What does a virtual CFO do?  And why you need one NOW!

What does a virtual CFO do? And why you need one NOW!

Imagine if your finance team and bookkeeper are holding you back and you didn’t even know it….

Generally, the frustrations CEOs and boards feel about the financial reporting of their companies fall into these general areas:

Month end reporting – a CEO’s biggest bugbear!  If you’re struggling with this area of your business then rest assured you’re not alone.  Most CEO’s or business owners I speak to have these common complaints about the financial reporting systems in their business or not for profit:

Reports are always late  – “I get my reports the day before my board meeting (if at all) and I never have time to prepare or ask questions – I hate walking into board meetings unprepared!”

I don’t trust my reports  – “When I do get my reports I never can be certain they are accurate….I’m not a CFO but my gut feel is they’re not quite right but I don’t know how to check them…”

I don’t fully understand them – “I’m given these reports each month but to me they’re just numbers on a page…there’s no interpretation of the numbers or guidance on how the business is performing, what areas I should focus on, where we’re leaking profit or cash and how we could do better next month.

Sound familiar?

Over the years I’ve found these businesses or NFP’s are all suffering from the same underlying problem – they don’t have a qualified CFO working alongside them, presenting them with reliable and easy to understand financial information and guiding and supporting them in their financial decision making…in fact most of the time this critical financial reporting role is left to an under-qualified finance or admin resource or an external tax accountant, and whilst they do their best, they just don’t have the strategic “CFO level”  expertise to deliver what the business needs to thrive…

If thinking back over these issues, hiring a virtual CFO Service offers you the best opportunity to achieve your growth goals, and to do so quickly and more economically.

 

 

What does a virtual CFO Service do?  And why you need one NOW!

A Virtual CFO will understand your business and your industry and help design and generate financial reports so they are easy to digest for you and your board of directors, giving you the opportunity to fully understand where your business stands and where it is headed.

A Virtual CFO will oversee your current bookkeeping and finance staff to ensure all procedures have a series of checks and balances to strengthen security and present accurate financials. These steps are crucial to avoid cash flow issues.

A Virtual CFO will generate a budget and financial projections to give you and your board the best financial information possible to make strategic decisions about your company’s future.   As well as the toolset to hold your team accountable for hitting your goals.  These projections can also include “what if” scenarios so you can truly be a future-driven business and quantifiably compare the potential impact of key decisions before they happen.

A virtual CFO can assist your business to gain strategic perspective and world class reporting at a fraction of the cost of hiring a full-time CFO, saving costs without compromising on financial leadership.

The expertise of a virtual CFO expands with your business needs – Virtual CFO’s expand the scope and level of sophistication only as you need it, while maintaining the continuity that comes with working with trusted resources over the long-term.

The services of a Virtual CFO are cloud based – you won’t experience the geographical limitations of finding someone in your area as you can engage with us online.

 

 

What does a traditional bookkeeper and a dinosaur have in common?

Everyone’s talking about using tech automation, right? The predictive text function that finishes typing your email messages for you, the coffee machine that knows when to stop pouring.

But what almost no one understands about using technology automation, is that it can be applied to bookkeeping.

What does a traditional bookkeeper and a dinosaur have in common?

They’re both extinct.

We all know that traditional bookkeepers have supported businesses for years, but they haven’t evolved to keep up with modern advancements, such as automation.. Keeping the same bookkeeping systems will not see your business into the future, it will keep your business at a standstill.

On the flip side, harnessing the power of cloud based technology will reduce salary costs and will give you better financial information in your hands straight away. Switching to a cloud based, virtual CFO Service gives businesses better financial reporting, data and insights straight away.

Engaging a virtual CFO will future proof your business, enabling you to not just to survive but thrive!

 

Did you know that hiring a virtual CFO is a fraction of the cost of an in-house full time CFO?

So what is a virtual CFO Service?  It’s a virtual Chief Financial Officer (CFO), based in ‘the cloud’ who works with your team remotely.

I’m going to share with you three financial structure issues holding your company back, what a virtual Chief Financial Officer (CFO) is, and how you can have expert advice for a fraction of the cost of hiring an internal resource.

So the first issue holding your company back is, that without a clear long term strategy including forecasts, your business cannot grow or expand.

You are operating as ‘business as normal’.

The big idea here is if you have accurate and timely financial information – along with practical interpretation and guidance on how best to leverage it, it will be the difference in your business success.

