Category: Virtual CFO

The best way of dissecting this and answering is to do a Porters 5 Forces analysis.

Competitive Rivalry

The rate of industry growth in this fast-growing and emerging sector of the accounting profession means there is plenty of work to go around.

Because we are all so individually different based on our extensive elite industry vertical expertise, we don’t represent threats to each other. If anything, we complement each other’s skillsets, which allows us to cover more ground and dig deeper than any other Virtual CFO organisation in the country. The Association also has the 5 principles of collaboration which includes a no-poaching rule. We believe that with collective experience totalling almost 500 years, across over 20 industry verticals that the Association members offer a more comprehensive, compelling solution to non-members and solopreneurs.

Threat of new entrants

How hard it is for someone to come in and compete for market share against a VCFO’s offering?

The set-up capital costs are relatively insignificant. A desk, a laptop, website, phone and enough cash in the bank to last until your business is profitable. What is not insignificant is the comprehensive educational background and average of 25 years of corporate industry experience. You cannot accelerate getting these and you cannot do without them. Bookkeepers and compliance accountants cannot do a simple course to ‘convert’ and without the requisite expertise, clients and their businesses will be disappointed or even harmed.

The twin crisis has given Virtually every CFO a taste of life as Virtual CFO. For many CFO’s, through no fault of their own, they will find themselves underemployed or worse and needing to find work as a Virtual CFO. For others, the crisis represents an opportunity to capitalise on their immense expertise and start a consulting Virtual CFO business. But getting off the ground, starting a business from scratch is tough, as all our members know from experience.

Buyers’ Bargaining Power

Ultimately the client chooses who they work with and who they do not. Most clients realise that the best Virtual CFO for them, will have many years of experience in their industry vertical. As such, it becomes a supply and demand issue. If you want expertise and there is not a huge pool of people to choose from, they don’t have much bargaining power. Virtual CFO is not a commodity.  Most Virtual CFO’s are limited to about 10 decent sized clients, so they are careful about aligning themselves with the client’s success.  If clients chose on price alone, they will probably end up with a Virtual CFO that isn’t suited to their business or experienced enough to keep up with the bouncing ball.

Suppliers’ Bargaining Power

Is relatively weak. Virtual CFO’s are technology-enabled, but software agnostic. That is, the software itself isn’t the ‘secret sauce’ of what we do. Whilst we do factor in client’s preferences and switching costs, there are often several options we could use for our clients, meaning we are not beholden to any particular supplier.

Substitutes and Complements

When people start to question the value of something, they might look towards an alternative, or substitute. An example would be someone who likes going to the theatre to see live performances but finds that the cost has become prohibitive and that for a fraction of the price they can go to the movies and still be entertained.

Given Virtual CFO’s have an average of around 25 years of industry experience, it makes it hard for someone without that experience to come up with a credible alternative, compelling reason to switch. Historically the biggest obstacle Virtual CFO’s encounter as a substitute, is from the clients employing a full-time CFO. Mostly that has been due to psychological inertia and fear of the unknown. Often the internal CFO option they chose is someone with half the experience, that works twice as long, but that isn’t the same thing as a 25+ year industry experienced expert. The twin crisis has changed that and proven the Virtual team / remote working model can work. In fact it has been the ultimate in validation.

We do not think there has ever been a more exciting time to be starting out in this fast-growing and emerging sector. If you look at the USA and Europe, Virtual CFO’s are more common, and more known across the business world. They are early adopters; Australia has been the laggards, but uptake of Virtual CFO services in the broader business community is set to explode as the economy gears up for a re-start.

Virtual CFO’s enabled by cloud accounting can offer huge efficiencies compared to the traditional model. We are a resourceful nation and as people look to reduce inefficiency, waste and excess, they will soon realise the value of having a Virtual CFO.

Wait, what? You’re an accountant who is looking to make me pay more tax? Are you mental? Why on earth would I want to pay MORE tax? Yes, you’ve read it correctly but just to underline it.

I WANT TO HELP YOU PAY MORE TAX.

On too many occasions to mention over the years I’ve been in a social environment with people I haven’t met before and the subject comes around to what we do for a living. I tell the people who have asked that I am an accountant and the responses fall within a few groups ranging from “but you don’t look like an accountant” (seems we can’t have tattoo’s) to “are you able to wangle me a bigger tax rebate” and a number of varieties in between.

