How can hiring a virtual CFO make a critical difference in a downturn?

A deep economic recession might seem like no time to incur the additional expense of hiring a Virtual Chief Financial Officer or virtual CFO to help you better manage your company’s cashflow and accounts. But keep in mind that 82% of early-stage companies fail because of poor cash flow or financial management. And ask yourself whether you can afford NOT to think about hiring a VCFO.

This is what you can expect from an experienced VCFO:

1. Cash flow management

It goes without saying but this is critical, because if a business runs out of cash, continuing to operate quickly becomes impossible.

2. Cost control

Keep you up to speed with best practice in your sector so that you cut waste and deploy cash more efficiently.

3. Financial reporting and analysis

Pinpoint your Northstar metric, put aside vanity metrics, figure out what other KPIs to pay close attention to, and cross-check your own interpretation of your financial results to make sure you have a solid grasp of your business’ financial health.

4. Strategic planning and fundraising

Learn how to manage annual forecasting and budgeting, identify new areas of opportunity, and understand when it’s time to think about fundraising.

5. Scalability

The beauty of a VCFO is that as your business scales and its complexity grows, your VCFO can grow with it. Two days a month can quickly become two days a week, strengthening your financial grasp of your business as it scales.

For a company with a revenue of S$500,000 to S$5,000,000, it is hard to hire a full-time CFO. According to forecasts by the recruitment agency Robert Walters, in Singapore in 2020 it will cost a company at least $100,000 a year to hire a finance manager, at least $250,000 to hire a finance director and at least $300,000 to hire a chief financial officer. And this is for professionals with limited experience in these roles. An experienced finance manager will cost you closer to $150,000.

If those sorts of budgets make hiring a finance professional full-time impractical or impossible, a VCFO or fractional CFO might be your best option, and here’s a list of five things to ask potential candidates:

1. Do you offer only VCFO services? Ideally, you want to work with a company that acts as a VCFO as well as offering services including bookkeeping, accounting, tax, payroll and compliance services. This gives you the option of outsourcing your entire finance department, a solution many companies in Singapore are choosing.
   
   

2. Have you helped companies like mine in the last year? Working with a VCFO with extensive experience working with early-stage and mid-sized companies is generally more effective than working with the former CFO of a large corporate, where priorities are different.
   
   

3. Can you show me examples of forecasts and reports we need as a business? First-rate VCFOs will be able to show you cashflow forecast and report templates that they can customize to match your business’ needs, as these vary from one industry to another.
   
   

4. What happens if my VCFO leaves? Make sure you are talking with a company with a solid client base, a track record you can verify and the financial strength to continue servicing its client base at a high standard.
   
   

5. What kinds of reports do boards and investors want to see? Even if you have not taken investment from outside investors or funds, you want to know that you are speaking with a VCFO that understands best practices and can help you communicate with outside investors if you need to.
   
   

Before you go any further now ask yourself these questions. This will help you figure out whether your business might benefit from a VCFO:

1. Is your business now so complex that a bookkeeper alone is no longer enough for you to accurately monitor your business’ financial health?
   
   

2. Is the economic downturn impacting your business negatively and raising questions about your future viability as a business that you feel incapable of answering accurately?
   
   

3. Does your team lack the experience and expertise to accurately interpret detailed financial reports so that you can drive your business in the right direction?
   
   

4. Are you experiencing runaway growth and a deterioration of your cash flow at the same time?
   
   

If you have answered yes to any of these questions, it might be time to think about engaging a VCFO.

Click here for a complimentary session about the benefits of accurate cashflow forecasting
and to receive the Lanturn cashflow forecasting template. Or click here to learn about how to
make the most of a VCFO or click here to learn more about how a VCFO can help a
company under financial distress.