This is important because without financial accuracy you and your team are making business decisions in the dark.  A miss- informed strategy will impact your business operations now and into the future.

The second financial structure issue holding your company back is accountability – it is vital.

The main thing to understand here is that as your business has grown, so has the complexity of the financial situation and sheer volume of transactions and information held by your team.

This means there needs to be adequate financial information security, division of responsibilities amongst your team, with clear job performance standards.

The third financial structure issues holding your company back is raising capital for future growth needs to be planned for.

Banks and investors are only going to come on board if you can present a compelling, substantive financial picture.

This is key because having a complete and accurate financial history and projections – coupled with a credible financial story – is vital to secure the capital your business needs to grow.

Now, I know what you’re thinking.

It’s a big step forward to bring on a CFO.

Well the great thing is, the cost of a virtual CFO is a fraction of the price of hiring an internal full time CFO.

A virtual services model offers you expert CFO consultancy services which can streamline your business operations, help you plan for future growth and gain the executive level support your team needs.

Hiring a virtual CFO Service offers you the best opportunity to achieve your growth goals, and to do so quickly and more economically.  Is it time you considered engaging a virtual CFO?

 

Rachael Turner is a member of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging VCFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals.

If you would like any more information regarding the Association of VCFO’s please visit our website http://www.vcfoassociation.com.au

Tools do not maketh the Tradie

Tools do not maketh the Tradie

A new tool like a power-saw does not have magical powers to turn a bad tradesperson into a good one, however there is an old saying that has been around centuries that says a bad worker will always blame their tools.

But it also holds true that modern equipment and power tools will enable a good tradesperson to carry out their work quicker and with less effort, than previously was the case with traditional hand powered tools, that the craftspeople of the past used. Consequently over time there has been an evolutionary shift away from traditional tools.

The difference between a good and bad tradesperson seems to be the factor that determines if the enabling tool is going to result in a real benefit.

Tradespeople must go through an apprenticeship program, where they are legally bound through indenture to a master craftsman, for a period of time, in order to learn a trade. Usually, on-the-job training is accompanied by some type of formal study. The idea is that hands-on experience gives context to the knowledge and vice versa, allowing the apprentice to learn the craft.

This is where I find it gets interesting.

Learning the craft is much different to being taught the craft, being shown the craft, or doing things by rote. Learning is something the apprentice needs to do themselves.  It follows then, that learning is the thing that differentiates the good tradespeople from the bad.

Only when the tradesperson has accumulated enough knowledge to be able to adapt and apply it to different situations, along with enough practical experience are they considered qualified.  At this point they have enough EXPERTISE to call themselves a tradesperson.  Interestingly, 6 days a week for 4 years, with a little overtime on top which most apprenticeships run for, is roughly 10,000 hours.

I am not an educator, but I take my hat off to them, because they have a tough and important job.  I have always told my kids that it is the teacher’s job to teach and the students’ job to learn. It has always fascinated me that within the same class the top half of kids say the teacher was ‘good’ whereas the bottom half say the teacher was ‘bad’.  The teacher delivers the same curriculum to the whole class, so how can the experience be so different?

Largely it comes down to attitude of both student and their family along with a false expectation that the ‘bad teacher’ was reason their child ‘didn’t learn anything’. Naturally the teacher is going to devote more attention to the kids who are trying to learn.

I was not a great student at school and unfortunately, I took that with me to university. I was however good at passing exams, so I got through my undergraduate studies without really raising a sweat ….and got my golf handicap down to 12. Once I graduated, the 12 handicap was not that useful (other than the odd corporate golf day) and I felt that it took me 10, 000 hours to be good at my job.

 I learned about learning the hard way.

Eventually, I decided that I had enough practical experience, across a range of industries and company types that I would have a go at doing an MBA. It was certainly not easy to find time and I needed to take a hiatus as life demands and house renovations took priority, but I eventually finished with a Distinction average.  I felt that the benefit of all that on-the-job experience really allowed me to validate the extent of my knowledge, but I did learn a lot of new things too.

Often, I would start a topic and get excited thinking ‘I know about this’ only to be amazed at how ‘deep’ we would ‘dig’ beneath the surface. I would learn that my on-the-job experience was often only the equivalent of 6 inches deep, but the MBA seemed to dig down to 6 feet. Nowadays, I observe the odd critic of ‘MBA’s who think they know everything’ within the broader business community, but I doubt anyone that has done an MBA would think like that. I am certainly grateful and glad I took the opportunity to do one.