In relation to the tax comments my standard response, and I would imagine will be familiar to many accountants outside of tax practice, is to tell them I’m not that kind of accountant. That got tedious after a while as I then had to go into more detail of the wide variety of roles in our profession. It was boring saying it, never mind hearing it. So, I looked for a response which may perk their ears up a bit and get them thinking.

My standard response to those who are business owners or senior managers these days is to tell them that no, I won’t reduce their tax bill as my focus in life is to get them to pay more. Cue the tumbleweeds.

Most people simply don’t know how to react to that. We have had it ingrained into us that paying tax is a bad thing and that we have to pay as little as possible. Leaving the moral issues to one side, such as how we pay to educate our children if nobody paid tax, I go to it from a much more practical perspective. The more profit you make, the more likely you are to have a higher tax bill.

Good tax experts are absolutely worth their weight in gold in my opinion. Just because it wasn’t a field I wished to follow doesn’t mean that I don’t have a strong appreciation of their value. Their technical knowledge of legal methods to reduce your tax bill and subsequently leave more of your hard earned revenue in the business is vital. If you are a small business owner who isn’t utilising your tax accountant’s ability to assist you strategically manage your tax affairs you are quite simply missing a trick.

The problem is that they have a decidedly limiting factor as to how much they can save you. The profit you make. If your accountant is consistently saving you 10% of your tax bill each year but you are only making $10k profit then the saving is in the region of $300. The price of a good meal for two in some restaurants in Perth. What if your profit was $50K? Saving of around $1,700-$1,800. Starting to get better eh?

However, the majority of people only think of the tax they want to save but what happens to the rest of the profit? Correct, it is left in the business for reinvesting or payment of dividends. Let me give you an example to illustrate. All savings or benefits are after fees for ease of understanding.

Company A makes $100k profit per annum. At 30% their tax bill is $30k. Their accountant maximises their tax relief and saves them 10% so their tax bill is $27k, a saving of $3k. $73k is left in the business. Pretty decent result if you ask me.

The following year the same company employed us to work with them to improve the efficiency and effectiveness of their operations and administrative functions which led to a $20k increase in profit before tax. We go back to the same tax accountant with a $120k profit. At 30% their tax bill is $36k. The same 10% saving applies so they save $3,600 and are left with a tax bill of $32.4k. We have helped them increase their tax bill. However, the funds they have left for reinvestment or dividends has also increased to $87.6k, an additional $14.6k in the bank. I’m yet to meet a small business owner who would turn their nose up at an extra $14k-$15k.

So you see, maybe a bigger tax bill isn’t such a bad thing after all.

Simon 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 www.vcfoassociation.com.au

No matter what I read or hear, the word “unprecedented” keeps popping up.  Whilst I am positive society has known similar times and came out stronger, I believe this time for us has made us STOP and reassess our work and personal lives.

On the work front, we have had to learn and adapt to having employees set up home offices so they work remotely. Managers have had to learn to manage teams remotely. The internet has been one of the best inventions enabling communication for work, but it’s true potential is only now starting to be tapped. This is our new Virtual Community and we are leveraging all the right communication technology. We are now utilizing video conferencing, Zoom, Skype, emails, phone and even virtual drinks after work.

For now this has become our new business model and who is to say it won’t remain.

Businesses are now seeing firsthand how a Virtual working model can be productive and cost effective.  No need for daily commutes, clock cards, calling in sick because a relative is not well, bringing in sickness to work or office rent. We can still have structure, a united culture and maybe even more availability than previously when we had physical offices.  The whole idea is to get the job done at the most cost effective way.  It’s highlighted that outcomes are what matter most and it’s validated the Virtual CFO model that’s been around for 5 or 6 years now.

Don’t forget to check out the Government Stimulus offers and which ones apply to your business. At the moment I know of at least 10 incentives available to SME’s, such as :

• 1 PAYGW cash boost
• 2 Payroll Tax refunds/deferrals
• 3 Jobkeeper Payments
• 4 Wage subsidies for apprentices and trainees
• 5 Business Support Fund grant

 

Terena Lane is a member of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, that’s been advocating and promoting the emerging VCFO sector within the accounting profession since 2015. 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 www.vcfoassociation.com.au

As the devastating effects of the ‘twin crisis’ unfold before our very eyes,  thousands of CFO’s will find themselves working remotely to start with and  as many businesses are forced to cut costs, eventually many will be reduced to part time (or even let go).

