When your accounting/bookkeeping firm decides to offer financial/commercial advisory services, they have the opportunity to become a Chief Financial Officer to your suitable clients. This is a major achievement as it allows you to create engagements that generate an ongoing source of revenue. Establishing your expertise as a business advisor opens doors and allows you to move away from the day-to-day grind of churning out compliance and tax work, if you so choose. Here is how you can become a CFO for your clients.
WHAT DOES BEING A CHIEF FINANCIAL OFFICER MEAN?
When a client takes you on as a Chief Financial Officer, your firm provides a representative who formally becomes recognised as the “Virtual Chief Financial Officer” for their business. This person is often the head of your financial/commercial advisory team, and other team members involved in the process become their assistants. In this role, you need to ensure you clearly articulate the services you provide in this capacity, which includes reviews of the company’s finances on a daily, weekly, and monthly basis.
You take an active role in financial management, offering expert advice critical to the business’ success. They will rely on you for analysing their financial strengths and weaknesses and proposing corrective actions that keep them moving forward. Your finger is on the pulse of their finances, allowing them to make decisions based on their financial health, cash flow, and access to new capital. They might also depend on you to help them find the perfect balance of debt, equity, and internal financing to meet their business goals. In other words, becoming a Virtual Chief Financial Officer comes with a lot of responsibility you have to be prepared to take on.
HOW TO SUCCEED AS A VIRTUAL CHIEF FINANCIAL OFFICER
To find success in this role, you need to “dig down” into the client’s business. We refer to this process as gaining a “1 inch wide and 1 mile deep” understanding of your client’s activities rather than “1 mile wide and only 1 inch deep” knowledge of your clients affairs.
You develop your understanding of your client’s affairs “1 each wide and 1 mile deep” by undertaking a “Detailed Due Diligence Review” of your client’s business activities from “A to Z”.
Because this is crucial, you need buy-in from the client to ensure they are comfortable opening up their books so to speak so you can develop a clear understanding of their business activities, the transactions, and how it all fits together
You will find that in most cases you do not obtain a detailed understanding of your client’s business activities from the preparation of an annual set of accounts and an Income Tax Return. This “Due Diligence Review” gives you an overview of your client’s affairs similar to what you would develop if you were employed as the full-time Chief Financial Officer of a business because you would be very concerned about:
- Internal control
- Risk management
- Purchasing processes and authorising of payment for purchases
- Receipt of stock, storage of stock, invoicing of stock, stock on hand, regular stock takes
- Offering of credit to customers, monthly debtors days outstanding analysis, follow-up of outstanding debtors
- Monitoring of weekly performance and ensuring that investigations are made of any unexpected variances. For example, if there is an expectation that the gross profit percentage for the week should have been in the vicinity of 41% and the actual gross profit achieved as per the weekly performance report was only 27% an investigation should immediately be conducted to find out what went wrong. This is an automatic response by many larger businesses whereas unfortunately a large number of SMEs do not have access to a weekly performance report that produces this information and therefore do not conduct the immediate reviews to see what went wrong and the problem could continue to go wrong for the entire year.
However, you also have to ensure the leadership team members understand the reports you prepare and see the value in using them to make key decisions. Reports would vary but could be as basic as providing Key Performance Indicator Reports. Reporting and analysis is a major part of the Chief Financial Officer’s duties and often requires the collection of data and tracking from a team of contributors.
BECOMING AN “EMPLOYEE”
As a Virtual Chief Financial Officer, you need to think of yourself as a full-time employee of your client. This is important because in this role you are often expected to be available and dedicate full-time hours to the role. This is a good eight to 10 hours of your day if you want to maintain a clear understanding of their business. In a virtual capacity, you won’t be required to be at their office every day, but you do require focus that allows you to keep up with their day-to-day activities. You have to be prepared to attend to all matters that would have been referred to a Chief Financial Officer. These matters have to remain on your radar and therefore team members must ensure you are kept informed of these matters as they arise.
Understanding who in the company currently receives this information, and ensuring these people know what information you require, is key to your success. Training people in these roles so they recognise what information they can handle, and what needs to pass on to you right away, will help keep things running smoothly.
IMPLEMENTING PROCESSES
Knowing you become responsible for the day-to-day activities of the business highlights the need for you to be involved in far more than the annual accounts and tax return requirements. In fact, the only way you can do this effectively is to implement processes that must occur based on certain scenarios or time periods. This must be shared with individuals involved in the processes so they can understand their role in keeping you up to date.
It also avoids balls being dropped by team members who fail to understand what you do and don’t do, and how that affects their job description moving forward. Keep in mind that it is all based on the individual agreement you sign with your client. For some, you might be very top-level, while others might require more hands-on involvement. Be sure you can deliver on the level of involvement they require to meet expectations.
THE “SCALING UP” CLIENT
Understanding your client’s goals plays a key role in future demands. If your client is proposing to “scale up their business,” your role is to help tide them over until they can find someone to take on the helm as a full-time CFO. You still become a part of their journey to success and might even prove your value by letting them know when your role is becoming more demanding, and the timing might be right to start seeking to fill the CFO position full-time. The beauty of this opportunity is you are there at the beginning and can contribute to their success.
This reflects well on you and can be used to find your next Virtual Chief Financial Officer assignment. You can also stay on in a consulting capacity until the new CFO gets up to speed. The details of your role must always be agreed upon before you commence the assignment so there aren’t any misunderstandings. Ensuring you fulfil the role to the full extent your clients expect can only be achieved with a thorough proposal outlining your duties, the expected outcomes, and when your duties might be considered fulfilled. Anything above and beyond that should be addressed in a new proposal to make sure every aspect of your contributions is accounted for properly.
As you can see, taking on the role of a Chief Financial Officer for your client is an excellent opportunity. However, you have to ensure you have the bandwidth and backup to accept the assignment and avoid falling behind on the needs of your other clients.