How does that relate back to the power tools you are probably wondering?

It makes me cringe when I hear the current crop of tech-enabled finance business partners make comparisons to ‘bean counters’ of the past and say they aren’t ‘your stereotypical bean-counter’.  All they are really saying is ‘in 2021 I do things differently to how they did it in 1978’ Well Duh!  It is about as useful as comparing an iPad to a slide rule.

Time stands still for nobody. The tech-enabled world is evolving at a huge rate, but accounting is not developing any quicker than other industries, like medicine or communications.

Today you can drive an entry model new car off the lot in Sydney, drive to Perth and back again without so much as checking the fluids. 50 years ago, that was unimaginable. Is it because we are better drivers today? If so, why is the road toll so appallingly high?

In golf, the average pro whacks his driver 50% further than Arnold Palmer or Ben Hogan did in their day. Are the current crop of golfers better than these past gods of the game, or is it their equipment?

Without doubt technology has shifted the capability baseline of accountants over the years.

But debits are still debits and credits are still credits. Let us not forget that… it is just that today’s accountant uses an iPad, not a 14-column paper pad as a tool.  With automatic system entries, pretty much anyone can reconcile the bank account and produce a P+L, whereas to do this manually requires more skill, accuracy and tenacity.

It takes EXPERTISE to look at the information in a strategic way, then leverage it by combining financial and non-financial information to find the meaning behind the numbers.

As the ‘Master craftsperson’ in the accounting space, a ‘good’ CFO will be able to figure out what is working and what is not, regarding the strategic plan, quickly putting their companies into a position to quickly pivot and seize opportunities or mitigate whilst the business holds on, waits, and survives until the next opportunity comes along.

They must be able to communicate at a very succinct, distilled  (exec summary) level telling users what they need to focus on, (which sometimes comes as a slap in face with wet fish), and then trying to influence people to get them to co-operate and CHANGE. which is a completely different way of thinking to compliance accounting.

Accountants need to be careful not presume that new digital tools are a substitute for expertise and get swept up in comparisons to the past. If we are doing such a great job, why are so many small businesses still failing?

 

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

3 Reasons why accounting firms should work with VCFO’s

3 Reasons why accounting firms should work with VCFO’s

Let me be clear, this article is trying to encourage your accounting firm to offer Virtual CFO services to your clients.

In saying that, I’d advise you be realistic about the challenges. If it was easy, then everyone would be doing it. Do the rewards justify the risks? Only you and your clients will ever know the answer to that.

Accounting firms that are looking to expand beyond traditional compliance work and grow their own businesses by offering Virtual CFO services can leverage the ‘Know Like Trust’ aspect of longstanding relationships, solve their clients problems and save themselves a whole bunch of hassle in the process.

Most firms will have clients that have outgrown their own rudimentary in-house financial management capabilities. More than likely these clients are often frustrated, worried and disappointed with unreliable and unpredictable nature of their finance and know they need help. They wake up every day hoping to find a better way and it is a relatively to persuade them that they need help.

However as many accounting firms have discovered, fulfilling the clients needs and making a decent return for the effort involved is proving to be quite a challenge.

The biggest problems public practice firms encounter when trying to get Virtual CFO services off the ground are pricing, scoping and resourcing. This plays out as the client become very hard ‘manage’ on the monthly agreed fee. Typically Accounting firms adopt a tiered (senior, manager, partner) team structure It is common to hear that the client will not deal with the ‘senior’ or ‘manager’ allocated to the job but goes straight to the partner. If the Partners time has not been costed into the recurring fee, profit margins quickly get eaten away.

What strikes me about this problem is that the CFO role is part of the internal capability of a business and the owner has expectations that a Virtual CFO will be just as real actual and tangible as an in-house CFO, as and when they need them. They expect their VCFO to be accessible, available, dependable, flexible, efficient and capable. These expectations are more or less at odds with the tiered (senior, manager, partner) team structure model.

So, what is the alternative?

Clients get the best outcome when they have a Virtual CFO working in harmony with their traditional compliance accountants. CFO’s through their knowledge and experience, are experts in the area of commercial financial management within specific industry verticals. CFO’s in industry consciously decide to move away from public practice and pursue a commercial path. Every big company has a CFO that has chosen this path and devoted the prime of their careers towards the goal of being a CFO. Virtual CFO’s are ex-CFO’s that do the same thing, but on a part-time for SME’s who have not yet reached the scale to justify the investment in a full-time CFO.