If a company can survive the biggest crisis in it’s life with a Virtual part-time CFO, they won’t ever go back to a full-time internal CFO.

In other words, full-time Joe (or Jo) (because of the crisis and through no fault of their own) will become part-time Joe.

Many of these CFO’s will have comprehensive educational backgrounds, top tier qualifications and an average of 25 years of corporate industry experience. Top shelf people who know their jam and have lots to offer. Far from feeling threatened or looking to benefit from someone else’s misfortune, the Association of Virtual CFO members feel for anyone that’s been affected by this twin crisis. We are reaching out to offer you comfort and a place to find support amongst like- minded professionals.

And whilst it’s going to be tough to do anything in the coming weeks (and maybe months) the first thing part-time Joe is going to do is look to become full-time Joe again.

Joe is either going to need to leave the part-time job and find a full-time job, or add another (or several other) small client to their book. If in becoming full-time Joe again, they take the route of having a small portfolio of clients, by default Joe will have become by definition a  Virtual CFO.

Whilst 2 weeks ago, full-time Joe may have never imagined being in this position, by now it’s fast starting to sink in that this is the  ‘new normal’.

But the experience we’ve seen hundreds of  Virtual CFO’s go through over the past 6 or 7 years have  is that at the start, until you have clients and a track record of running your own business, it’s been hard to win clients. We’ve seen some very capable people give it a go, but things still haven’t worked out for them in the end. Capability and qualifications aren’t enough on their own.

Clients want comfort that if Joe gets run over by a bus that someone else will pick up the pieces.

Clients are also going to have plenty of Joe’s to pick from. It’s sad but it’s happening, every day I see a message or hear about someone that been effected. If you haven’t been yet, fingers crossed you don’t.

Collectively, amongst our elite peer network, The Association of Virtual CFO’s  have over 500 years of industry experience spread across over more than 20 industry verticals.

We cover more ground and dig deeper than any other organisation in the country and our aim is to recognised as the mark of quality within the Virtual CFO sector

This gives our members a very compelling point of difference in the market and provides comfort for clients.

We are also  the only group whose sole focus is to advance the emerging Virtual CFO sector within the accounting profession. Together our members ‘never walk alone’.

Think about this, if part-time Joe is pitching for the same client against an Association of VCFO member of identical capabilities, ceteris paribus – who do you think gets the client?

David Dillon is a Fellow of CPA and CA, has an MBA and over 30 years of corporate experience. He has been the Managing Director of Custodian Backoffice, a specialist Virtual CFO business since 2014. He is also a committee member of the Virtual CFO Association + Author of “3-Levers” https://mailchi.mp/1453761b50c9/cfy6cguw3u “Profit Metrics” and e-book “So, you want to be a Virtual CFO” https://vcfoassociation.com.au/so-you-want-to-be-a-virtual-cfo/

Everyone knows you wouldn’t try to dig a hole with a hammer. Both are good tools, the tool itself isn’t the problem, but you need to use the right tool for the job.

Flying by the seat of your SME pants?

Many SME owners are finding that “keeping up with the bouncing ball” as their business becomes more complex, has more moving parts etc, is harder and harder for them and their team. Most of these think if they have a tax advisor and a bookkeeper, they should have all their bases covered. But their, profitability is often disappointing, and they feel like they are being dragged away from what they should be doing (focusing on clients’ needs and delivering on promises) and pulled into a daily battle with their financial management problems. Even after they have ‘doused the spot fires’ they feel like they are flying by the seat of their pants. Does this sound familiar?

Tax Accountants and bookkeepers  

A bookkeeper’s role is to record the day-to-day financial transactions of a business and bring the books to the trial balance stage. Over the years that role has changed dramatically with the advent of desktop accounting programs like Xero, QB’s and MYOB. These programs work with other efficiency enabling tools, that can scan images and code them and as a package it saves a bunch of time. But a bookkeeper is still only a bookkeeper, that just they are using power tools not hand tools.

Tax/advisors offer strategic advice to help accumulate and protect private wealth, using tax structures to legally minimise tax.  Often the ‘touch points’ between client and advisor are relatively infrequent with a retrospective focus.

But here’s the thing; the best tax accountant in the country, using the cleverest tax structure has nothing to do until your business has a profit to push through the structure. Virtual CFO’s focus is to reduce inefficiency and maximise profit.

