFO and FD is the level before reaching CFO. The CFO typically reports to the chief executive officer and the board of directors and may additionally have a seat on the board. The CFO supervises the finance unit and is the chief financial spokesperson for the organization.

The CFO directly assists the chief corporate officer (COO) on all business matters relating to budget management, cost-benefit analysis, forecasting needs, and securing new funding after all the effort  

Supports business growth

Performing financial forecasts and risk assessments allows virtual CFOs to support your business’s expansion plans. They can ensure that its financial infrastructure is where it needs to be, help obtain financing and apply for registrations, if applicable

Conclusion

If your business is increasing exponentially and in the near future you plan to require investor funding, a CFO could be important in securing the financing. A CFO can be highly productive in the preparation and transformation if you need to build an in-house financial IT system. A virtual CFO will help ensure that everything goes smoothly if you plan to take on any big financial deals, such as a merger or takeover, and assign responsibilities and challenges to the right people at the right time to prevent missteps. 

There is also the versatility of recruiting virtual CFOs, so if you need someone to help assess a single big project, need assistance in the creation of medium-term strategic financing, or just want to measure how well a CFO will help drive progress, hiring a virtual CFO is an excellent way of choice

This article is submitted by by our intern SP Blessy Karena