Virtual CFO’s provide financial leadership for business and credibility with external stakeholders. A VCFO will be actively involved setting, reviewing and implementing strategy. They assist with establishing the reporting foundations, systems, strategic plans, budgets, forecasts as well as cash flows to ensure there is adequate funding in place to seize opportunities and grow the business. Importantly they communicate across the business, working as an integral part of the client’s management team to improve profitability.

Ultimately, VCFO’s allow business owners to focus on their clients and grow their business by freeing them from financial management problems. VCFO’s also make it easier for accounting firms by presenting them with reliable and predictable information to do the compliance and tax strategy work, and removing the distractions of being available on demand in a dynamic capacity.

Public practice accounting firms can engage with Association of Virtual CFO’s members under a white label or sub-contract arrangement. Accounting firms can leverage their client relationship to make a decent return, their client gets a better outcome and the firm makes a return without the risks and distractions of trying to build a new business in a specialty area that they might not be experts in. Surely this is the win-win scenario

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals.

If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

Risk-free rivers of gold?

Risk-free rivers of gold?

Are Virtual CFO services risk-free rivers of gold for public practice?

Many accounting firms are looking to expand beyond traditional compliance work and grow their own businesses by offering Virtual CFO services.

It is hard to know whether this is in response to ‘fear peddling’ about the imminent death of compliance work, through client driven demand, a result of just trying to capitalise on an opportunity or a combination of these.

Regardless, firms are looking to leverage the ‘Know Like Trust’ aspect of longstanding relationships, with clients that have outgrown their own rudimentary in-house financial management capabilities. These clients are often frustrated, worried and disappointed with unreliable and unpredictable nature of their finance and know they need help. They wake up every day hoping to find a better way. It is a relatively easy ‘sell’ because people in this situation love ‘buying’ hope.

The biggest problems public practice firms encounter when trying to get Virtual CFO services off the ground are pricing, scoping and resourcing. This plays out as the client become very hard ‘manage’ on the monthly agreed fee. It is common to hear that the client will not deal with the ‘senior’ allocated to the job but goes straight to the partner whose time has not been costed into the recurring fee. This is not the client being difficult, it is the client wanting to cut the ‘middle-man’ out.

The two things that strike me with this problem is that the CFO role is part of the internal capability of a business. Compliance work is external. It is always going to be hard scoping up work if you do not have any experience working within a similar type of company. It is also going to be hard to understand the dynamic nature of managing a business like theirs if you have never done it either. The client soon figures out the senior does not have the experience either and by having to go through the senior to get an answer from the partner wastes THEIR time.

I have heard people espouse the belief that industry vertical knowledge is not important. That a fresh set of eyes brings in a new perspective and challenges ingrained ideas and ‘group think’. However, if we transpose that argument , can you imagine a leg doctor pushing forward the idea that they would like to branch out into heart surgery because the profit margins are better and “we’ll we all went to Uni together didn’t we”.

Does not sound as convincing when you say it like that does it?

I agree that perspective is important. But I would argue that insight from industry experience is more so. If you can combine both, then you have something immensely powerful.

So, are the rewards and why are firms chasing them?   Margins at best would be double that of compliance. Let us use a compliance fee of $30K fee at 25% profit ($7.5K in profit) as the benchmark. Let us say you can get 40% margin doing the Virtual CFO service. So, you are taking on a huge amount of risk for at best an extra $4.5K per year.

Do the rewards justify the risks? 

To answer that you need to understand what the risks are.

In the best-case scenario if ‘it all’ goes bad, the extra time and resources thrown at trying to ‘manage’ the client will reduce your margins. Any worse than that, the privilege of having a happy client might cost you a few dollars out of your own wallet.

If ‘it all’ goes very bad, you can lose a great tax client and the 25% bankable profit every year. You may as well add your reputation to the loss’s column, as clients that walk out the door are hardly going to remain as advocates. That might cost you some more clients as well.

If it goes extremely bad, the worst-case scenario must be that your client might lose their business and probably their family home as well.

So, ask yourself again, do the rewards justify the risks? 

Clients assume that your actions and their best interests directly correlate. You will understand why they trust you to put their needs before your own aspirations to grow your firm. So, what is the alternative?