Virtual CFO’s

Virtual CFO’s are fully qualified accountants, with many years of commercial / industry experience to make them experts in businesses like yours. Most have worked in larger companies and have seen the systems and processes that are needed to successfully grow and have many years of experience working with boards of directors and C-suite executives as they thrash out strategies to survive and prosper.

To put some context around that, collectively, amongst the Virtual CFO Associations elite peer network we have over 500 years of industry experience spread across over 20 industry verticals. This gives our members a very compelling point of difference in the market. Confidence for members and comfort for clients.

Different Types of Accountants

The best way to explain the difference between accountants is imagining if accounting were a swimming pool.

Then split the pool length-ways in 2 halves. One half is public practice, the other half commercial. (see feature image):

Lanes are split by tax, audit, insolvency and restructuring. Commercial lanes are split by compliance, control and strategic support, with management accounting, financial accounting, treasury, systems, risk and compliance nesting beneath.

Small business is at shallow end, Big companies up the deep end.

 At the shallow end, you can stand up, but at the deep end, you’ll sink if you can’t swim.

That’s why Big 4 (public practice) tend to stay in their lanes and specialise. The more laps you do in a lane, the bigger stronger and faster you become until you become a partner, or lane champion. They don’t try to swim across lanes at the deep end of the pool. They niche.  The bigger the firms are, the deeper they can dig into a niche, say perhaps a Specialist Payroll tax expert in each state, that the other states can call upon. Smaller firms simply can’t do that and at best end up as “jack of all trades’

In commerce, experience allows you start to swimming across lanes. CFO’s generally prove they can swim across the pool at the shallow end, before they attempt it at the deep end, i.e. they work their way up to ASX100 companies, learning the ropes in smaller companies first.  Industry verticals, such as manufacturing, retail, shipping, banking etc also come into it. Think of these like different swimming strokes. Sure, CFO’s can learn other industries, but the person swimming a medley isn’t as strong as a specialist. It’s the same for CFO’s – 10,000 hours is the accepted benchmark for understanding an industry well.

There is a definite sweet spot for Virtual CFO’s in the mid-tier range, the smaller companies probably haven’t reached a stage where they really need the full range in a VCFOs expertise, nor can they justify the investment. Larger companies generally have navigated through this stage of the business growth life-cycle to the other side and can justify a full-time CFO internally.

Tax advisors and bookkeepers are far better off when they acknowledge the value of a commercial financial management expert like a Virtual CFO to fill a void for their clients than attempt to do it themselves. Public Practice Accountants who see VCFO as an area they can learn and ‘upsell’ to their clients are often taking a huge risk, at the expense of their unsuspecting clients. Clients need the help and without the Accountant having the right skill set their needs will go unfulfilled or something far worse.

To put some context around that, collectively, amongst the Virtual CFO Associations elite peer network we have over 500 years of industry experience spread across over 20 industry verticals. Under our spirit of collaboration, we can call upon other members for specific industry or software experience. This gives our members a very compelling point of difference in the market. Confidence for members and comfort for clients.

Make sure you use the right tool for the dynamic financial management of your business – strategy, reporting, budget, forecast and cash flow management; use a member of the Virtual CFO Association.

David Dillon is a committee member 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 https://vcfoassociation.com.au/

What do I get from being a member of the Virtual CFO Association?

Aside from the core reason for belonging;  being part of the ONLY elite group with the sole focus of advancing the emerging Virtual CFO sector, there are many other benefits and features:

 Advocacy

We aim to mark out and protect out turf.

• How do we mark it out? As pioneers in the sector we know better than anyone what it takes to be good at VCFO. Using our credibility, we are at the forefront of educating the broader business community that not all accountants are equal. Our client’s testimonials are the ultimate validation. Our brand will become the mark of quality and clients will demand their Outsourced CFO
• Who are we protecting it from? Anyone who is offering VCFO services that doesn’t have the requisite expertise. We need the whole community to understand that done wrong, by incompetent or incapable people, VCFO can have harmful, devastating impacts on businesses and the lives of the owners and their families.

Promotion

• The Website is our centrepiece. The committee is proposing to invest some funds into upgrading the website in the near future. The ‘find a member’ function provides clients a way look up member details and connect with them directly.
• Blogs – our members get access to our high value content guide and we both give the opportunity to and actively encourage them to write original, relevant, authentic and engaging, thought leader articles. The purpose of this content is to attract customers. We call these our digital hooks
• LinkedIn, – we have a dedicated VCFO page. https://www.linkedin.com/company/association-of-virtual-cfos/

We can link our Blogs to the LinkedIn page to amplify the reach. Members are expected to and encouraged to like or share other members articles. It is quite possible to have 10,000 people see the post. They say people need to see something up to 7 times before they act, so our content plan includes some repetition, but around half is original and unique, virgin content.

Articles are signed off with the following tag line, attributing the author.

XXXXXXX YYYYYY 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 almost 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 www.vcfoassociation.com.au

• YouTube channel – this gives us video capability. Again, we can link this back to other social media channels and run videos on the website.
• Events – we have held several successful events in the past. In 2017 we had panel discussions in both Sydney and Melbourne. Guests included Nick Bouris (Mentored.com), Carolyn Miller (The Honeycomb effect) and QuickBooks.

As well as our own events, we are trying to use our profile to raise our profile, by securing speaking opportunities at larger accounting conferences.

• Media – we have been quoted in the media on several occasions. Acuity Magazine has featured members and VCFO generally. It is an area that we intend to double down on in the coming months. We have made connections with Accountants Daily, AFR and Fairfax which we intend to issue press releases for significant milestones, such as member numbers, years of experience etc.

Best Practice Forum

• Private WhatsApp group – for quick “Does anyone know…, does anyone have…has anyone used” type guidance.
• Monthly Zoom meetings – ½ hour to 1 hour (depending on agenda – who attends etc) these give our interstate colleagues an opportunity to ‘meet’ and stay in touch. Our sub-committees
• 1/4ly Mastermind (face to face) are held in each location. Typically, these are reasonably informal, where members meet 7.00am -8.30am at a central, convenient and comfortable location, (like a city hotel) grab a buffet breakfast and chew the fat. We pride ourselves on being inclusive and giving members the opportunity to contribute.

Typical topics that are covered are like: risk / practice management / new software / extended network (lawyers, etc)

Collaboration

We believe that being able to tell your clients and prospective clients that you are part of a much bigger collective, who has almost 500 years of experience, across over 20 industry verticals is super powerful. Being able to draw upon capabilities and capacity that you don’t have, can remove barriers to winning a client. What’s more we don’t think there is another VCFO organisation in the country that can boast that.

• Industry specific Expertise
• Software expertise
• Capacity overload sharing resources
• White label or subcontract
• The 5 Principals
• No Poaching

Collaborating is beneficial to each other and the client. If you are introduced to someone else’s client, you are acting as their agent. Aside from breaking every ethical and moral code known to man, it is very uncool

• Respect

Nobody likes having their time wasted chasing people for responses etc. Show the respect you’d expect someone to show you and your time. Be upfront and honest, don’t tyre kick and dick people around.

• Professional

If you are asking for help, be as clear and complete as you can so others don’t have to keep going back and asking for information. Package things so they can be priced and to work out the expertise fit is right.

• Honour your commitments

Do what you say you’ll do, when you say you’ll do it, for the price you agreed. If you agree to a deadline, assume the client is expecting it.

• What goes around

When this is working at its best, members will reciprocate when they can. There is no firm obligation as such, clients need come first and foremost, but put back in what you take out overall and everyone will share the benefit.

Honestly this is the best $40 per month you could possibly spend on your business. There aren’t any $40 per month alternatives that come close.

The Association of Virtual CFO’s gives all members a separate, credible platform to showcase their expertise and extend your own sales funnel. We offer members encouragement and coaching on how to write great content. We amplify the reach beyond individual networks by engaging with each other’s content.

Be part of a collective of elite peers to bounce things off and ask for help. Don’t waste time and resources re-inventing the wheel.

Enjoy the synergies of being part of the only elite group with extensive expertise at its’ disposal – whose sole focus is to advance the emerging Virtual CFO sector within the accounting profession. Never again walk into a client meeting as ‘only you is it?’

If you would like any more information jump on the “What is a Virtual CFO?” Page and watch the videos or if you would like to obtain a free copy of our e-book “So, you want to be a Virtual CFO”

If you feel like this is for you – then jump on the “Membership” page above and fill out the ‘Apply for membership’ details. One of our guys will promptly be in touch.