Clients get the best outcome when they have a Virtual CFO working in harmony with their traditional compliance accountants. CFO’s through their knowledge and experience, are experts in the area of commercial financial management. CFO’s in industry consciously decide to move away from public practice and pursue a commercial path. Every big company has a CFO that has chosen this path and devoted the prime of their careers towards. Virtual CFO’s are ex-CFO’s that do the same thing, but on a part-time for SME’s who have not yet reached the scale to justify the investment in a full-time CFO.

Virtual CFO’s provide financial leadership for business and credibility with external stakeholders. A VCFO will be actively involved setting, reviewing and implementing strategy. They assist with establishing the reporting foundations, systems, strategic plans, budgets, forecasts as well as cash flows to ensure there is adequate funding in place to seize opportunities and grow the business. Importantly they communicate across the business, working as a key part of the management team to improve efficiency and reduce waste. Ultimately, they allow business owners to focus on their clients and grow their business.

Public practice firms can engage with Virtual CFO’s under a white label or sub-contract arrangement and still leverage their client relationship to make a return. The client gets the best outcome and the firm makes a return without the risks and distractions of trying to build a new business in a specialist area that they are not experts in. Surely this is the win-win scenario

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

Monthly Reporting 1-pager

Monthly Reporting 1-pager

I have always worked on the principal with management reporting, that if I was down to my very last sheet of paper and my life depended on it, how would I convey the right message to the decision makers.

In this respect reporting is highly creative.

Management reporting, that is, not reporting compliance where accounts are prepared using common standards to remove inconsistencies from country to country and Auditors then examine the accounts to provide assurance that these standards are being followed. Compliance is more about accuracy and adherence with a historical focus. Essential and skilful, but not strategic, insightful, and future focused like management accounting.

When designing a good management report, in addition to having bullet-proof numbers you must:

  • understand the audience
  • structure the information to make it easy to understand
  • anticipate any queries and be proactive

Often existing, lengthy reports are the legacy of numerous ad-hoc requests by Directors to add a new schedule here and there. Additional information is easy to add, but nobody ever removes and then nobody has time to read and work out it is the same information, just formatted differently.  After all, there is only so many ways you can slice up an apple.

Albert Einstein once said, “If you can’t explain it simply, you don’t understand it well enough.”

To make a change to the agreed ‘one-pager’ other stakeholders input on requisite content should be sought, before issuing a draft format of what the proposed 1-pager would look like, sort of road-testing and then Directors reaching a new consensus that this new version will be the new one-pager.  Maintaining a good ‘1-pager’ then becomes an exercise in discipline, cohesion, and prioritising. If something new is proposed, something old needs to be dropped to make room for it.  Ongoing feedback and communications play a huge role here.

I love how dashboards can virtually stream information live to managers, but you must understand the correct drivers of the business to monitor. A good-looking dashboard reporting on unnecessary metrics is a waste of time.

There will always be a need to dig deeper and provide supplementary detail if required but sending this out as a standard reporting package overwhelms the end user, taking the focus away from the message you want to convey.

I have had a lot of success with the one-pager over my career. It will take a few months to change things around if you are not yet at that point, but the effort will pay dividends later. Stick to the one-pager principal and you will soon find your top-level conversations assume a more strategic flavour.

David Dillon is the President of the Virtual CFO Association.

 

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

Accountants ain’t Accountants

Accountants ain’t Accountants

Here’s a story about 3 kids who lived next door to each other, went to school together and got identical results in the HSC, attended cooking school together and got identical results, but on completion of their courses were then presented 3 different employment opportunities.

One got a job at the local RSL, in their award winning bistro, flipping burgers, steaks and smashing out chicken parmigiana by the hundreds, on a busy Saturday night.

Another got a job at a local Italian restaurant learning to make a mean pizza and even better authentic pasta sauces.

The last one got a job at a Michelin hat restaurant,  learning to make small, fancy tasty and expensive dishes garnished in air dried, baby Himalayan, wild zucchini flowers.

After 10,000 hours experience, each were experts in their fields.

Then one night, for fun, they decided to do a 3-way role swap.

What do you think happened?

Thankfully it didn’t actually happen. It would have been a disaster.

Another great analogy to explain the difference between accounting specialities is to look at the medical profession. People get that GP’s are generalists. Leg specialists look after legs, eye specialists look after eyes and heart specialists after hearts.

You can draw the same parallels  in the accounting profession and that’s the reason why tax people should do tax, audit people should do audit, insolvency people should do insolvency and leave the expert commercial financial management up to CFO’s.

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has over 500 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au